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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q/A

Amendment No. 1

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002.
|- | ------------------------------------------------------------------------------------------------------------------------------------------

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|COMPUCREDIT CORPORATION                                                                  |  | logo
|---------------------------------------------------------------------------------------- |  | ----
|a Georgia Corporation
IRS Employer Identification No. 58-2336689
SEC File Number 0-25751
|245 Perimeter Center Parkway, Suite 600
Atlanta, Georgia 30346
(770) 206-6200           

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý    NO o

The
number of shares outstanding of the issuer's only class of Common Stock, no par value, (the "Common Stock"), as of October 31, 2002, was 45,726,265 shares.

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COMPUCREDIT CORPORATION        FORM 10-Q        TABLE OF CONTENTSSeptember 30, 2002

|         |  |                       |  |                                                                                       |  |                                                           |  | Page
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------- |  | ----
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                      
|         |  | Item 1.               |  | Financial Statements (Unaudited)                                                      |  |                                                          
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Balance Sheets                     |  | 1   
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Statements of Operations           |  | 2   
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Statements of Shareholders' Equity |  | 3   
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Statements of Cash Flows           |  | 4   
|         |  |                       |  |                                                                                       |  | Notes to Condensed Consolidated Financial Statements      |  | 5   
|         |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 13                                                       
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 41                                                       
|         |  | Item 4.               |  | Controls and Procedures                                                               |  | 42                                                       
|PART II. |  | OTHER INFORMATION     |  |                                                                                      
|         |  | Item 1.               |  | Legal Proceedings                                                                     |  | 43                                                       
|         |  | Item 2.               |  | Changes in Securities and Use of Proceeds                                             |  | 43                                                       
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                       |  | 43                                                       
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                   |  | 43                                                       
|         |  | Item 5.               |  | Other Information                                                                     |  | 43                                                       
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                      |  | 44                                                       
|         |  |                       |  | Signatures                                                                            |  | 45                                                       

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CompuCredit Corporation and Subsidiaries  Consolidated Balance Sheets

|                                                              |                                                                                                            | September 30,
2002 |         | December 31,
2001 |  
|------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------------ | ------- | ----------------- | -
|
|
|Assets                                                        |                                                                                                            |                    |         |                   |  
|Cash and cash equivalents                                     |                                                                                                            | $                  | 60,550  |                   | $
|Restricted cash                                               |                                                                                                            |                    | 10,055  |                   |  
|Retained interests in credit card receivables securitized     |                                                                                                            |                    | 312,525 |                   |  
|Accrued interest and fees                                     |                                                                                                            |                    | 16,596  |                   |  
|                                                              |                                                                                                            |                    |         |                   |  
|Net credit card receivables                                   |                                                                                                            |                    | 329,121 |                   |  
|Amounts due from securitization                               |                                                                                                            |                    | 14,788  |                   |  
|Deferred costs, net                                           |                                                                                                            |                    | 9,061   |                   |  
|Software, furniture, fixtures and equipment, net              |                                                                                                            |                    | 30,651  |                   |  
|Prepaid expenses                                              |                                                                                                            |                    | 1,004   |                   |  
|Investment in equity-method investee                          |                                                                                                            |                    | 16,355  |                   |  
|Investment in debt security                                   |                                                                                                            |                    | 20,881  |                   |  
|Other assets                                                  |                                                                                                            |                    | 13,037  |                   |  
|                                                              |                                                                                                            |                    |         |                   |  
|Total assets                                                  |                                                                                                            | $                  | 505,503 |                   | $
|                                                              |                                                                                                            |                    |         |                   |  
|Liabilities                                                   |                                                                                                            |                    |         |                   |  
|Accounts payable and accrued expenses                         |                                                                                                            | $                  | 37,311  |                   | $
|Notes payable                                                 |                                                                                                            |                    | 9,890   |                   |  
|Deferred revenue                                              |                                                                                                            |                    | 6,595   |                   |  
|Income tax liability                                          |                                                                                                            |                    | 19,925  |                   |  
|                                                              |                                                                                                            |                    |         |                   |  
|Total liabilities                                             |                                                                                                            |                    | 73,721  |                   |  
|Shareholders' equity                                          |                                                                                                            |                    |         |                   |  
|Preferred stock, no par value, 10,000,000 shares authorized:  |                                                                                                            |                    |         |                   |  
|                                                              | Series A preferred stock, 30,000 shares issued and outstanding at September 30, 2002 and December 31, 2001 |                    |         | 31,658            |  
|                                                              | Series B preferred stock, 10,000 shares issued and outstanding at September 30, 2002 and December 31, 2001 |                    |         | 10,766            |  
|Common stock, no par value:                                   |                                                                                                            |                    |         |                   |  
|                                                              | 150,000,000 shares authorized, 46,559,165 shares issued at September 30, 2002 and December 31, 2001        |                    |         |                  |  
|Additional paid-in capital                                    |                                                                                                            |                    | 240,352 |                   |  
|Treasury stock, at cost, 500,000 shares at September 30, 2002 |                                                                                                            |                    | (2,614  | )                 |  
|Note issued to purchase stock                                 |                                                                                                            |                    | (500    | )                 |  
|Retained earnings                                             |                                                                                                            |                    | 152,120 |                   |  
|                                                              |                                                                                                            |                    |         |                   |  
|Total shareholders' equity                                    |                                                                                                            |                    | 431,782 |                   |  
|                                                              |                                                                                                            |                    |         |                   |  
|Total liabilities and shareholders' equity                    |                                                                                                            | $                  | 505,503 |                   | $
|                                                              |                                                                                                            |                    |         |                   |  

See
accompanying notes.

1

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CompuCredit Corporation and Subsidiaries  Consolidated Statements of Operations (Unaudited)

|                                                      |                                                                              | For the three months ended
September 30, |         | For the nine months ended
September 30, |  
|----------------------------------------------------- | ---------------------------------------------------------------------------- | ---------------------------------------- | ------- | --------------------------------------- | -
|
|
|Interest income                                       |                                                                              | $                                        | 754     |                                         | $
|Interest expense                                      |                                                                              |                                          | (5,670  | )                                       |  
|                                                      |                                                                              |                                          |         |                                         |  
|Net interest (expense) income                         |                                                                              |                                          | (4,917  | )                                       |  
|                                                      |                                                                              |                                          |         |                                         |  
|Other operating income:                               |                                                                              |                                          |         |                                         |  
|                                                      | Securitization (loss) income, net                                            |                                          |         | (18                                     | )
|                                                      | Income (loss) from retained interests in credit card receivables securitized |                                          |         | 23,708                                  |  
|                                                      | Servicing income                                                             |                                          |         | 17,242                                  |  
|                                                      | Other credit card fees                                                       |                                          |         | 23,856                                  |  
|                                                      | Interchange fees                                                             |                                          |         | 3,912                                   |  
|                                                      | Ancillary products                                                           |                                          |         | 3,295                                   |  
|                                                      | Equity in income of equity-method investee                                   |                                          |         | 19,552                                  |  
|                                                      |                                                                              |                                          |         |                                         |  
|Total other operating income                          |                                                                              |                                          | 91,547  |                                         |  
|Other operating expense:                              |                                                                              |                                          |         |                                         |  
|                                                      | Non-servicing salaries and benefits                                          |                                          |         | 5,663                                   |  
|                                                      | Credit card servicing                                                        |                                          |         | 29,385                                  |  
|                                                      | Marketing and solicitation                                                   |                                          |         | 4,361                                   |  
|                                                      | Professional fees                                                            |                                          |         | 2,261                                   |  
|                                                      | Data processing                                                              |                                          |         | 2,339                                   |  
|                                                      | Net occupancy                                                                |                                          |         | 1,365                                   |  
|                                                      | Ancillary product expense                                                    |                                          |         | 1,009                                   |  
|                                                      | Other                                                                        |                                          |         | 6,326                                   |  
|                                                      |                                                                              |                                          |         |                                         |  
|Total other operating expense                         |                                                                              |                                          | 52,709  |                                         |  
|Income (loss) before income taxes                     |                                                                              |                                          | 33,921  |                                         |  
|Income taxes                                          |                                                                              |                                          | (11,872 | )                                       |  
|                                                      |                                                                              |                                          |         |                                         |  
|Net income (loss)                                     |                                                                              | $                                        | 22,049  |                                         | $
|                                                      |                                                                              |                                          |         |                                         |  
|Net income (loss) attributable to common shareholders |                                                                              | $                                        | 20,995  |                                         | $
|                                                      |                                                                              |                                          |         |                                         |  
|Net income (loss) per common sharebasic              |                                                                              | $                                        | 0.43    |                                         | $
|Net income (loss) per common shareassuming dilution  |                                                                              | $                                        | 0.43    |                                         | $

See
accompanying notes.

2

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CompuCredit Corporation and Subsidiaries  Consolidated Statements of Shareholders' Equity (Unaudited)  For the nine months ended September 30, 2002 and 2001

|                              |                                           |   |        | Common Stock |            |        |   |   |   |   |         |     |   |        |       
|----------------------------- | ----------------------------------------- | - | ------ | ------------ | ---------- | ------ | - | - | - | - | ------- | --- | - | ------ | ------
|
|
|
|Balance at December 31, 2000  |                                           | $ |       |              | 46,514,639 |        | $ |  |   | $ | 239,789 |     | $ |       |       
|                              | Issuance of common stock                  |   |        |             |            | 44,526 |   |   |  |   |         | 563 |   |        |      
|                              | Note issued to purchase stock             |   |        |             |            |       |   |   |  |   |         |    |   |        |      
|                              | Net income                                |   |        |             |            |       |   |   |  |   |         |    |   |        |      
|                              |                                           |   |        |              |            |        |   |   |   |   |         |     |   |        |       
|Balance at September 30, 2001 |                                           | $ |       |              | 46,559,165 |        | $ |  |   | $ | 240,352 |     | $ |       |       
|                              |                                           |   |        |              |            |        |   |   |   |   |         |     |   |        |       
|Balance at December 31, 2001  |                                           | $ | 39,512 |              | 46,559,165 |        | $ |  |   | $ | 240,352 |     | $ |       |       
|                              | Issuance cost of Series A preferred stock |   |        | (140         | )          |       |   |   |  |   |         |    |   |        |      
|                              | Preferred dividends                       |   |        |             |            |       |   |   |  |   |         |    |   |        |      
|                              | Accretion of preferred dividends          |   |        | 3,052        |            |       |   |   |  |   |         |    |   |        |      
|                              | Treasury stock (500,000 shares, at cost)  |   |        |             |            |       |   |   |  |   |         |    |   |        | (2,614
|                              | Net loss                                  |   |        |             |            |       |   |   |  |   |         |    |   |        |      
|                              |                                           |   |        |              |            |        |   |   |   |   |         |     |   |        |       
|Balance at September 30, 2002 |                                           | $ | 42,424 |              | 46,559,165 |        | $ |  |   | $ | 240,352 |     | $ | (2,614 | )     
|                              |                                           |   |        |              |            |        |   |   |   |   |         |     |   |        |       

See accompanying notes.

3

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CompuCredit Corporation and Subsidiaries  Consolidated Statements of Cash Flows (Unaudited)

|                                                                                         |                                                    | For the nine months ended
September 30,                |         
|---------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------------ | --------
|
|
|Operating activities                                                                     |                                                    |                                                        |         
|Net (loss) income                                                                        |                                                    | $                                                      | (11,908 
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |                                                    |                                                        |         
|                                                                                         | Depreciation expense                               |                                                        |         
|                                                                                         | Amortization expense                               |                                                        |         
|                                                                                         | Securitization income                              |                                                        |         
|                                                                                         | Retained interests income adjustment, net          |                                                        |         
|                                                                                         | Income from equity investee (net of distributions) |                                                        |         
|                                                                                         | Changes in assets and liabilities:                 |                                                        |         
|                                                                                         |                                                    | Increase in restricted cash                            |         
|                                                                                         |                                                    | Decrease (increase) in accrued interest and fees       |         
|                                                                                         |                                                    | Decrease (increase) in amounts due from securitization |         
|                                                                                         |                                                    | Increase in deferred costs                             |         
|                                                                                         |                                                    | Decrease in prepaid expenses                           |         
|                                                                                         |                                                    | Increase in accounts payable and accrued expenses      |         
|                                                                                         |                                                    | (Decrease) increase in deferred revenue                |         
|                                                                                         |                                                    | (Decrease) increase in income tax liability            |         
|                                                                                         |                                                    | Other                                                  |         
|                                                                                         |                                                    |                                                        |         
|Net cash provided by operating activities                                                |                                                    |                                                        | 141,242 
|Investing activities                                                                     |                                                    |                                                        |         
|Investment in equity investee                                                            |                                                    |                                                        | (34,890 
|Proceeds from bond investment                                                            |                                                    |                                                        | 604     
|Purchases of credit card portfolios and retained interests                               |                                                    |                                                        | (75,247 
|Net loan payments (net loans originated)                                                 |                                                    |                                                        | (43,484 
|Recoveries of loans previously charged off                                               |                                                    |                                                        | 16,709  
|Net proceeds from securitization                                                         |                                                    |                                                        | 16,321  
|Purchases and development of software, furniture, fixtures and equipment                 |                                                    |                                                        | (7,070  
|                                                                                         |                                                    |                                                        |         
|Net cash used in investing activities                                                    |                                                    |                                                        | (127,057
|Financing activities                                                                     |                                                    |                                                        |         
|Net proceeds from issuance of preferred stock                                            |                                                    |                                                        | (140    
|Note issued to purchase stock                                                            |                                                    |                                                        |        
|Net proceeds from issuance of common stock                                               |                                                    |                                                        |        
|Purchase of treasury stock                                                               |                                                    |                                                        | (2,614  
|Proceeds from short-term borrowings                                                      |                                                    |                                                        | 126,679 
|Repayment of short-term borrowings                                                       |                                                    |                                                        | (133,306
|                                                                                         |                                                    |                                                        |         
|Net cash (used in) provided by financing activities                                      |                                                    |                                                        | (9,381  
|Net increase (decrease) in cash                                                          |                                                    |                                                        | 4,804   
|Cash and cash equivalents at beginning of period                                         |                                                    |                                                        | 55,746  
|                                                                                         |                                                    |                                                        |         
|Cash and cash equivalents at end of period                                               |                                                    | $                                                      | 60,550  
|                                                                                         |                                                    |                                                        |         
|Supplemental cash flow information                                                       |                                                    |                                                        |         
|Cash paid for interest                                                                   |                                                    | $                                                      | 5,670   
|Cash paid for income taxes                                                               |                                                    | $                                                      | 4,983   
|Accretion of preferred stock dividends                                                   |                                                    | $                                                      | 3,052   
|Distribution of bonds from equity-method investee                                        |                                                    | $                                                      | 21,485  

See
accompanying notes.

