Cabela's 2013 Annual Report Download - page 43

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Cabela’s CLUB continues to manage credit card delinquencies and charge-offs below industry average by
adhering to our conservative underwriting criteria and active account management. Comparing Cabela’s CLUB
results for 2013 to 2012:
• Financial Services revenue increased $56 million, or 17.7%;
• the number of average active accounts increased 9.9% to 1.7 million, and the average balance per active
account increased 2.9%;
• the average balance of our credit card loans increased 13.1% to $3.5 billion; and
• net charge offs as a percentage of average credit card loans decreased seven basis points to 1.80% in 2013
from 1.87% in 2012.
In 2013, the Financial Services segment issued $395 million in certificates of deposit, early renewed its
$300 million variable funding facility and extended the commitment for an additional two years, and completed term
securitizations of $385 million and $350 million that will mature in February 2023 and August 2018, respectively.
Current Business Environment
Worldwide Credit Markets and Macroeconomic Environment – Beginning in August 2013, and throughout
the remainder of fiscal 2013, we experienced a significant deceleration in the sales of firearms and ammunition
as well as a challenging consumer environment across all business channels. These trends have continued into
the first quarter of fiscal 2014. To address these trends, we increased our promotional spending while managing
other expenses to levels consistent with how our business is performing. We plan to continue managing those
costs accordingly through the remainder of fiscal 2014. The Financial Services segment continues to monitor
developments in the securitization and certificates of deposit markets to ensure adequate access to liquidity. We
expect our charge-off rates and delinquency levels to remain below industry averages.
Developments in Legislation and Regulation – Since the later part of 2012, there has been significant
discussion regarding enacted gun control legislation and potential gun control legislation, primarily aimed at
modern sporting rifles, certain semiautomatic pistols, and high capacity magazines. For example, the States of
Colorado, Connecticut, Maryland, and New York enacted legislation that prohibits the sale of certain high capacity
magazines and, in some cases, the sale of certain firearms. We do not expect the recently enacted state legislation
to have a significant impact on our business. Any new federal legislation that prohibits the sale of certain modern
sporting rifles, semiautomatic pistols, or ammunition could negatively impact our hunting equipment sales.
The Federal Deposit Insurance Corporation (“FDIC”) conducted compliance examinations in 2009 and 2011
and found that certain former practices of WFB were improper. As a result of these compliance examinations,
WFB was required to enter into a consent order and pay restitution and civil money penalties. The FDIC conducted
another compliance examination in 2013, and WFB may be ordered to pay restitution and civil money penalties as
a result of the 2013 compliance examination.
On July 9, 2013, the FDIC adopted interim final rules which revised its risk-based and leverage capital
requirements for FDIC-supervised institutions. These interim final rules are substantially identical to the joint
final rules issued by the Office of the Comptroller of the Currency and the Board of Governors of the Federal
Reserve System on July 2, 2013. The interim final rules and the joint final rules implement the regulatory capital
reforms recommended by the Basel Committee on Banking Supervision in December 2010, commonly referred to
as “Basel III,” and capital reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Reform Act”). Among other things, the interim final rules and the joint final rules revise the agencies’ prompt
corrective action framework by introducing a common equity tier 1 capital requirement and a higher minimum
tier 1 capital requirement. In addition, the interim final rules and the joint final rules include a supplementary
leverage ratio for depository institutions subject to the advanced approaches capital rules. The phase-in period for
the interim final rules will begin in January 2015 for WFB. WFB is continuing to assess how the interim final
rules and the joint final rules will impact it and its ability to comply with the new common equity tier 1 capital
requirement and higher minimum tier 1 capital requirement.