Cabela's 2012 Annual Report Download - page 51

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41
Financial Services Revenue – The following table sets forth the components of our Financial Services
revenue for the years ended:
2012 2011
Increase
(Decrease) % Change
(Dollars in Thousands)
Interest and fee income $ 301,699 $ 277,242 $ 24,457 8.8%
Interest expense (54,092) (70,303) (16,211) (23.1)
Provision for loan losses (42,760) (39,287) 3,473 8.8
Net interest income, net of provision for loan losses 204,847 167,652 37,195 22.2
Non-interest income:
Interchange income 292,151 267,106 25,045 9.4
Other non-interest income 12,364 13,620 (1,256) (9.2)
Total non-interest income 304,515 280,726 23,789 8.5
Less: Customer rewards costs (189,963) (156,632) 33,331 21.3
Financial Services revenue $ 319,399 $ 291,746 $ 27,653 9.5
Financial Services revenue increased $28 million, or 9.5%, in 2012 compared to 2011. The increase in interest
and fee income of $24 million was due to an increase in credit card loans, partially offset by changes in the mix of
credit card loan balances at each interest rate. Interest expense decreased $16 million due to decreases in interest
rates. The provision for loan losses increased $3 million in 2012 compared to 2011 due to growth in our credit card
loan balances, even though our net charge-off rates and allowance for loan losses have decreased. The increase in
interchange income of $25 million was due to an increase in credit card purchases, partially offset by $12.5 million
pursuant to the proposed settlement regarding the Visa litigation. Customer rewards costs increased $33 million
due to an increase in credit card purchases.
The following table sets forth the components of our Financial Services revenue as a percentage of average
credit card loans, including any accrued interest and fees, for the years ended:
2012 2011
Interest and fee income 9.7% 10.1%
Interest expense (1.7) (2.6)
Provision for loan losses (1.4) (1.4)
Interchange income 9.4 9.7
Other non-interest income 0.4 0.5
Customer rewards costs (6.1) (5.7)
Financial Services revenue 10.3% 10.6%
Excluding the affect of the $12.5 million adjustment reducing interchange income from the proposed Visa
settlement, interchange income and Financial Services revenue as a percentage of average credit card loans,
including any accrued interest and fees, would have been 9.8% and 10.7%, respectively.
Our Cabela’s CLUB Visa credit card loyalty program allows customers to earn points whenever and wherever
they use their credit card, and then redeem earned points for products and services at our retail stores or through
our Direct business. The percentage of our merchandise sold to customers using the Cabela’s CLUB Visa credit
card approximated 29% for 2012. The dollar amounts related to points are accrued as earned by the cardholder and
recorded as a reduction in Financial Services revenue. The dollar amount of unredeemed credit card points and
loyalty points was $128 million at the end of 2012 compared to $109 million at the end of 2011.