4

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CompuCredit Corporation and Subsidiaries  Notes to Condensed Consolidated Financial Statements (Unaudited)  September 30, 2002

1. Organization and Basis of Presentation

The condensed consolidated financial statements include the accounts of CompuCredit Corporation and its wholly owned subsidiaries (collectively, the "Company").
The Company was formed for the purpose of offering unsecured credit and fee-based products and services to a segment of the consumer credit market. The Company sources the accounts to
which it offers these products and services through direct mail, telemarketing, television, the internet, and acquisition from other credit card issuers. Because only financial institutions can issue
general purpose credit cards, the Company has a contractual arrangement with a third party financial institution pursuant to which the financial institution issues general purpose Visa and MasterCard
credit cards, and the Company purchases the receivables relating to such accounts on a daily basis. Additionally, the Company has purchased the receivables relating to accounts generated by other
third party financial institutions from time to time as a further source for growth in its business. The Company markets to its cardholders other fee-based products including card
registration, memberships in preferred buying clubs, travel services and credit life, disability and unemployment insurance.

The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission ("SEC")
Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete consolidated
financial statements. In the opinion of management, all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented have been included. The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amount of revenues and
expenses during the reporting period. Actual results could differ from these estimates. Certain estimates such as credit losses, payments, discount rates and the yield earned on securitized
receivables have a significant impact on the gains and losses recorded on securitizations and the value of retained interests in credit
card receivables securitized. Operating results for the three and nine months ended September 30, 2002, are not necessarily indicative of the results for the year ended December 31,
2002. These condensed consolidated financial statements should be read in conjunction with the notes to the financial statements for the year ended December 31, 2001, contained in the Company's
Annual Report on Form 10-K filed with the SEC.

Certain
amounts in prior period financial statements have been reclassified to conform to the current period presentation. All significant intercompany balances and transactions have
been eliminated for financial reporting purposes.

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of the condensed consolidated financial statements.

Asset Securitization

All of the Company's credit card receivables are securitized. When the Company sells originated receivables in securitizations, it retains certain undivided
ownership interests, interest-only ("I/O") strips

5

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and servicing rights. Although the Company continues to service the underlying credit card accounts and maintains the customer relationships, these securitizations are treated as sales and the
securitized receivables are not reflected on the consolidated balance sheet. The retained ownership interests and the interest-only strips are included in Retained Interests in Credit Card
Receivables Securitized.

Under
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement
No. 140"), gains and losses are recognized at the time of each sale. These gains or losses on sales of receivables depend in part on the previous carrying amount of the financial assets sold as
well as the fair value of the assets and cash proceeds received. The cash flows used in measuring the gains and losses represent estimates of finance charges and late fees, servicing fees, costs of
funds paid to investors, payment rates, credit losses, and required amortization payments to investors. The Company initially records a servicing liability with respect to a securitization structure
when the servicing fees the Company expects to receive do not provide adequate compensation for servicing the receivables. The initial servicing liability is recorded at estimated fair market value.
The servicing liability is then evaluated each quarter and carried at its estimated fair market value with changes in fair value included in income. The change in the fair value is included as a
component of the Company's income from retained interests in credit card receivables securitized with actual expenses being recorded into operations as incurred. Because quoted market prices are
generally not available, the Company estimates fair value based on the estimated present value of future cashflows using management's best estimates of key assumptions as outlined in Note 4.
The servicing liability is netted against the value of the I/O strip and included in Retained interests in credit card receivables securitized on the Company's Balance Sheet. In accordance with
Statement No. 140, the Company does not consolidate any of the qualified special purpose entities ("QSPEs") in its securitizations.

The
retained interests are subsequently accounted for as trading securities and reported at estimated fair market value, with changes in fair value included in income in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("Statement No. 115"). The estimates used in the determination of
the gains and losses and the related fair values of interest-only strips and retained ownership interests are influenced by factors outside the Company's control, and, as a result, such
estimates could materially change from quarter to quarter.

Purchased
retained interests are recorded at the lower of their amortized cost or estimated fair market value in accordance with Emerging Issues Task Force issue 99-20,
"Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" ("EITF 99-20").

Amounts
due from securitization include payments recently received on the securitized receivables that are still held by the securitization structure but are due and payable to the
Company within the next 30 days.

Accrued Interest and Fees

Accrued interest and fees on our originated portfolio represent the estimated collectable portion of fees earned but not billed to the cardholder at any period
end. Prior to the second quarter of 2002, the Company estimated accrued interest and fees using its estimates of total accrued interest and fees earned but not yet billed. During the second quarter of
2002, the Company revised the accrued balance to better estimate the collectible portion of these fees. The Company believes its change in estimate is preferable, because it will more accurately
reflect the cash it expects to receive in the future from cardholders with respect to these fees.

6

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Equity Investment

Investments are accounted for using the equity method of accounting if the investment gives the Company the ability to exercise significant influence, but not
control, over an investee. Significant
influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the
investee's board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. The Company has a 50% interest in a
limited liability company and records its 50% interest in the income or loss of such investee within other operating income each period. The carrying amount of the Company's investment is recorded on
the balance sheet as investment in equity-method investee. There is no difference between the cost of the investment and the underlying equity in net assets of the equity-method investee. The Company
evaluates its investment in the equity-method investee for impairment each quarter by comparing the carrying amount of the investment to its fair value. Because no active market exists for the
investment's stock, the Company compares the carrying amount to the expected undiscounted future cash flows the investment is expected to produce. If the expected undiscounted future cash flows equal
or exceed the carrying amount, the asset is not considered impaired; if, on the other hand, the undiscounted future cash flows are less than the carrying amount, the asset is considered impaired.

Investments in Debt Securities

During the third quarter of 2002, CSG, LLC (the Company's equity method investee; see Note 3, "Equity-Method Investment in CSG, LLC" below) distributed
certain bonds to its members as a partial return of their initial investment in CSG, LLC. The Company recorded the bonds it received at their fair value. In accordance with Statement No. 115,
and based on the Company's intentions and ability to hold these bonds to maturity, the Company has classified these bonds as held-to-maturity and accounts for these bonds at
their amortized cost. Investments in debt securities are regularly reviewed for impairment.

Servicing Income

As of September 30, 2002, the Company is the servicer for the receivables underlying its securitizations transactions, and is the servicer for 100% of the
receivables underlying the CSG Trust (see Note 3, "Equity-Method Investment in CSG, LLC" below). The Company receives servicing fees equal to 0.1% of the originated principal receivables. The
Company receives between 2% and 5% on all other receivables the Company services, or 5% of cash collected, depending on the terms of the securitization structure. Gross servicing revenue is recognized
as income on a monthly basis during the same period in which the servicing is performed and is included as servicing income in the Company's Consolidated Statement of Operations. Total assets being
serviced by the Company were $3.7 billion as of September 30, 2002, and $1.9 billion as of December 31, 2001.

3. Equity-Method Investment in CSG, LLC

CSG, LLC ("CSG") was formed during the second quarter of 2002 by affiliates of Goldman, Sachs & Co. and Salomon Smith Barney and a wholly owned subsidiary
of the Company to acquire notes and a certificated interest issued by a trust ("CSG Trust") that owns a portfolio of credit card receivables.
The Company accounts for its interest in CSG using the equity-method of accounting. The Company has a 50% interest in CSG and funded its initial $34.9 million investment in CSG with cash of
$3.5 million and by borrowing $31.4 million (see Note 8, Borrowings and Restricted Cash). CSG had net income before taxes of $39.1 million for the three months ended
September 30, 2002, and $48.2 million for the nine months ended September 30, 2002. In exchange for servicing 100% of the receivables owned by the CSG Trust, the Company receives
a servicing fee from the securitization structure, the compensation for which is considered adequate.

7

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4. Purchase of Assets

In July 2002, the Company closed a transaction with Federated Department Stores, Inc. (NYSE: FD) in which the Company purchased the retained
interests in a trust (the "Fingerhut Trust") that owned approximately $1.0 billion in face amount of receivables. The receivables included in the trust are private label revolving credit cards
used to purchase items from the Fingerhut catalog. This portfolio will decrease in size over time because payments from cardholders are expected to be significantly greater than purchases being made
by cardholders. In accordance with EITF 99-20, the Company will account for the retained interest it purchased at the lower of amortized cost or fair market value. The expected cash flows
in excess of the cost of the purchased retained interests are being amortized into income from retained interest using the effective interest method.

5. Securitizations

The Company securitizes all of its credit card receivables originated on a daily basis under its primary third party financial institution relationship (the
"originated portfolio") through Master Trusts. Credit card receivables are transferred to the Master Trusts, which issue notes representing undivided ownership interests in the assets of the Master
Trusts. The Company also has securitized two portfolios of credit card receivables relating to pools purchased in 1998 through a securitization structure with a third party commercial paper conduit
administered by a national banking institution. Additionally, during the third quarter of 2002, the Company acquired retained interests in a credit card receivables trust (see Note 4, "Purchase
of Assets").

In
accordance with the above, all of the Company's credit card receivables (whether from the originated portfolio or the purchased portfolio) are held by securitization trusts, and the
exclusive interest of the Company in these receivables is in the form of retained interests in the trusts. Generally accepted accounting principles in the United States of America require the Company
to treat transfers of its receivables to the securitization trusts as sales, and the receivables are removed from the Company's consolidated balance sheet. Under Statement No. 140, an entity
recognizes the assets it controls and liabilities it has incurred, and derecognizes the financial assets for which control has been surrendered and all liabilities that have been extinguished. An
entity is considered to have surrendered
control over the transferred assets and, therefore, to have sold the assets, if the following conditions are met:



The
securitization transactions do not affect the relationship the Company has with its customers and the Company continues to service the credit card receivables.

8

---

The
table below summarizes all of the Company's securitization activity:

|                                                                             |  | For the three months ended
September 30, |           | For the nine months ended
September 30,
|---------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | ---------------------------------------
|
|
|Securitization Activity:                                                     |  |                                          |           |                                        
|Gross amount of receivables securitized at period end                        |  | $                                        | 2,509,136 |                                        
|Proceeds from securitizations                                                |  |                                          | 12,000    |                                        
|Excess cash flows received on retained interests                             |  |                                          | 184,232   |                                        
|Pretax securitization (loss) income                                          |  |                                          | (18       | )                                      
|Income (loss) from retained interests in credit card receivables securitized |  |                                          | 23,708    |                                        

The
investors in the Company's securitization transactions have no recourse against the Company for cardholders' failure to pay their credit card loans. However, most of the Company's
retained interests are subordinated to the investors' interests until the investors have been fully paid. The gross amount of receivables securitized increased from September 30, 2001, to
September 30, 2002, due to the purchase of the retained interest in the Fingerhut Trust (see Note 4, "Purchase of Assets").

All
collections received from the cardholders underlying each securitization are included in the securitization cash flows. This includes collections from the cardholders for interest,
fees and other charges on the accounts and collections from the cardholders repaying the principal portion of their account balances. The cash flows are then distributed to us as servicer for our
servicing fee, to the investors as interest on their outstanding notes, to the investors to repay any portion of their outstanding notes that become due and payable, and to us as the seller to fund
new purchases. Any collections from cardholders remaining each month after making the payments noted above are paid to the Company on our retained interests.

The
pretax securitization (loss) or income recorded by the Company and the measurement of the Company's retained interests are dependent upon management's estimates of future cash flows
using the cash-out method. Under the cash-out method, the future cash flows (including the release of any cash related to credit enhancements) are recorded at a discounted
value. The cash flows are discounted based on the timing of when the Company expects to receive the cash flows. The discount rates are based on management's estimates of returns that would be required
by investors in an investment with similar terms and credit quality. Interest rates received on the credit card receivables are estimated based on the stated annual percentage rates in the credit card
agreements. Estimated default and payment rates are based on historical results, adjusted for expected changes based on the Company's
credit risk models. Credit card receivables are typically charged off when the receivable becomes 180 days past due, although earlier charge offs may occur specifically related to accounts of
bankrupt or deceased customers. Bankrupt and deceased customers' accounts are typically charged off within 30 days of verification.

Subsequent
to each sale, the Company's retained interests are carried at the lower of amortized cost or estimated fair market value, and because they are classified as trading
securities, any changes in fair value are included in income. Because quoted market prices for the Company's retained interests in its originated portfolio are generally not available, the Company
estimates fair value for these retained interests based on the estimated present value of future cash flows using management's best estimates of key assumptions.

9

---

The
retained interests in credit card receivables securitized include the following:

September 30,
2002

December 31,
2001(In thousands)I/O strip

$
102,372

$
84,390Fair value of Seller's Interest


333,906


312,622Servicing liability


(123,753
)

(38,123
)Retained interests in credit card receivables securitized

$
312,525

$
358,889


The
I/O strip reflects the fair value of the Company's rights to future income from our originated portfolio. The servicing liability reflects, for those securitizations for which
servicing compensation is not adequate, the fair value of the costs to service the receivables above and beyond the servicing
income the Company expects to receive from the securitizations. The change in the servicing liability is included in income from retained interests in credit card receivables securitized. The fair
value of seller's interest includes those interests the Company retains in securitizations of the originated and purchased portfolio receivables.

