Cabela's 2004 Annual Report Download - page 25

""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Quarterly
Results of Operations and Seasonal InÖuences''.
Government Regulation
Regulation of our Bank Subsidiary. Our wholly-owned bank subsidiary is a Nebraska state chartered
bank with deposits insured by the Bank Insurance Fund of the Federal Deposit Insurance Corporation, or
the FDIC. Our bank subsidiary is subject to comprehensive regulation and periodic examination by the
Nebraska Department of Banking and Finance, or NDBF, and the FDIC. We are also registered as a bank
holding company with the NDBF and as such are subject to periodic examination by the NDBF.
Our bank subsidiary does not qualify as a ""bank'' under the Bank Holding Company Act of 1956, as
amended, or the BHCA, because it is in compliance with a credit card bank exemption from the BHCA.
If it failed to meet the credit card bank exemption criteria, its status as an insured depository institution
would make us subject to the provisions of the BHCA, including restrictions as to the types of business
activities in which a bank holding company and its aÇliates may engage. We could be required to either
divest our bank subsidiary or divest or cease any activities not permissible for a bank holding company and
its aÇliates, including our direct and retail businesses. While the consequences of being subject to
regulation under the BHCA would be severe, we believe that the risk of being subject to the BHCA is
minimal as a result of the precautions we have taken in structuring our business.
There are various federal and Nebraska law regulations relating to minimum regulatory capital
requirements and requirements concerning the payment of dividends from net proÑts or surplus, restrictions
governing transactions between an insured depository institution and its aÇliates, and general federal and
Nebraska regulatory oversight to prevent unsafe or unsound practices. At the end of 2004, our bank
subsidiary met the requirements for a ""well capitalized'' institution, the highest of the Federal Deposit
Insurance Corporation Improvement Act's (FDICIA) Ñve capital ratio levels. A ""well capitalized''
classiÑcation should not necessarily be viewed as describing the condition or future prospects of a
depository institution, including our bank subsidiary.
FDICIA also requires the FDIC to implement a system of risk-based premiums for deposit insurance
pursuant to which the premiums paid by a depository institution will be based on the probability that the
FDIC will incur a loss in respect of that institution. The FDIC has since adopted a system that imposes
insurance premiums based upon a matrix that takes into account an institution's capital level and
supervisory rating.
Subject to certain limitations, federal bank agencies may also require banking organizations such as
our bank subsidiary to hold regulatory capital against the full risk-weighted amount of its retained
securitization interests. We understand that these federal bank agencies continue to analyze interests in
securitization transactions under their rules to determine the appropriate capital treatment. Any such
determination could require our bank subsidiary to hold signiÑcantly higher levels of regulatory capital
against such interests.
The activities of our bank subsidiary as a consumer lender also are subject to regulation under the
various federal laws, including the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the USA Patriot Act, the Fair and Accurate Credit Transactions Act of 2003, the
Community Reinvestment Act, the Service members' Civil Relief Act and the Gramm-Leach-Bliley Act
(GLB), as well as various state laws. The Truth-in-Lending Act requires disclosure of the ""Ñnance
charge'' and the ""annual percentage rate'' and certain costs and terms of credit. The Equal Credit
Opportunity Act prohibits discrimination against an applicant for credit because of age, sex, marital status,
religion, race, color, national origin or receipt of public assistance. The Fair Credit Reporting Act
establishes procedures for correcting mistakes in a person's credit record and generally requires that the
records be kept conÑdential. The USA Patriot Act, among other things, regulates money laundering and
prohibits structuring Ñnancial transactions to evade reporting requirements. The Community Reinvestment
Act requires federal agencies to encourage depository Ñnancial institutions to help meet the credit needs of
their communities. The Service members' Civil Relief Act provides for temporary suspension of legal
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