Changes
in any of the assumptions used to value our retained interests could impact the fair value estimates. The weighted average key assumptions used to estimate the fair value of the
retained interest in receivables the Company has securitized are included in the following table:

September 30,
2002

December 31,
2001Payment rate (monthly)

6.7
%
8.0
%Expected credit loss rate (annualized)

16.7
%
16.7
%Residual cash flows discount rate

22.5
%
34.9
%Servicing liability discount rate

14.1
%
14.0
%


At
September 30, 2002, the following illustrates the hypothetical effect an adverse 5 and 10 percent change in key economic assumptions has on the retained interests in
credit card receivables securitized by the Company ($ in thousands):

Credit card
ReceivablesPayment rate (monthly)


6.7
%Impact on fair value of 5% adverse change

$
(1,014
)Impact on fair value of 10% adverse change

$
(1,556
)Expected credit loss rate (annualized)


16.7
%Impact on fair value of 5% adverse change

$
(8,029
)Impact on fair value of 10% adverse change

$
(16,047
)Residual cash flows discount rate


22.5
%Impact on fair value of 5% adverse change

$
(2,900
)Impact on fair value of 10% adverse change

$
(5,709
)Servicing discount rate


14.1
%Impact on fair value of 5% adverse change

$
(140
)Impact on fair value of 10% adverse change

$
(280
)


These
sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 5% and a 10% variation in assumptions generally cannot be
extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other assumptions; in reality, changes in one

10

---

assumption may result in changes in another. For example, increases in market interest rates may result in lower prepayments and increased credit losses, which could magnify or counteract the
sensitivities.

The
retained interests purchased by the Company during 2002 are carried at the lower of amortized cost or fair market value, net of a servicing liability. In accordance with EITF
99-20, expected cash flows in excess of the cost of the purchased retained interests are being amortized into income from retained interests using the effective interest method.

The
Company's managed receivables portfolio underlying its securitizations is comprised of retained interests in receivables securitized and the investors' share of securitized credit
card receivables. The investors' share of securitized credit card receivables is not an asset of the Company, and as such, is not included in the Company's consolidated balance sheets. The principal
balances outstanding as of September 30, 2002, and December 31, 2001, were $2.2 billion and $1.7 billion, respectively. The following table summarizes the balances included
in the Company's managed receivables portfolio underlying its securitizations.

September 30,
2002

December 31,
2001(in thousands)Total principal balance

$
2,228,840

$
1,711,755Total finance charge balance


280,296


180,087Total receivables

$
2,509,136

$
1,891,842Receivables delinquent 60 or more days

$
373,668

$
210,382


6. Commitments and Contingencies

The Company is an equity member of CSG. During the second quarter of 2002, CSG entered into a note purchase agreement whereby it has agreed to buy additional
interests in a portfolio of credit card receivables owned by CSG Trust should there be net new growth in the receivables or should collections not be available, to fund new cardholder purchases.
Measuring as of September 30, 2002, CSG has agreed to purchase up to $200 million of new notes from the CSG Trust should this contingency arise. In general, this contingency amount will
decline as the amount of credit available to cardholders for future purchases declines. The portfolio has and is expected to continue to decline during the life of the CSG Trust as payments are
expected to exceed new purchases each month. As a member of CSG, the Company has agreed to guarantee the payment of the purchase price of the aforementioned new notes if the events giving rise to this
contingency arise, but only if CSG itself should fail to purchase the new notes under the note purchase agreement. As of September 30, 2002, CSG had not and was not required to purchase any
additional notes under the note purchase agreement. The Company's guarantee is limited to its ownership percentage in CSG (which at
September 30, 2002, was 50%) times the total amount of the notes that CSG would be required to purchase. Therefore, as of September 30, 2002, the maximum amount of the Company's
guarantee was $100 million. The Company currently does not have any liability recorded with respect to this guarantee.

In
connection with the third quarter of 2002 extension of the Company's affinity agreement with its principal third-party originating financial institution through March 2006, the
Company, through certain of its subsidiaries, has pledged retained interests valued at approximately $69.2 million to secure its obligations to purchase credit card receivables originated on a
daily basis through the third-party financial institution's cardholder accounts.

11

---

7. Income (Loss) Per Share

The following table sets forth the computation of basic and diluted income (loss) per share:

|             |                                                                                   | For the three months ended
September 30, |   | For the nine months ended
September 30,
|------------ | --------------------------------------------------------------------------------- | ---------------------------------------- | - | ---------------------------------------
|
|
|Numerator:   |                                                                                   |                                          |   |                                        
|             | Net income (loss)                                                                 |                                          | $ | 22,049                                 
|             | Preferred stock dividends                                                         |                                          |   | (1,054                                 
|             |                                                                                   |                                          |   |                                        
|             | Income (loss) attributable to common shareholders                                 |                                          | $ | 20,995                                 
|Denominator: |                                                                                   |                                          |   |                                        
|             | Denominator for basic income (loss) per shareweighted-average shares outstanding |                                          |   | 51,132                                 
|             | Effect of dilutive stock options                                                  |                                          |   | 8                                      
|             |                                                                                   |                                          |   |                                        
|             | Denominator for diluted income (loss) per shareadjusted weighted-average shares  |                                          |   | 51,140                                 
|             | Basic income (loss) per share                                                     |                                          | $ | 0.43                                   
|             | Diluted income (loss) per share                                                   |                                          | $ | 0.43                                   

The
Company's preferred shares, plus dividends that have been accreted, are convertible into approximately 4.7 million shares of common stock at $9.14 per share as of
September 30, 2002. These shares were not included in the computation of diluted EPS for the nine months ending September 30, 2002, because including these shares would have been
anti-dilutive. Additionally, for the nine months ended September 30, 2002, no stock options were included in the diluted earnings per share calculation because their inclusion would
have been anti-dilutive.

8. Borrowings and Restricted Cash

During the second quarter of 2002, the Company entered into a loan in the amount of $31.4 million to partially fund the purchase of its equity interest in
CSG (see Note 3, "Equity-Method Investment in CSG, LLC"). The loan bears interest at Prime plus 5% and is non-recourse to the Company. Although the note has a stated maturity in
2007, it is payable only with the cash flows received from CSG and therefore does not have any minimum payment amounts. The Company anticipates it will receive cash flows from CSG each month, and
therefore, the Company anticipates repaying this loan monthly. At September 30, 2002, $9.9 million was outstanding under the loan. The lender is also entitled to share in a portion of
excess cash flows received by the Company from CSG once the loan has been repaid.

During
the first quarter of 2002, the Company entered into an irrevocable standby letter of credit agreement for $10.0 million with a bank, for the purposes of securing the
Company's obligations to the financial institution that issues the credit cards marketed by the Company. The purpose of the letter of credit is to protect the financial institution from
non-payment by the Company of its obligation to purchase receivables arising in the credit card accounts on a daily basis. The Company is required to maintain a cash balance of
$10.0 million with the bank that has issued the letter of credit. Such cash has been disclosed as "Restricted cash" on the face of the balance sheet.

9. Treasury Stock Repurchases

During the third quarter of 2002, the Company's Board of Directors authorized a program to repurchase up to 5 million shares (approximately
11 percent) of its outstanding common stock. Under the repurchase plan, the Company may buy back shares of its common stock from time to time either on the open market or through privately
negotiated transactions in compliance with SEC guidelines. During the third quarter of 2002, the Company repurchased 500,000 shares on the open market at a total cost of approximately
$2.6 million.

12

---



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes included
herein.

This
Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. We have based these forward-looking statements on our
current plans, expectations and beliefs about future events. In light of the risks, uncertainties and assumptions discussed under the caption "Forward-Looking Information" and others set forth under
the caption "Risk Factors" in "Item 1. Business" of our Annual Report on Form 10-K filed with the Securities and Exchange Commission and other factors discussed in that section,
there is a risk that our actual results will differ materially from the expectations and beliefs reflected in the forward-looking statements in this section.

General

CompuCredit is a credit card company that originates and purchases credit card receivables and markets products and services to its customers for which it earns
fees. We market unsecured Visa and MasterCard credit cards through direct mail, telemarketing, television and the internet.

Our
revenues primarily consist of (1) securitization income, (2) income from our retained interests in credit card receivables securitized, (3) servicing income,
(4) other credit card fee income, (5) interchange fees, (6) ancillary product revenue and (7) equity in the income of our equity-method investee.

Securitization
income is gain or loss we recognize at the time of each sale of our credit card receivables. Income or loss from retained interests in credit card receivables securitized
is the income or loss we recognize from credit card receivables that have been securitized. See the "Credit Card Securitizations" and "Results of Operations" sections for additional information.
Servicing income consists of the gross fees we receive for servicing the various portfolios of credit card receivables. Other credit card fee income includes annual fees, over-limit fees,
cash advance fees and other fees assessed to our cardholders. Interchange fees are the portion of the merchant fees assessed by Visa and
MasterCard that are passed on to us and are a function of the purchase volume of our cardholders. Ancillary product revenue consists of the fees earned by selling various fee-based
products including various memberships, insurance, subscription and other products. Equity in the income of our equity-method investee is discussed below.

Our
primary operating costs include the costs of funding our receivables, credit losses and other operating expenses, such as employee compensation, account solicitation and marketing
expenses, data processing, servicing expenses and income taxes.

We
originate the receivables in our originated portfolio through the use of our target marketing system and direct mail, television, telemarketing and internet campaigns to obtain our
customers. We also add accounts by purchasing portfolios of credit card receivables or by acquiring retained interests in credit card receivables securitizedeither by ourselves or with
entities formed through our partnership with others. With the exception of receivables purchased or originated through accounts added in portfolio acquisitions, the size of our receivables depends in
part on the timing, size and success of our marketing campaigns. During periods of reduced marketing, our originated receivables portfolio may not grow and may decline. We continue to evaluate
opportunities to purchase portfolios because we believe they may provide an attractive return on our investment.

During
the second quarter of 2002, we purchased a 50% interest in CSG, LLC ("CSG"). CSG was formed during the second quarter of 2002 by affiliates of Goldman, Sachs & Co. and
Salomon Smith Barney and one of our wholly owned subsidiaries. CSG was formed to acquire notes and a certificated

13

---

interest issued by a trust ("CSG Trust"). Equity in the income of our equity-method investee is 50% of CSG's income or loss, before income taxes. See the "Results of Operations" and "Other Operating
Income" sections for additional information on these revenues. We agreed to service the entire portfolio of credit card receivables underlying the CSG Trust. In exchange for our servicing, we receive
a fee. In our "Selected Credit Card Data" section, we include information relating to the receivables underlying our securitizations. Beginning with the second quarter of 2002, our data reflects the
credit card receivables that we have securitized as well as 50% of the managed receivables underlying the CSG Trust (which reflects our 50% interest in CSG).

In
July 2002, we closed a transaction with Federated Department Stores, Inc. (NYSE: FD) in which we purchased the retained interests in a trust (the "Fingerhut Trust") that
owned approximately $1.0 billion in face amount of receivables. The receivables included in the trust are private label revolving credit cards used to purchase items from the Fingerhut catalog.
This portfolio will decrease in size over time because payments from cardholders are expected to be significantly greater than purchases being made by cardholders. We also hired approximately 830
employees from Federated to service the receivables in the trust.

We
assumed a servicing liability in the Federated transaction because the contractual servicing fee from the trust is less than adequate compensation for servicing the receivables. Our
servicing liabilities, as
well as why we accept servicing revenues less than our anticipated servicing costs, are more fully described in our "Credit Card Securitizations" section below.

During
the third quarter of 2002, we extended an Affinity Card Agreement with Columbus Bank and Trust ("CB&T"), the subsidiary of Synovus Financial Corporation that provides for the
issuance of our credit cards. This agreement was extended from December 2003 to March 2006.

Our
income is dependent upon the size and the quality of the credit card receivables underlying our securitizations. During the third quarter of 2002, we added approximately 72,000
accounts within our originated portfolio. Additionally, with the acquisition of the retained interests from Federated, the portfolio underlying all of our securitizations increased by approximately
$0.9 billion. The receivables underlying the Fingerhut Trust are expected to decline very rapidly. If we do not increase the growth of our portfolio either by originating more accounts or by
acquiring additional portfolios, our income from retained interests in future quarters may decrease relative to that experienced in this quarter.

Credit Card Securitizations

We began marketing and servicing credit card accounts in February 1997. Columbus Bank &Trust ("CB&T") originates Visa and MasterCard revolving
credit card accounts under an agreement with us. On a daily basis, CB&T sells us an interest in the receivables created that day in their accounts. Similarly, with respect to the retained interests we
acquired from Federated in July 2002, the credit card accounts underlying the securitization are owned by Axsys National Bank. Each day, upon our acquisition of that day's receivables, we in
turn sell our interest in the receivables to trusts or to multi-seller commercial paper conduits administered by national banking institutions. The trusts or conduits issue notes to investors in order
to obtain the cash to pay us for the receivables.

After
an initial purchase of notes by the investors, there is usually a period during which collections from the receivables are used to purchase new receivables. This is referred to as
a revolving period. The revolving period typically begins on the issuance date of any particular series of notes and ends at the beginning of an amortization period. At the end of the revolving
period, the investment of collections in new receivables ends, and collections are instead used to repay the investors. The period during which investors are being repaid is referred to as an
amortization period. The revolving periods have coincided with the maturity dates of each series, which are either 364 days for our series issued to commercial paper conduits or no less than
two years for our series placed with other investors. The maturity date for each series is included in our "Liquidity, Funding and Capital Resources" section.

14

---

All
collections received from the cardholders underlying each securitization are included in the securitization cash flows. This includes collections from the cardholders for interest,
fees and other
charges on the accounts and collections from the cardholders repaying the principal portion of their account balances. The cash flows are then distributed in accordance with the securitization
documents. Cash is distributed to us as servicer for our servicing fee, to the investors as interest on their outstanding notes, to the investors to repay any portion of their outstanding notes that
become due and payable, and to us as the seller to fund new purchases. Any collections from cardholders remaining each month after making the payments noted above are paid to us on our retained
interests.

In
each securitization transaction, we retain the risk of compliance with federal and state laws and regulations regarding the securitized accounts and any fraudulent activity with
regard to the accounts. The fraud for which we are responsible includes the unauthorized use of the credit cards, including identity theft or purchases on lost or stolen cards or account numbers. We
expense these fraud losses in other operating expense. To date, we have experienced very little fraud for unauthorized use of the credit cards, and the total expense has consistently been below 0.20%
of average managed receivables.

The
investors in the securitizations require us to provide credit support for the receivables to reduce the risk of loss to the investors resulting from cardholders not repaying their
credit card balances when due. We negotiate with each investor the amount of the credit support, which is based on historical and expected delinquency and loss experience on the receivables. The
credit support is usually in the form of over-collateralization, which means that we sell the receivables for cash and a subordinated retained interest. Because the retained interest is
subordinate to the investors' investment, the investors get excess collateral for their cash purchase price. As a result, the receivables available to repay the investors exceed the total amount of
the investors' interests in the receivables. This excess is the retained interest that we own, which is also referred to as a subordinated interest, or a seller's interest. These retained interests
represent the difference in the cash we receive from the investors when we sell our originated receivables in our securitizations and the cash we paid to initially purchase the receivables. Increases
in retained interests are a use of our cash.

The
investors in the securitized receivables have no recourse against us for the cardholders' failure to pay their credit card balances; however, substantially all of our retained
interests are subordinated to the investors' interests until the investors have been fully repaid. This means that our retained interests will absorb any losses due to cardholders' failure to repay
their balances first before investors in the securitizations have to absorb these losses.

We
will receive additional cash from the securitized receivables if collections from the receivables exceed required interest and principal payments to the investors. The collections
from the receivables depend on the performance of the receivables, which includes the timing and amount of payments on the receivables, the interest, fees and other charges paid on the receivables,
and their delinquency and loss rates.

Our
securitizations are treated as sales under generally accepted accounting principles in the United States of America ("GAAP"). As such, we remove the securitized receivables from our
consolidated balance sheet. As noted above, we retain a seller's interest in the pool of assets included in each securitization, with the right to receive collections allocated to such seller's
interest after payments to investors are made. These amounts are recorded as income from retained interests in credit card
receivables securitized. Because quoted market prices are generally not available for the retained interests arising from securitizations of our originated portfolio, the fair values of our seller's
interests in our originated portfolio's receivables are based on the estimated present value of the future cash flows using management's best estimates of key assumptions and the estimated collectible
portion of finance charge receivables. We also recognize an "interest-only" ("I/O") strip, which is the present value of the projected excess cash flows the receivables will produce during
their life. The excess cash flow is the excess of the finance charges and late fees generated by the securitized receivables over

15

---

related credit losses, interest paid to investors, servicing costs and other expenses. The I/O strip and the seller's interest are included in "Retained Interests in Credit Card Receivables
Securitized" on our consolidated balance sheet.

During
July 2002, we acquired retained interests in a trust of credit card receivables. The retained interests purchased by us from third parties during 2002 are carried at the
lower of amortized cost or fair market value. Expected cash flows in excess of the cost of the purchased retained interests are being amortized into income from retained interests using the effective
interest method.

Amounts
Due from Securitization on our consolidated balance sheets include payments recently received on the securitized receivables that are still held by the securitization structure
but are payable to us in the next 30 days.

Securitizations
are accounted for in accordance with Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("Statement No. 140"), and, prior to April 1, 2001, were accounted for under Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement No. 125"). Under these statements, gains or losses are recognized at the time of each sale and they
are recorded as securitization income or loss in our consolidated statement of operations. The gains or losses recognized on the sales of credit card receivables depend in part on the previous
carrying amount of the financial assets sold as well as the fair value of the financial assets and cash proceeds received.

We
believe our securitizations satisfy the conditions of Statement No. 140 for sale accounting because each trust, as the issuer, is a qualified special purpose entity ("QSPE").
The activities of each trust are limited to (1) acquiring, owning and managing its assets and the proceeds of those assets; (2) issuing and making payments on notes; and
(3) engaging in related activities. In addition, each holder of a beneficial interest in the notes has the right to pledge or exchange its beneficial interest. Finally, the transferor transfers
the receivables to each trust or to a third party conduit and does not maintain control over the receivables.

The
securitization transactions do not affect the relationship we have with our customers, and we continue to service the credit card receivables. We either perform the servicing or
contract with third party service providers. The fees we receive to service credit cards are included in our servicing income
and are discussed in our "Results of OperationsOther Operating Income" section. In cases where we do not receive adequate compensation for servicing the credit cards, we have recognized a
servicing liability for the projected servicing costs that exceed our projected servicing revenue. See our "Net Securitization Income and Income from Retained Interests" section for the assumptions
used and the servicing liability amounts. The amount of servicing revenue we receive is dictated by the trust agreements in our securitizations. We accept servicing revenue that is less than the
anticipated servicing costs because during the revolving period, we receive all of the excess cash flows from the securitizations; these excess cash flows represent collections on the receivables in
excess of the interest paid to the investors, the servicing fees paid to us as servicer, and required amortization payments. Because we receive the residual or excess cash flows during the revolving
period, the total cash we expect to receive inclusive of both the servicing revenue as well as the excess cash flows is expected to more than cover our servicing costs.

16

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The
table below summarizes our securitization activity:

|                                                                             |  | For the three months ended
September 30, |           | For the nine months ended
September 30,
|---------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | ---------------------------------------
|
|
|Securitization Activity:                                                     |  |                                          |           |                                        
|Gross amount of receivables securitized at period end                        |  | $                                        | 2,509,136 |                                        
|Proceeds from securitizations                                                |  |                                          | 12,000    |                                        
|Excess cash flows received on retained interests                             |  |                                          | 184,232   |                                        
|Pretax securitization (loss) income                                          |  |                                          | (18       | )                                      
|Income (loss) from retained interests in credit card receivables securitized |  |                                          | 23,708    |                                        

The
gross amount of receivables securitized at September 30, 2002, increased from September 30, 2001, due to the receivables underlying the Fingerhut Trust. Proceeds from
securitizations decreased during that same time period due to reduced growth in our originated portfolio. Also during this time period, excess cash flows received on retained interests increased due
to the cash flows generated from the retained interests in the Fingerhut Trust. Our pretax securitization income is recognized when the receivables are securitized. Net securitization loss was
approximately $18,000 for the three and nine months ended September 30, 2002, compared to net securitization income of $0.6 million and $1.1 million for the three and nine months
ended September 30, 2001. This income decreased from 2001 to 2002 because of reduced growth in our originated portfolio.

The
trusts or the conduits purchase receivables from us by raising proceeds from investors. These proceeds are raised by the trusts or by the conduits by issuing notes to investors. We
had the following total commitments and outstanding amounts in our securitizations for each period presented:

As of September 30,
2002

As of December 31,
2001(In millions)Total commitments from investors

$
2,410

$
2,046Total outstanding amounts


1,786


1,524


The
maturities of these notes range from February 2003 to July 2004, and are more fully detailed in the "Liquidity, Funding and Capital Resources" section. We
try to structure our securitization funding
sources by having commitments in excess of our current growth plans so that we have investors who will purchase notes from the trusts, which in turn allows the trusts to purchase receivables from us.
We believe we have structured our securitization program to reduce our reliance on any one series of notes by staggering the maturity dates of the notes.

The
payment terms of each securitization structure are negotiated with investors. Some facilities enter into accumulation periods at pre-determined dates prior to their
maturity. During an accumulation period, a portion of cash collected from the cardholders is required to be accumulated in an account for the benefit of the facility and is not available to us to fund
new purchases. We also have a facility associated with our portfolios that we purchased in 1998 that was structured to use a percentage of cash flows each month to pay down amounts outstanding to the
investors. The structure was negotiated in this manner with the investors at its inception because the portfolio of receivables was decreasing very rapidly. This occurred because most of the accounts
were making payments in excess of new purchases and no new accounts were being added to the portfolio. We detail the maturity dates and describe our facilities and amounts being used to repay
investors in the "Liquidity, Funding and Capital Resources" section.

17

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We
include in our consolidated financial statements all of our wholly owned subsidiaries. However, in accordance with Statement No. 140, we do not consolidate any of the trusts,
which are QSPEs. We are required to service the receivables that have been sold. We also perform the administrative functions for the trusts including preparing daily and monthly reports relating to
the receivables. We do this pursuant to an administration agreement between the trustees of the trusts and us. The investors do not have any recourse against us for the cardholders' failure to pay
their credit card balances; however, most of our retained interests are subordinate to the investors' interests. Under our securitization agreements, our retained interests would absorb losses due to
the cardholders' failure to pay before the investors would have to absorb these losses.

Our
securitization documents require us, as servicer of the receivables, to covenant that we will maintain an acceptable ratio of tangible net worth to total managed receivables or that
we will not default in the payment of material indebtedness or reduce the periodic finance charges assessed on the receivables below agreed upon levels. We have also agreed to service the receivables
in accordance with our servicing policies and procedures. In addition to the above, there are events described in our agreements that may trigger an early amortization, which would cause all
collections on the receivables to go to the investors to pay the principal on the notes. This would delay any cash being paid to us with respect to our seller's interests until the notes were paid in
full. These events include our failure as servicer to remit the collections that we receive from cardholders to the appropriate securitization accounts within the required time frames, our failure to
provide reports regarding the activity in the accounts within required time frames, or a breach of our representations and warranties. These events also include financial performance measures on the
underlying receivables. As servicer of the accounts, we do not covenant or make any representation or warranty regarding the collectibility of the receivables in the accounts.

Our
securitization documents require us, as the seller of the receivables, to make representations and warranties relating to the validity and the enforceability of the agreements
pursuant to which the receivables were created. We also make other standard representations and warranties including our ability to enter into the agreements and the accuracy of the information
provided by us to investors. If we breach any of these representations, we may cause an early amortization event, and we may not be able to sell additional receivables into our securitization
structures. As seller of the receivables, we do not make any representation or warranty regarding the collectibility of the receivables in the accounts.

We
have not breached any representations or warranties or otherwise caused an early redemption event, and the underlying performance of the receivables has not caused an early
amortization event in any of our securitizations.

Results of Operations

Net income attributable to common shareholders for the three months ended September 30, 2002, was $21.0 million, or $0.43 per diluted share,
compared to net income of $14.9 million, or $0.32 per diluted share for the three months ended September 30, 2001. We have substantially increased the size of the total receivables that
underly our securitizations, which increased our net income during the third quarter of this year as compared to the third quarter of last year. At September 30, 2002, we had total managed
receivables of $3.0 billion (including 50% of the receivables underlying the retained interest owned by the CSG Trust), as compared to $1.8 billion at the end of September 30,
2001. This $1.2 billion increase is due to $0.5 billion of receivables underlying our equity investment in CSG, which we acquired in June of 2002, as well as $0.8 billion of
receivables underlying the retained interests we acquired in July 2002. During the third quarter of 2002, we recorded $19.6 million of pretax income from our equity investment in CSG. We
did not have this income during the comparable quarter of the prior year.

18

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In
connection with both the CSG investment and the Federated acquisition, we agreed to service 100% of the receivables underlying the securitizations. We receive servicing fees, which
have increased our servicing income to $17.2 million during the three months ended September 2002, as compared to $1.4 million during these same three months in 2001. Because we
are servicing these assets, our credit card servicing expense increased from $15.7 million in the third quarter of 2001 to $29.4 million in the third quarter of 2002.

Net
loss attributable to common shareholders for the nine months ended September 30, 2002 was $15.0 million, or $0.32 per diluted share, compared to net income attributable
to common shareholders of $36.0 million, or $0.77 per diluted share for the nine months ended September 30, 2001. Although we had an increase in our net income during the third quarter
of 2002 as compared to the third quarter of 2001, our year-to-date income from 2002 is less than 2001. This is primarily due to our year-to-date loss
from retained interests in credit card receivables securitized during 2002 of $33.5 million as compared to
income from retained interests during this same period of 2001 of $55.9 million. The decrease in this income is due to a decrease during the second quarter of 2002 of our estimate of the fair
value of our retained interests in finance charge receivables of approximately $54.7 million. Prior to the second quarter of 2002, we estimated the fair value of our retained interests in
finance charge receivables using our estimates of total finance charges billed to cardholders. Our new estimates better reflect our expectation of just the collectible portion of these finance
charges. We believe our change in estimate was preferable as it more accurately reflects the cash we expect to receive in the future from cardholders with respect to these fees. We made this change in
our estimate during the second quarter based in part on proposed regulatory guidelines, which affect many other companies in the credit card industry. Although we are not a bank and are not directly
regulated by any financial regulator, we believe other credit card companies either have or will be adopting this change in estimate.

Our
income from retained interests also decreased during 2002 as compared to 2001 due to a reduction in the profitability of the credit card receivables underlying our retained
interests. This is due to an increase in the charge offs of the receivables, which is due to a larger percentage of our receivables aging through the second year of their life. When credit card
receivables are first originated, they tend to have low charge off rates in their first twelve months. The charge off rate then dramatically increases during year two and then moderates in year three
and beyond. We have seen this trend in the performance of our receivables and believe it is typical in other credit card portfolios in the industry. For the first nine months of 2002, we incurred
charge offs of $199.1 million, as compared to $169.8 million during the first nine months of 2001. We further describe the receivables portfolio in the "Selected Credit Card Data"
section.

The
largest component of our income comes from the profit generated from the credit card receivables underlying our securitizations. Growth in managed receivables cannot be predicted
with certainty. In general, it is a product of our marketing, portfolio acquisitions, and other strategic efforts. In general, our growth is a product of (1) the growth in the number of
accounts, and (2) the amount of usagebalanceson accounts. Our growth also is dependent upon a number of factors that we are not able to control, such as levels of
consumer spending, competition and general economic conditions. Growth in the number of accounts is a product of several factors, primarily the level of our marketing efforts, our competition, the
general economy and our portfolio acquisition efforts. Our marketing and solicitation expenses decreased to $4.4 million for the three months ended September 30, 2002, from
$7.7 million for the three months ended September 30, 2001. We decreased our marketing in 2002 because we believed that we had limited access to liquidity, and we did not want our
portfolio to grow beyond what we may be able to fund in the future. Additionally, during the third quarter of 2002, we concentrated on adding accounts through portfolio acquisition rather than through
marketing efforts to originate a significant number of new accounts.

19

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Net Interest Income

Net interest expense or income consists of interest income earned on cash and cash equivalents less interest expense. Net interest expense totaled
$4.9 million for the three months ended September 30,
2002, compared to net interest income of $0.3 million for the three months ended September 30, 2001; net interest expense totaled $4.4 million for the nine months ended
September 30, 2002, compared to net interest income of $1.9 million for the nine months ended September 30, 2001. The decrease in net interest income during 2002 is attributable
to the interest expense and fees from the loans we entered into to finance our acquisitions in the second and third quarters of 2002.

During
the second quarter of 2002, we entered into a loan in the amount of $31.4 million to partially fund the purchase of our equity interest in CSG. The loan bears interest at
Prime plus 5% and is non-recourse to the Company. Although the note has a stated maturity in 2007, it is payable only with the cash flows received from CSG and therefore does not have any
minimum payment amounts. It is anticipated that we will receive cash flows from CSG each month, and therefore, we anticipate repaying this loan monthly. At September 30, 2002,
$9.9 million was outstanding under the loan. The lender is entitled to share in a portion of excess cash flows received by the Company from CSG once the loan has been repaid. During the third
quarter of 2002 and in connection with our acquisition of the retained interests from Federated, we entered into a loan in the amount of $95.3 million. The loan was repaid during the third
quarter of 2002.

Net Securitization (Loss) Income and Income (Loss) from Retained Interests

Retained interests in credit card receivables securitized are valued in accordance with the provisions of Statement No. 140. These retained interests are
subsequently accounted for as trading securities and reported estimated fair market value in accordance with Statement of Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("Statement No. 115"). Purchased retained interests are recorded at the lower of their amortized cost or estimated fair market value in accordance
with EITF 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" ("EITF 99-20"). See the "Credit
Card Securitizations" section.

Net
securitization (loss) income is recognized under Statement No. 140 at the time the receivables are securitized. Gains or losses on sales of receivables depend in part on the
previous carrying amount of the financial assets sold as well as the fair value of the assets and cash proceeds received. In a sale, we receive cash, retain an interest in the receivables sold
(Seller's Interest) and retain rights to receive cash in the future (the "I/O" interest only, or "I/O strip"). Net securitization loss was $18,000 for the three and nine months ended
September 30, 2002, compared to net securitization income of $0.6 million and $1.1 million for the three and nine months ended September 30, 2001. This income decreased
from 2001 to 2002 because of the lack of growth in our originated portfolio during 2002.

Income
(loss) from retained interests in credit card receivables securitized includes the income earned on the retained interests and any changes in the fair value of the retained
interest in credit card receivables securitized in accordance with Statement No. 115 and EITF 99-20. Income from retained interests in credit card receivables securitized for the
three months ended September 30, 2002, was $23.7 million, compared to income of $19.2 million for the three months ended September 30, 2001. The increase in our income from
retained interests is primarily due to the increase in our managed receivables underlying our securitizations. At September 30, 2002, we had total managed receivables
underlying our securitizations of $2.5 billion as compared to $1.8 billion at September 30, 2001. This $0.7 billion increase is primarily due to the acquisition of the
retained interests from Federated, the managed receivables underlying which were $0.9 billion at the time of acquisition and $0.8 billion as of September 30, 2002. We recorded the
retained interests acquired at cost, and we are carrying these interests at the lower of amortized cost or fair market value. Expected cash flows in excess of the cost

20

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of the retained interests are being amortized into income from retained interests in credit card receivables securitized using the effective interest method.

Loss
from retained interests in credit card receivables securitized for the nine months ended September 30, 2002, was $33.5 million, compared to income of
$55.9 million for the nine months ended September 30, 2001. The decrease in our income from retained interests in credit card receivables securitized for the nine months ended
September 30, 2002, compared to September 30, 2001, was due primarily to (a) a decrease in our estimate of the fair value of our retained interests in finance charge receivables
of our originated portfolio of approximately $62.0 million; (b) a decrease in our estimate of accrued interest and fees earned but not billed of approximately $13.1 million to
better estimate the collectible portion of these fees; and (c) an increase in the charge offs of the receivables. This increase is due to a larger percentage of our receivables aging through
the second year of their life. When credit cards are first originated, they tend to have low charge off rates in their first twelve months. The charge off rate then dramatically increases during year
two and then moderates in year three and beyond. These decreases in our income from retained interests were partially offset, however, by (a) an approximate $22.8 million increase in our
retained interest due to decreasing our residual cash flows discount rate from 34.9%to 22.5%; and (b) income from the retained interests we acquired during July 2002.

The
fair value of our retained interests in our originated portfolio in credit card receivables securitized is estimated by discounting the expected future cash flows from the
securitized receivables at rates we believe are consistent with those that would be used by an independent third party. These rates historically reflect (a) prior transactions completed by us,
(b) average rates disclosed by our peers, (c) average rates we have reviewed from transactions where the total interest rate to the investor has been disclosed and (d) an
independent financial advisory firm's evaluation of the residual cash flow discount rate during the second quarter of 2002. Because quoted market prices are generally not available for retained
interests in our originated portfolio, the fair value of our retained interests is based on the estimated present value of future cash flows from the receivables that have been securitized using
management's best estimates of finance charges and late fees, servicing fees, costs of funds paid to investors, payment rates, credit losses, discount rates and required amortization payments to
investors. The weighted average key assumptions used as of the end of each period are presented below. Changes in any of these assumptions could impact the estimates of the fair value of our retained
interest as well as the realization of expected future cash flows. (See the "Critical Accounting Policies" section.)

The
following table shows the assumptions used to estimate the fair value of the retained interests of the receivables the Company has securitized:

|                                               |  | At or for the Three Months Ended |  
|---------------------------------------------- |  | -------------------------------- | -
|
|
|Assumptions                                    |  |                                  |  
|Payment rate (monthly)                         |  | 6.7                              | %
|Expected credit loss rate (annualized)         |  | 16.7                             | %
|Residual cash flows discount rate (annualized) |  | 22.5                             | %
|Servicing liability discount rate (annualized) |  | 14.1                             | %

Management
estimates the fair value of the retained interests at the end of each period. Fair value is estimated as the amount the retained interests could be bought for, or sold for, in
a current transaction between willing parties; specifically, other than in a forced liquidation. We believe that quoted market prices in active markets are the best evidence of fair value. Because
quoted market prices are not available for our retained interests, the estimated fair value is based on the best

21

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information available under the circumstances. As such, we utilize a discounted cash flow approach, under which our estimated future cash flows are discounted at the estimated rate of return that we
believe an investor in our retained interests would expect to be associated with such an investment (the "residual cash flows discount rate").

Estimated
default and payment rates are based on historical results, adjusted for expected changes based on our credit risk models. The payment rate decreased from 2001 to 2002,
primarily due to the seasoning of the originated portfolio and the effects of the generally poor economic climate on our cardholders. Expected credit loss rates have increased due to the generally
poor economic climate, increases in our delinquencies and our expected overall credit quality decline within our portfolios given the trending higher weighted-average age of the portfolios. We compare
historical loss rates on each vintage of our portfolio at comparable points in their lives to project our expected credit loss rate. Our servicing liability discount rate is based on management's
estimate of the required returns for Company's who service similar assets.

The
residual cash flow discount rate is dependant on the asset backed securities market and the various companies that make up this market (e.g., Providian, Capital One, Metris, NextCard
and CompuCredit). The asset backed securities market is influenced by the results of the issuers who participate in the market, as well as (a) the reaction of rating agencies to the results of
issuers, (b) general economic conditions and (c) the investment appetite of investors, which include banks, commercial paper conduits administered by banks, money market funds, pension
funds, hedge funds and insurance companies. Also, as demonstrated to us in December 2001, they also are impacted by our own perceived liquidity and negotiating positions. However, absent exigent
circumstances, the asset backed securities market tends to react to the overall performance of the group as opposed to the individual companies comprising the group (i.e., the advance rates, pricing
and terms available are responsive to the peer group that includes us, as opposed to just us).

Our
residual cash flows discount rate has been volatile during the latter part of 2001 and the first half of 2002. That volatility was unprecedented and unforeseen, both by us and other
market participants, but reflected the prevailing market conditions in the asset backed securities market as well as our own liquidity. GAAP requires, however, that we estimate the residual cash flows
discount rate at the end of each period.

During
the fourth quarter of 2001, we completed transactions at very unfavorable pricing, which yielded a 35% return to the buyers. This pricing reflected the deterioration of the asset
backed securities markets and our near-term liquidity needs in December 2001. The December transaction was the most readily available information upon which to base the Company's
fourth quarter 2001 discount rate estimateat this point we increased our discount rate to 34.9%.

During
the first quarter of 2002, due to the continued general weakness of the economy and the continued stress and liquidity challenges that we saw in the asset backed securities
markets, we did not believe that there was sufficient evidence to warrant a reduction in our discount rate. In the second quarter of 2002, however, our liquidity position improved with the purchase
(through our 50%-owned equity method investee, CSG) of the retained interests from Providian. Additionally, we finalized the
terms of a new securitization structure with more favorable advance rates, pricing and other terms. As a result, we concluded, after consultation with and corroboration by an independent third-party
valuation firm, that a reduction in our discount rate was warrantedat this point we reduced our discount rate to 22.5%. The valuation techniques utilized by the third-party valuation firm
included analyzing our recent transactions and our competitors (both direct and indirect) discount rates and cost of equity, with equal weighting given to each. During the third quarter of 2002, we
did not see any evidence indicating an adjustment in our discount rate was necessary, thus, our residual cash flows discount rate remained at 22.5% at the end of that period.

22

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Our
retained interests in credit card receivables securitized include the following:

September 30,
2002

December 31,
2001(In thousands)I/O strip

$
102,372

$
84,390Fair value of Seller's Interest


333,906


312,622Servicing liability


(123,753
)

(38,123
)Retained interests in credit card receivables securitized

$
312,525

$
358,889


The
I/O strip reflects the estimated fair value of our rights to future income from the originated portfolio. The servicing liability reflects, for those securitizations for which
servicing compensation is not adequate, the estimated fair value of the costs to service receivables above and beyond the servicing income we expect to receive from the securitizations. The change in
the servicing liability is included in income from retained interests in credit card receivables securitized. The fair value of seller's interests includes all of the retained interests we own in the
securitizations. Our I/O Strip increased from December 31, 2001, primarily due to a decrease in our residual cash flows discount rate from 34.9% at December 31, 2001, to 22.5% at
September 30, 2002, as discussed in our Quarterly
Report on Form 10-Q for the three months ended June 30, 2002. Our servicing liability increased due to the servicing liability we assumed when we purchased the retained
interests from Federated in July 2002. The fair value of seller's interest increased due to the acquisition of the retained interests we purchased from Federated in July 2002, offset
however by a decrease during 2002 in our estimate of the fair value of our retained interests in finance charge receivables.

Prior
to the second quarter of 2002, we estimated the fair value of our retained interests in finance charge receivables using our estimates of total finance charges billed to
cardholders. Our new estimates better reflect our expectation of just the collectible portion of these finance charges. We believe our change in estimate is preferable, as it will more accurately
reflect the cash we expect to receive in the future from cardholders with respect to these fees. We also believe our revised estimates are preferable based in part on proposed regulatory guidelines
which affect many other companies in the credit card industry. Although we are not a bank, and we are not directly regulated by any financial regulator, we believe other credit card companies either
have or will be adopting this change in estimate.

Equity-Method Investment in CSG

CSG was formed during the second quarter of 2002 by affiliates of Goldman, Sachs & Co., Salomon Smith Barney and a wholly owned subsidiary of the Company
to acquire notes and a certificated interest issued by the CSG Trust, which owns a portfolio of credit card receivables. We account for our interest in CSG using the equity-method of accounting. We
have a 50% interest in CSG, and we funded our initial $34.9 million interest in CSG with cash of $3.5 million and by borrowing $31.4 million. In exchange for servicing 100% of the
receivables owned by the CSG Trust, we receive a servicing fee from the securitization structure. The servicing fee is considered adequate compensation.

Under
our equity method of accounting for our CSG investment, we recorded approximately $19.6 million and $24.1 million of pretax income during the three and nine months
ended September 30, 2002. This income primarily consisted of income from retained interests in credit card receivables securitized that CSG acquired in the second quarter of 2002 from the CSG
Trust. During the three months ended September 30, 2002, we received approximately $21.1 million in distributions from our investment in CSG.

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Other Operating Income

Other operating income, excluding securitization (loss) income, income (loss) from retained interests in credit card receivables securitized and equity in income
of equity-method investee, consists of the following:

|                       |                              | Three Months Ended
September 30, |        | Nine Months Ended
September 30,
|---------------------- | ---------------------------- | -------------------------------- | ------ | -------------------------------
|
|
|Gross servicing income |                              | $                                | 17,242 |                                
|Other credit card fees |                              |                                  | 23,856 |                                
|Interchange fees       |                              |                                  | 3,912  |                                
|Ancillary products     |                              |                                  | 3,295  |                                
|                       |                              |                                  |        |                                
|                       | Total other operating income |                                  | $      | 48,305                         
|                       |                              |                                  |        |                                

Other
operating income increased to $48.3 million for the three months ended September 30, 2002, from $40.3 million for the three months ended September 30,
2001, and increased to $117.0 million for the nine months ended September 30, 2002, from $108.9 million for the nine months ended September 30, 2001. Our servicing income
increased for the three and nine months ended September 30, 2002, compared to the same periods in 2001 primarily due to the servicing fees we earned as the servicer of receivables of the CSG
Trust and the Fingerhut Trust. Other credit card fees were $23.9 million for both the three months ended September 30, 2002, and 2001, and include annual, over-limit, cash
advance, insufficient funds, maintenance and other miscellaneous fees. Interchange fees are the portion of the merchant fee assessed by Visa and MasterCard and passed on to us on the purchase volume
on our credit card receivables. Interchange fees decreased to $3.9 million from $6.2 million due to a decrease in the purchase volume on the credit card receivables. Ancillary product
revenue decreased to $3.3 million from $8.7 million due to fewer customers purchasing our products and because we have decreased growth in new accounts within our originated portfolio
during the past four quarters. Our ancillary product income is very sensitive to the number of new accounts we originate as sales of our fee-based products are higher to new customers than
to existing cardholders. Within our originated portfolio, we added approximately 148,000 new accounts through September 30, 2002, versus approximately 549,000 new accounts through
September 30, 2001. Because we have decreased the number of new accounts we have added through our originated portfolio during 2002, our ancillary product income may continue to decline in
2002.

24

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Other Operating Expense

Other operating expense consists of the following for the periods indicated:

|                                    |                               | Three Months Ended
September 30, |        | Nine Months Ended
September 30,
|----------------------------------- | ----------------------------- | -------------------------------- | ------ | -------------------------------
|
|
|Non-servicing salaries and benefits |                               | $                                | 5,663  |                                
|Credit card servicing               |                               |                                  | 29,385 |                                
|Marketing and solicitation          |                               |                                  | 4,361  |                                
|Professional fees                   |                               |                                  | 2,261  |                                
|Data processing                     |                               |                                  | 2,339  |                                
|Net occupancy                       |                               |                                  | 1,365  |                                
|Ancillary product expense           |                               |                                  | 1,009  |                                
|Other                               |                               |                                  | 6,326  |                                
|                                    |                               |                                  |        |                                
|                                    | Total other operating expense |                                  | $      | 52,709                         
|                                    |                               |                                  |        |                                

Other
operating expense for the three months ended September 30, 2002, increased to $52.7 million, from $37.3 million for the three months ended September 30,
2001, and increased to $121.6 million for the nine months ended September 30, 2002, compared to $112.3 million for the nine months ended September 30, 2001. This increase
is due primarily to servicing expenses associated with servicing receivables of the CSG Trust and the Fingerhut Trust. Credit card servicing costs primarily include collections and customer service
expenses. These expenses include in-house collections and customer service expenses as well as costs associated with corresponding with our cardholders. Servicing expense also includes
outsourced collections and customer service expenses.

In
2002, marketing and solicitation costs decreased due to reduced budgeted levels of direct mail, television, telemarketing and internet campaigns. Ancillary product expense decreased
due to a decrease in ancillary product marketing and a decrease in ancillary products sold.

Other
expenses include depreciation, fraud, travel and entertainment, insurance, hiring expense, corporate communications, leased equipment expenses, office supplies and other
miscellaneous expenses. During 2002, expenses in this category, other than fraud, increased incrementally as we added infrastructure to support the growth in managed receivables. Our fraud expense
includes the expense of unauthorized use of the credit cards including identity theft or purchases on lost or stolen cards. To date, we have experienced very little fraud for unauthorized use, and the
total expense has consistently been below 0.20% of average managed receivables.

Income Taxes

Income tax expense was $11.9 million for the three months ended September 30, 2002, compared to income tax expense of $8.0 million for the
three months ended September 30, 2001. Income tax benefit was $6.4 million for the nine months ended September 30, 2002, and income tax expense was $19.4 million for the
nine months ended September 30, 2001. Our effective tax rate was 35.0% for each of the three and nine months ended September 30, 2002, and 2001. Substantially all of our income tax
liabilities at September 30, 2002, were deferred tax liabilities.

Selected Credit Card Data

In August 1997, we began securitizing our credit card receivables. In each securitization, we receive cash, retain an interest in the receivables that are
securitized, retain the rights to receive cash in the future, and retain the rights and obligations associated with servicing the accounts. Securitizations are treated as sales under GAAP. As such, we
remove the securitized receivables from our consolidated

25

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balance sheet. During the second quarter of 2002, we purchased a 50% interest in CSG, which was formed to acquire notes and a certificated interest in CSG Trust, which owns a portfolio of credit card
receivables. The performance of the underlying credit card receivables will affect the future cash flows we actually receive. The information in the following table is presented to reflect credit card
receivables that we have securitized and 50% of the managed receivables underlying the CSG Trust (which reflects our ownership percentage in CSG). We have included 50% of the managed receivables
underlying the CSG Trust because we have a 50% interest in the CSG, which owns the retained interest in the CSG Trust. CSG's cash flows and income are dependent on how the receivables in the CSG Trust
perform, and therefore, our cash flows and income are dependent upon 50% of the managed receivables. In addition to owning our 50% interest in CSG, we are the servicer for 100% of the receivables in
the CSG Trust, and we receive a servicing fee from the CSG Trust which we believe to be adequate compensation for the servicing we perform.

|                               |  | At or for the Three Months Ended |          
|------------------------------ |  | -------------------------------- | ---------
|
|
|
|Period-end managed receivables |  | $                                | 3,028,500
|Period-end managed accounts    |  |                                  | 4,070    
|Average managed receivables    |  | $                                | 3,090,254
|Net interest margin            |  |                                  | 21.4     
|Other credit card income ratio |  |                                  | 4.9      
|Operating ratio                |  |                                  | 8.0      

The net interest margin includes all net interest and late fee income on all outstanding receivables, less the interest expense paid to the
investors and finance charge charge offs. Our other credit card income ratio includes other credit card fees, such as over-limit fees, cash advance fees, maintenance fees, miscellaneous
fees, interchange income and ancillary product income. Our operating ratio includes all expenses associated with our business, net of any servicing income we receive as servicer for the CSG Trust,
other than marketing and solicitation and ancillary product expenses, and is expressed as a percentage of average managed receivables.

The
portfolios we acquired in 1998 were acquired at substantial discounts. The portfolio of credit card receivables owned by the CSG Trust and the portfolio of credit card receivables
underlying the retained interests we acquired from Federated were also acquired at substantial discounts. The presented credit card data excludes some of the acquired receivables and the related
accounts which, at the time of purchase, were in a late delinquency status. Our belief is that these receivables were either in the process of being charged off by the seller due to delinquency or
were likely to be charged off in the near term. In each purchase, these receivables were purchased as part of the portfolio as the sellers desired to sell the entire portfolio. The same
representations and warranties from the sellers were made on these receivables that were made on the entire portfolio; however, the sellers did not provide any representations or warranties as to the
ability or willingness of the cardholders to repay their balances. There is no recourse to any seller in the event the cardholders simply do not pay the account balances that have been acquired.

The
following summarizes the receivables purchased and the related accounts and those excluded from our credit card data:

Purchases occurring in2002

1998(In thousands)Acquired accounts


2,828


201Acquired receivables

$
1,652,559

$
579,700Excluded accounts


269


52Excluded receivables

$
219,778

$
137,200


26

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The
portfolios acquired during 1998 and 2002 were acquired at substantial discounts. A portion of each discount related to the excluded receivables noted above. A portion of each
discount related to the credit quality of the remaining acquired receivables and was calculated as the difference between the face amount of the receivables purchased (less the excluded receivables
described above) and the expected future cash flows expected to be collected. The balance of the discount for each purchase is not needed for credit quality, is referred to as accretable yield, and is
being amortized into net interest margin, using the interest method over the estimated life of each acquired portfolio for purposes of reporting our selected credit card data. The following table
summarizes the discounts associated with the acquired portfolios:

Purchases occurring in2002

1998(In millions)Total face value acquired

$
1,652.5

$
579.7Total discount


759.6


284.5Portion used for excluded receivables


219.8


137.2Portion needed for credit quality


516.8


87.5Portion reflecting accretable yield


23.0


59.8


Our
net interest margins are influenced by a number of factors, including the level of finance charges and late fees billed, the weighted average cost of funds and the level of our
finance charge charge offs. Our net interest margin for the three months ended September 30, 2002, was 21.4% as compared to 13.1% for the three months ended June 30, 2002. The increase
in our net interest margin is due to a decrease in our finance charge charge offs. The receivables acquired during 2002 have higher yields and lower finance charge charge offs than the receivables we
had outstanding prior to these acquisitions. Because certain accounts in late delinquency status and those at or near charge-off at the time of acquisition were excluded from our data, the
recently acquired portfolios experienced less finance charge charge offs in the third quarter than they will in future quarters. We would expect an increase in finance charge charge offs in the future
as the accounts we acquired age into later delinquency buckets and charge-off. This will decrease our net interest margins in the future. Additionally, the reported net interest margin of
13.1% for the quarter ending June 2002 is low due to changes we made during the second quarter in how we estimate accrued interest and fees earned but not yet billed. During the second quarter
of 2002, we revised our accrued balance to better estimate the collectible portion of these fees. The change resulted in a reduction in our second quarter net interest margin of approximately 2.1%.

Each
quarter, we re-underwrite our portfolio to price our products to appropriately reflect the level of each customer's credit risk. As part of this underwriting process,
existing customers may be offered increased or decreased pricing depending on their credit risk as well as their supply and demand for credit. Increases in pricing may increase our net interest
margin, while decreases in pricing may reduce our net interest margin.

Our
other credit card income ratio is calculated by dividing the cash advance fees, membership fees, overlimit fees, interchange, ancillary product fees by the average managed
receivables. This ratio decreased from the second quarter to the third quarter of 2002 primarily due to the addition of the receivables underlying the Federated Trust, which do not have a significant
amount of these other types of credit card fees.

Our
operating ratio includes all costs of operating our business, other than marketing expenses and ancillary product expenses. Our operating ratio fluctuates based on our rate of
receivables growth and the level of our expenditures on our infrastructure, our personnel, our collections and customer service operations, our Internet technology and our database management system.
The operating ratio

27

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increased to 8.0% during the three months ended September 30, 2002, as compared to 7.6% during the three months ended June 30, 2002. This operating ratio increase is due primarily to
additional expenses and conversion costs associated with the integration of the increase in the receivables we are servicing.

Asset Quality

Our delinquency and net charge off rates at any point in time reflect the credit performance of our receivables. The average age of our credit card accounts, the
timing of portfolio purchases, the success of our collection and recovery efforts and general economic conditions affect our delinquency and charge off rates. The average age of our credit card
account portfolio also affects the stability of delinquency and loss rates of the portfolio.

Our
strategy for managing delinquency and credit losses consists of active account management throughout the customer relationship. This strategy includes credit line management and
pricing based on each customer's credit risk.

Delinquencies.Delinquencies have the potential to impact net income in the form of net credit losses. Delinquencies are also
costly in terms of the personnel and resources dedicated to resolving them. A credit card account is contractually delinquent if the minimum payment is not received by the specified date on the
customer's statement. It is our policy to continue to bill interest and fee income on all credit card accounts, except in limited circumstances, until the account and all related receivables, interest
and other fees are charged off. See "the Net Charge Offs" section.

The
following table presents the delinquency trends of all of the credit card receivables underlying our securitizations, as well as, 50% of the receivables underlying the CSG Trust:

|                                                       |  | At or for the Three Months Ended |        
|------------------------------------------------------ |  | -------------------------------- | -------
|
|
|
|Total                                                  |  |                                  |        
|Receivables delinquent:                                |  |                                  |        
|30 to 59 days past due                                 |  | $                                | 155,897
|60 to 89 days past due                                 |  |                                  | 120,868
|90 or more days past due                               |  |                                  | 252,800
|                                                       |  |                                  |        
|Total 30 or more days past due                         |  | $                                | 529,565
|Total 60 or more days past due                         |  | $                                | 373,668
|Receivables delinquent as % of period-end receivables: |  |                                  |        
|30 to 59 days past due                                 |  |                                  | 5.1    
|60 to 89 days past due                                 |  |                                  | 4.0    
|90 or more days past due                               |  |                                  | 8.3    
|                                                       |  |                                  |        
|Total 30 or more days past due                         |  |                                  | 17.4   
|Total 60 or more days past due                         |  |                                  | 12.3   

Our 60 or more days past due delinquency rates have increased from 9.0% at June 30, 2002, to 12.3% at September 30, 2002, primarily
due to higher delinquency rates in the receivables relating to our recent acquisitions and due to a seasonal increase that is expected going into each holiday season. We expect the portfolio
delinquencies to increase as the receivables acquired in connection with our 2002 acquisitions age into later delinquency status during the fourth quarter of 2002 and into 2003.

28

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The
following table presents the delinquency trends of our originated portfolio:

|                                                       |  | At or for the Three Months Ended |        
|------------------------------------------------------ |  | -------------------------------- | -------
|
|
|
|Originated Portfolio                                   |  |                                  |        
|Receivables Delinquent:                                |  |                                  |        
|30 to 59 days past due                                 |  | $                                | 71,630 
|60 to 89 days past due                                 |  |                                  | 57,930 
|90 or more days past due                               |  |                                  | 147,070
|                                                       |  |                                  |        
|Total 30 or more days past due                         |  | $                                | 276,630
|Total 60 or more days past due                         |  | $                                | 205,000
|Receivables delinquent as % of period-end receivables: |  |                                  |        
|30 to 59 days past due                                 |  |                                  | 4.4    
|60 to 89 days past due                                 |  |                                  | 3.5    
|90 or more days past due                               |  |                                  | 9.0    
|                                                       |  |                                  |        
|Total 30 or more days past due                         |  |                                  | 16.9   
|Total 60 or more days past due                         |  |                                  | 12.5   

The 60 or more days past due delinquency rates in our originated portfolio increased to 12.5% at September 30, 2002, from 11.2% at
June 30, 2002. This increase is primarily reflected in the 90 or more days past due category. We anticipate this increase to increase our charge off rate for the fourth quarter of 2002 as these
receivables for which we do not receive a payment will charge off when they age past 180 days. We anticipate fairly stable delinquency rates in our originated portfolio going forward. Our
delinquency rates have increased in general due primarily to the seasoning of receivables that were originated during 2000 and 1999 and the general economic conditions that prevailed during
2001 and the nine months ended September 30, 2002. As the average age of an originated credit card receivables portfolio increases, delinquency rates can be expected to be low during the first
six months of their life; dramatically increase and peak towards the rest of the first year and during the second year; and then decrease and stabilize after year two. We have observed this trend in
the industry as well as within our own originated portfolio.

The
following table presents the delinquency trends of our purchased portfolio:

|                                                       |  | At or for the Three Months Ended |        
|------------------------------------------------------ |  | -------------------------------- | -------
|
|
|
|Purchased Portfolio                                    |  |                                  |        
|Receivables Delinquent:                                |  |                                  |        
|30 to 59 days past due                                 |  | $                                | 59,770 
|60 to 89 days past due                                 |  |                                  | 44,612 
|90 or more days past due                               |  |                                  | 67,516 
|                                                       |  |                                  |        
|Total 30 or more days past due                         |  | $                                | 171,898
|Total 60 or more days past due                         |  | $                                | 112,128
|Receivables delinquent as % of period-end receivables: |  |                                  |        
|30 to 59 days past due                                 |  |                                  | 6.8    
|60 to 89 days past due                                 |  |                                  | 5.1    
|90 or more days past due                               |  |                                  | 7.7    
|                                                       |  |                                  |        
|Total 30 or more days past due                         |  |                                  | 19.6   
|Total 60 or more days past due                         |  |                                  | 12.8   

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The 60 or more days past due delinquency rate in our purchased portfolio increased to 12.8% at September 30, 2002, compared to 9.5% at June 30, 2002. This increase is due
to the higher delinquency rates of the receivables in the Fingerhut Trust. We expected and continue to expect an increase in delinquencies in the future as the accounts age into later delinquency
buckets during the fourth quarter of 2002 and into 2003.

The
following table represents 50% of the receivables underlying the CSG Trust:

|                                                       |  | At or for the
Three Months Ended |       
|------------------------------------------------------ |  | -------------------------------- | ------
|
|
|
|50% of CSG Trust                                       |  |                                  |       
|Receivables delinquent:                                |  |                                  |       
|30 to 59 days past due                                 |  | $                                | 24,497
|60 to 89 days past due                                 |  |                                  | 18,326
|90 or more days past due                               |  |                                  | 38,214
|                                                       |  |                                  |       
|Total 30 or more days past due                         |  | $                                | 81,037
|Total 60 or more days past due                         |  | $                                | 56,540
|Receivables delinquent as % of period-end receivables: |  |                                  |       
|30 to 59 days past due                                 |  |                                  | 4.7   
|60 to 89 days past due                                 |  |                                  | 3.5   
|90 or more days past due                               |  |                                  | 7.4   
|                                                       |  |                                  |       
|Total 30 or more days past due                         |  |                                  | 15.6  
|Total 60 or more days past due                         |  |                                  | 10.9  

The
60 or more days past due delinquencies increased to 10.9% at September 30, 2002, as compared to 2.1% at June 30, 2002. The increase is due to an increase in accounts 90
or more days past due. At June 30, 2002, the majority of the accounts were less than 90 days past due, due to the fact that we excluded accounts that were at or near charge off at the
time of acquisition. We expected and continue to expect an increase in delinquencies in the future as the accounts age into later delinquency buckets during the fourth quarter of 2002 and into 2003.

We
are using our account management strategies on our portfolio, which are intended to reduce the expected increase in delinquency rates as our portfolio continues to mature. Examples of
management strategies include conservative credit line management, purging of inactive accounts and collection strategies intended to optimize the effective account to collector ratio across
delinquency buckets. We measure the success of these efforts by measuring delinquency rates.

Charge Offs.In the tables that follow, gross yield ratio represents finance charges and late fees as a percentage of average
managed loans. The other credit card income ratio represents the aggregate of other fees earned on credit cards (such as annual membership fees, over-limit fees, cash advance fees,
interchange fees, and ancillary products revenues) as a percentage of average managed receivables. Combined gross charge offs represent the aggregate amounts of accrued finance charge, fee, and
principal losses from customers unwilling or unable to pay their receivables balances, as well as bankrupt and deceased customers, less current period recoveries. Net charge offs include only the
principal amount of these losses, net of recoveries; they exclude accrued finance charges and fee charge offs, which are charged against the related income at the time of charge off. Losses from
fraudulent activity in accounts are also excluded from net charge offs and are included separately in other

30

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operating expenses. We generally charge off receivables when they become contractually 180 days past due. However, bankrupt accounts and the accounts of deceased customers without a surviving,
contractually liable individual or an estate large enough to pay the debt in full are charged off within 30 days of notification of the customer's bankruptcy or death and subsequent
confirmation, if applicable.

For
purposes of reporting adjusted charge offs and the adjusted charge off ratios on the managed receivables below, the discount related to credit quality discussed earlier in this
section was utilized to offset a portion of actual net charge offs. Because we treat the credit quality discount component of our acquisition discount as related exclusively to acquired principal
balances, the difference between our net charge offs and our adjusted charge offs for each respective reporting period represents the total dollar amount of our charge offs that were charged against
our credit quality discount during each respective reporting period.

The
following table presents the charge off data for all of the credit card receivables underlying our securitizations as well as 50% of the receivables underlying the CSG Trust:

|                                |  | 2002 |         | 2001 |   | 2000    |  
|------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|
|Gross yield ratio               |  |      | 32.4    | %    |   | 29.9    | %
|Other credit card income ratio  |  |      | 4.9     | %    |   | 7.0     | %
|Combined gross charge offs      |  | $    | 182,964 |      | $ | 143,840 |  
|Net charge offs                 |  | $    | 71,621  |      | $ | 72,979  |  
|Adjusted charge offs            |  | $    | 64,080  |      | $ | 72,979  |  
|Combined gross charge off ratio |  |      | 23.7    | %    |   | 29.6    | %
|Net charge off ratio            |  |      | 9.3     | %    |   | 15.0    | %
|Adjusted charge off ratio       |  |      | 8.3     | %    |   | 15.0    | %

Our generally declining other credit card income ratio can be attributed to (1) our growth slowdown during 2001 and 2002, which resulted in
a declining number of new cardholders, which yield higher ancillary product revenues than our mature cardholder relationships, and (2) the effects of our acquisitionsspecifically,
a large increase in the average managed receivables in the denominator of this ratio without a commensurate increase in other credit card income given that the Fingerhut portfolio, as a closed end
portfolio of specialty retail credit cards, yields little other credit card income.

The
trending increase in combined charge offs and net charge offs and their respective ratios throughout the latter part of 2001 and 2002 can generally be attributed to the expected
seasoning of our originated portfolio into the second and third years of our portfolio's life as discussed above and the effects of the generally poor economic environment that we have seen throughout
2001 and 2002 on our customer base level and their level of purchases and ability to pay. Further analysis of these
trends is provided below with the tables that relate to more specific components of our overall portfolio.

The
sharp declines in the combined gross charge off ratio and the net charge off ratio during the third quarter of 2002 can be attributed to the effects of our 2002 portfolio
acquisitionsspecifically, a large increase in the average managed receivables in the denominator of those ratios for the quarter without a commensurate increase in charge-offs
of accrued finance charges, fees, and principal in that quarter given that we do not record within our managed receivables data any acquired accounts that were at a late stage of delinquency and at or
near charge off by the seller on the date of our acquisitions. The exclusion from our credit card data of acquired accounts at a late stage of delinquency and at or near charge off by the seller means
that there are fewer accounts in the 90-plus day delinquency categories at an acquisition date and accordingly, fewer potential accounts that could potentially charge off until several
months after the acquisition date. We expect that this effect of our portfolio acquisitions will begin to normalize within our charge off data in the fourth quarter of 2002 and will continue to do so
during the first half of 2003; this occurs as some portion of the acquired

31

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accounts season into later stage delinquency status and ultimately are charged off throughout the first six to nine months or so following an acquisition.

The
difference between net charge offs and adjusted net charge offs represents the charge offs associated with acquired receivables that were charged against a credit quality discount
that we establish relative to our acquisitions on the acquisition date thereof. As explained above, it is necessary to establish this credit quality discount to allow us to view the true economic
losses associated with our acquired receivables; because by the acquisition date we know of credit quality issues within a portfolio and because we adjust our purchase price accordingly,
post-acquisition charge offs of known credit quality issues at the acquisition date do not represent economic losses to CompuCredit.

We
continue to focus our resources on refining our credit underwriting standards for new accounts and to increase our focus on collection and post charge off recovery efforts to minimize
losses. See the "Collection Strategies" discussion below.

The
following table presents the charge off data for our originated portfolio:

|                                |  | 2002 |         | 2001 |   | 2000    |  
|------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|
|Gross yield ratio               |  |      | 32.6    | %    |   | 30.4    | %
|Other credit card income ratio  |  |      | 7.6     | %    |   | 7.6     | %
|Combined gross charge offs      |  | $    | 125,700 |      | $ | 140,031 |  
|Net charge offs                 |  | $    | 62,409  |      | $ | 70,347  |  
|Adjusted charge offs            |  | $    | 62,409  |      | $ | 70,347  |  
|Combined gross charge off ratio |  |      | 30.6    | %    |   | 33.5    | %
|Net charge off ratio            |  |      | 15.2    | %    |   | 16.8    | %
|Adjusted charge off ratio       |  |      | 15.2    | %    |   | 16.8    | %

The general trending decline in the other credit card income ratio from 2001 through 2002 is due to our growth slowdown during this period, which
has resulted in a declining number of new cardholders, which yield higher ancillary product revenues than our mature cardholder relationships. Our combined gross charge off ratio has generally trended
higher during the latter part of 2001 and throughout 2002 primarily due to the seasoning of the originated portfolio and the generally poor overall economic conditions that have existed throughout
this time period. During the quarter ended September 30, 2002, however, we experienced lower charge off rates as we had a lower percentage of accounts 90 days or more past due at
June 30, 2002. This amount has increased at September 30, 2002; therefore, we anticipate our charge off rates increasing during the fourth quarter of 2002. As our portfolio matures, we
expect charge off rates to also increase and then stabilize. Typically, as our accounts mature, there are very few charge offs during the first 180 days, then the charge offs are expected to
increase and peak in the second year and then stabilize in the third year and beyond. While we have noticed this general trend within our originated portfolio and believe that this trend line applies
in moderate to good economic environments, our charge offs have not moderated as quickly as expected, we believe primarily due to the generally poor economic conditions that have existed since the end
of 2001 and the effects of these conditions on the ability of our cardholders to make their required payments. We also note that the combined gross charge off ratio and the net charge off ratio were
adversely impacted by reductions during the quarter in the average managed receivables balances used in the denominator of the respective ratio computations.

32

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The
following table presents the charge off data for our purchased portfolios:

|                                |  | 2002 |        | 2001 |   | 2000  |  
|------------------------------- |  | ---- | ------ | ---- | - | ----- | -
|
|Gross yield ratio               |  |      | 34.2   | %    |   | 25.0  | %
|Other credit card income ratio  |  |      | 0.2    | %    |   | 2.7   | %
|Combined gross charge offs      |  | $    | 22,597 |      | $ | 3,398 |  
|Net charge offs                 |  | $    | 4,960  |      | $ | 2,222 |  
|Adjusted charge offs            |  | $    | 1,671  |      | $ | 2,222 |  
|Combined gross charge off ratio |  |      | 9.9    | %    |   | 14.5  | %
|Net charge off ratio            |  |      | 2.2    | %    |   | 9.5   | %
|Adjusted charge off ratio       |  |      | 0.7    | %    |   | 9.5   | %

As one would expect, our combined gross charge offs and net charge offs for our purchased portfolios increased substantially during the third
quarter of 2002 based on our acquisition of the Fingerhut portfolio during the third quarter of 2002. The increases in both of these metrics as compared to the metrics for our 1998 acquisition in the
quarters leading up to the third quarter of 2002 are expected and are attributed principally to two factors. First, the receivables that were acquired in the 1998 acquisition have seasoned in the
several years since their acquisition into receivables with a relatively low rate of charge offs; we expect to experience higher charge offs in the first few years after a portfolio acquisition than
we should experience years later after several of the problem accounts have already been either charged off or closed and liquidated. Second, a higher rate of combined gross charge offs can be
expected for the Fingerhut receivables given the higher gross yield ratio for these receivables relative to those that we acquired in 1998.

The
declines in the other credit card income ratio for the purchased portfolios can be attributed to the effects of our Fingerhut acquisitionspecifically, a large increase
in the average managed receivables in the denominator of this ratio without a commensurate increase in other credit card income given that the Fingerhut portfolio, as a closed end portfolio of
specialty retail credit cards, yields little other credit card income.

The
sharp declines in the combined gross charge off ratio and, the net charge off ratio, during the third quarter of 2002 can also be attributed to the effects of the Fingerhut portfolio
acquisitionspecifically, a large increase in the average managed receivables in the denominator of those ratios for the quarter without a commensurate increase in charge-offs
of accrued finance charges, fees, and principal in that quarter given that we do not record within our managed receivables data any acquired accounts that were at a late stage of delinquency and at or
near charge off by the seller on the date of our acquisitions. The exclusion from our credit card data of acquired accounts at a late stage of delinquency and at or near charge off by the seller means
that there are fewer accounts in the 90-plus day delinquency categories at an acquisition date and accordingly, fewer potential accounts that could potentially charge off until several
months after the acquisition date. This effect of the Fingerhut portfolio acquisition began to normalize within our charge off data in the fourth quarter of 2002 and
will continue to do so during the first half of 2003; this occurs as some portion of the acquired accounts season into later stage delinquency status and ultimately are charged off throughout the
first six to nine months or so following an acquisition.

33

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The
following table presents the charge off data for 50% of the receivables underlying the CSG Trust:

|                                |  | 2002 |       
|------------------------------- |  | ---- | ------
|
|Gross yield ratio               |  |      | 28.8  
|Other credit card income ratio  |  |      | 4.9   
|Combined gross charge offs      |  | $    | 34,667
|Net charge offs                 |  | $    | 4,252 
|Adjusted charge offs            |  | $    | 0     
|Combined gross charge off ratio |  |      | 26.2  
|Net charge off ratio            |  |      | 3.2   
|Adjusted charge off ratio       |  |      | 0.0   

Our
net and combined gross charge off ratios increased at September 30, 2002, as compared to June 30, 2002, primarily due to the fact that at June 30, 2002, there
were very few accounts 90 days or more past due. This was because receivables that were at or near charge off at the time of acquisition were
excluded. The difference between net charge offs and adjusted charge offs is due to the amortization of the discount related to credit quality discussed at the beginning of this "Asset Quality"
section. Because the portfolio has aged to later delinquencies during this quarter, we expect higher net charge offs during the fourth quarter of 2002, and during 2003. As we utilize the entire
discount ascribed to credit quality, we would expect our adjusted charge rate to increase during the second half of 2003.

Credit Losses.For securitized receivables, anticipated credit losses are reflected in the calculations of net securitization
income and the fair value of our retained interests in credit card receivables securitized while the actual charge offs are included in income from retained interests in credit card receivables
securitized. In evaluating credit losses, we take into consideration several factors, including (1) historical charge off and recovery activity by receivables portfolio, (2) recent and
expected delinquency and collection trends by receivables portfolio, (3) the impact of current economic conditions and recent economic trends on the customers' ability to repay and
(4) the risk characteristics of the portfolios.

Collections Strategies.The goal of the collection process is to collect as much money from the cardholder as possible in the
most cost effective and efficient manner. To this end, we employ competitive techniques that focus on having the lowest possible delinquencies for our portfolios. As part of our collection analysis
and consistent with what we believe to be prevalent industry practice, we evaluate our economic investment in the cardholder (i.e., the principal balance) and aggressively attempt to recover our
economic investment made on each receivable.

We
consider managements' experience in operating professional collection agencies, coupled with our proprietary systems, to be a competitive advantage in minimizing delinquencies and bad
debt losses. Our collectors employ various and evolving tools when working with a cardholder, and they routinely test and evaluate new tools in their drive toward improving our collections with the
greatest degree of efficiency possible. These tools include programs under which we may reduce or eliminate a cardholder's APR or waive a certain amount of accrued late fees, provided the cardholder
makes a minimum number or amount of payments. In some instances, we may agree to match a customer's payments, for example, with a commensurate reduction of accrued finance charges or waiver of accrued
late fees. In other situations, we may actually settle with customers and adjust their accrued finance charges and accrued late fees, for example, based on their commitment and their follow through on
their commitment to pay certain portions of the balances that they owe. Our collectors may also decrease a customer's minimum payment once a certain number of minimum payments are received.

34

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We also may occasionally use our marketing group to assist in determining various programs to assist in the collection process. Moreover, we willingly participate in the Consumer Credit Counseling
Service ("CCCS") program by waiving a certain percent of a customer's debt that is considered our "fair share" under the CCCS program.

We
are constantly monitoring and adapting our collection strategies, techniques, technology and training to optimize our efforts to reduce delinquencies and charge offs. We use our
systems to develop these proprietary collection strategies and techniques, which we employ in our operations. We analyze the output from these systems to identify the strategies and techniques that we
believe are most likely
to result in curing a delinquent account in the most cost-effective manner, rather than treating all accounts the same based on the mere passage of time.

Our
collection strategies include utilizing both internal and third-party collectors and creating a competitive process of rewarding the most effective and efficient group of collectors
from within our system and among third-party agencies. We divide our portfolios into various groups that are statistically equivalent and provide these groups of accounts to our various internal and
external collection shops. We compare the results of the internal and external collectors against one another to determine which techniques and which collection groups are producing the best results.

The
various credit card data and charge off statistics above generally reflect our application of customer payments first to accrued finance charges, then to fees, and then to principal.
However, pursuant to the payment application discretion that we have under our cardholder agreements, we have varied from this general payment application priority where appropriate at certain stages
of an account's delinquency to assist our collectors in evaluating our cardholder relationships against our economic investment made in the cardholder relationship. To assist them in making this
evaluation, we have, in certain circumstances and at certain stages of an account's delinquency, applied customer payments first to principal and then to accrued finance charges and fees. Application
of payments in this manner permits our collectors to know real time the degree to which a customer's payments over the life of an account have covered the principal credit extensions to the customer
over the life of the account. This allows our collectors to readily identify our potential "economic" loss associated with a charge off of a particular account (i.e., the excess of principal loaned to
the customer over payments received back from the customer throughout the life of the account). Armed with this information, our collectors will focus on settling with customers in a way that ideally
will best protect us from economic loss on the cardholder relationship. Under this approach, for example, our collectors may forgo collections of accrued finance charges and fees in order to preserve
our opportunity to at least achieve repayment of our principal credit extensions to the cardholder. Our selection of collection techniques, including, for example, whether we apply payments to finance
charges or principal, impacts the statistical performance of our portfolios.

As
in all aspects of our risk management strategies, we compare the results of each of the above strategies with other collection strategies and devote resources to those strategies that
yield the best results. Results are measured based on delinquency rates, expected losses and costs to collect. Existing strategies are then adjusted as suggested by these results. Management believes
that maintaining the ongoing discipline of testing, measuring and adjusting collection strategies will result in minimized bad debt losses and operating expenses. We believe this on-going
evaluation differs from the approach taken by the vast majority of credit grantors that implement collection strategies based on commonly accepted peer group practices.

Liquidity, Funding and Capital Resources

A primary financial goal is to maintain an adequate level of liquidity through active management of assets and liabilities. Because the characteristics of our
assets and liabilities change, liquidity management is a dynamic process affected by the pricing and maturity of our assets and liabilities.

35

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We
finance our business through cash flows from operations, asset securitizations and the issuance of equity:



Securitization Facilities.As of September 30, 2002, we had total securitization facilities of $2.4 billion and
had used approximately $1.8 billion of these facilities. These facilities include the outstanding amounts on floating rate three-year term securitizations of approximately
$441.5 million that were issued during July 2001, approximately $627.4 million that were issued during August 2000, and approximately $427.5 million that were issued
by the Fingerhut Trust in April 1998. Repayment for each one-year securitization facility begins on its maturity date. In the case of our three-year term
securitizations, cash may be accumulated as early as one year prior to the scheduled maturity date. Once accumulation or repayment on any facility begins and until the facility is paid, cash may be

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accumulated within the trust or paid to investors and not paid to us to provide for the repayment of such facility. We have noted the facilities and the maturity dates below.

Maturity Date

Facility Limit(in millions)October 2002(1)

$
306.0February 2003(2)


57.6March 2003


250.0July 2003


300.0September 2003(3)


627.4April 2004 (4)


427.5July 2004(5)


441.5$
2,410.0


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During
the nine months ended September 30, 2002, we generated approximately $141.2 million in cash from the company operations. Cash generated or used by Company's
operations is dependent on the performance of our managed portfolio including charge off rates, net interest margin, payment

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rates and operating expenses. We generated positive cash flow in the third quarter and based on our current expectations of our managed portfolio performance and our expected growth rates during the
fourth quarter of this year, we expect to generate positive cash flow from operations during the fourth quarter as well.

We
continue to explore a wide range of options for liquidity in order for us to maintain our growth and to be prepared for adverse changes in the securitization marketplace. These
options may include revolving lines of credit, selling a subordinated interest in one or more of our securitizations, or the issuance of debt or equity. We may explore other options as well. There
cannot, however, be any assurances that we will be able to obtain liquidity on satisfactory terms. Should we not obtain additional liquidity, we will need to significantly limit our growth and will be
more susceptible to adverse changes in the securitization marketplace.

Our
most significant source of liquidity is the securitization of credit card receivables. The maturity terms of our securitizations vary. We have two three-year
securitizations that we completed in July 2001 and August 2000, several one-year securitizations, and, through the Fingerhut Trust, an amortizing term securitization. Once
repayment begins, payments from customers on credit card receivables are accumulated to repay the investors and are no longer reinvested in new credit card receivables. At that time, our funding
requirements for new credit card receivables will increase accordingly. The occurrence of adverse events may also cause the securitization transactions to amortize earlier than scheduled or may
require additional enhancements. These events include a decline in the portfolio's annualized net yield or a decline in the payment rate, in each case, below set rates, or an increase in delinquencies
or charge offs, in each case, above set rates. The portfolio's annualized net yield typically includes monthly finance charges and past due fees earned on the receivables less monthly servicing fees,
credit losses and cost of funds. These events would accelerate the need to utilize alternative funding sources. If our securitization facilities begin to trap cash flows or otherwise increase their
required credit enhancement and we are unable to obtain additional sources of liquidity (such as other securitization facilities structurally subordinate to those facilities that are trapping cash or
are in their amortization period, other debt or the issuance of additional equity), we would begin to close the credit card accounts that are open to new purchases and thus significantly reduce our
need for any additional cash. Under each of our securitization structures, there has not been an early amortization period; however, and as noted above we expect the Fingerhut Trust
Series 1998-2 issuance to begin an early amortization during the first quarter of 2003. In line with our expectations at the time of our acquisition and projections upon which we
based our purchase price for the Fingerhut Trust retained interests, the Fingerhut Trust Series 1998-2 is expected to trigger an early amortization as a result of either one or both
of the following factors. First, we expect that the principal balance of receivables in the trust will fall below the minimum balance required by this series. Secondly, we expect that the three-month
average annualized net yield will fall below the minimum levels required by this series. As each facility expires or comes up for renewal, there can be no assurance that the facility will be renewed
or if renewed there can be no assurance that the terms will be as favorable as the terms that currently exist. Either of these events could significantly increase our need for additional liquidity.
For additional information regarding our securitization practice, see the "Credit Card Securitizations" section.

Our
most significant uses of cash are marketing expenses, operating expenses and the purchase of the credit card receivables that arise in the accounts that are issued through our
relationship with Columbus Bank & Trust. We raise cash by selling the credit card receivables into our securitization programs. When we sell the receivables we receive cash and a seller's
interest (a portion of which is
regularly referred to as a "retained interest"). Because the amount of cash that we receive is less than the face amount of the receivables, this seller's interest is a use of cash for us. The
receivables in the securitization programs then generate cash as the cardholders make payments on their accounts. This cash is allocated by the securitization agreements to pay for servicing the
receivables, to pay interest on

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the investor's notes, to cover charge offs, and to repay any portion of the investor's notes that are due. Any excess cash after the above allocations is remitted to us.

During
periods of rapid receivables growth, the cash that we raise from selling the credit card receivables and from our retained interests is not by itself enough to cover our uses of
cash. During periods of decline in the receivables, there typically would be enough cash flow to cover our costs and we would generate excess cash flow (depending on the performance of the underlying
receivables). To fund our use of cash associated with our significant growth during 1999, 2000 and 2001, we used the proceeds from our initial public offering and our follow-on offering.
During the fourth quarter of 2001, we used a portion of our revolving credit facility, and we also raised additional cash by selling retained interests and preferred stock that we described more fully
in our 2001 Annual Report on Form 10-K. During 2002, we used our cash proceeds from our fourth quarter 2001 transactions and two notes, of which one is repaid, to fund our
operations.

Absent
changes in the manner in which we securitize credit card receivables, we believe that our asset securitizations, cash flow from operations and cash flows from our investment in
CSG generally will provide adequate liquidity for our business at its current level. However, in order for us to continue growing our business, we will need additional sources of liquidity to fund our
retained interest portion of the growth. In addition, should the terms of the securitizations available to us become less favorable, we also will need additional sources of liquidity to fund our
retained interests. We are particularly concerned about the continued availability of securitizations on terms previously available to us given the recent poor performance of several of our
competitors and the impact of their performance on the marketplace for securitizations.

Stock Repurchase Plan

During the third quarter of 2002, our Board of Directors authorized a program to repurchase up to 5 million shares (approximately 11 percent) of our
outstanding common stock. Under the repurchase plan, we may buy back shares of our common stock from time to time either on the open market or through privately negotiated transactions in compliance
with the Securities and Exchange Commission guidelines. We repurchased 500,000 shares on the open market at a total cost of $2.6 million during the third quarter of 2002.

Critical Accounting Policies

Our financial statements are prepared in accordance with GAAP. These principles are numerous and complex. Our significant accounting policies are summarized in
the notes to our financial statements. In many instances, the application of GAAP requires management to make estimates or to apply subjective principles to particular facts and circumstances. A
variance in the estimates used or a variance in the application or interpretation of GAAP could yield a materially different accounting result. It is impracticable for us to summarize every accounting
principle that requires us to use judgment or estimates in its application. In our Annual Report on Form 10-K for the year ended December 31, 2001, we discuss the two areas,
valuation of retained interests and non-consolidation of special purpose entities, where we believe that the estimations, judgments or interpretations that we have made, if different,
would have yielded the most significant differences in our financial statements, and we urge you to review that discussion. In addition, in Note 5, "Securitizations" to the financial statements
included in this report we updated our sensitivity analysis with respect to valuations.

Forward-Looking Information

All statements in this quarterly report concerning our operating and earnings expectations for fiscal year 2002 and our liquidity expectations, and all other
statements regarding our future performance (including those using words such as "believe," "estimate," "project," "anticipate, or

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"predict"), are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause
our actual results to differ materially from those suggested by these forward-looking statements. These factors include, among others, the following risks and others set forth under the caption "Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2001:



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We
expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate sensitivity is comprised of basis risk, gap risk and market risk. Basis risk is caused by the difference in the interest rate indices used to price
assets and liabilities. Gap risk is caused by the difference in repricing intervals between assets and liabilities. Market risk is the risk of loss from adverse changes in market prices and rates. Our
principal market risk is related to changes in interest rates. This risk affects us directly in our lending and borrowing activities, as well as indirectly as interest rates may impact the payment
performance of our customer.

We
incur basis risk because we fund managed assets at a spread over the commercial paper rate or LIBOR while the rates on the underlying assets are indexed to the prime rate. This basis
risk results from the potential variability in the spread between the prime rate and the commercial paper rate, on the one hand, and LIBOR, on the other hand, over time. We have not hedged our basis
risk due to the cost of hedging this risk versus the benefits from elimination of this risk.

We
attempt to minimize the impact of market interest rate fluctuations on net interest income and net income by regularly evaluating the risk inherent in our asset and liability
structure, especially our off-balance sheet assets and liabilities such as securitized receivables. The impact of market interest rate fluctuations on our securitized receivables is
reflected in the valuation of our retained interests in credit card receivables securitized. This risk arises from continuous changes in our asset and liability mix, changes in market interest rates,
including changes affected by fluctuations in prevailing interest rates, payment trends on our interest-earning assets and payment requirements on our interest-bearing liabilities, and the general
timing of all other cash flows. To manage our direct risk to market interest rates, management actively monitors market interest rates and the interest sensitive components of our securitization
structures. Management seeks to minimize the impact of changes in interest rates on the fair value of assets, net income and cash flow primarily by matching asset and liability repricings. There can
be no assurance that management will be successful in its attempt to manage such risks.

At
September 30, 2002, all of our credit card receivables and other interest-earning assets had variable rate pricing, with receivables carrying annual percentage rates at a
spread over the prime rate, subject to interest rate floors. At September 30, 2002, our securitizations had $1.8 billion in variable rate, interest-bearing liabilities payable to
investors, compared to $1.4 billion as of September 30, 2001. Because both our managed interest-earning assets and substantially all of our managed interest-bearing liabilities reprice
approximately every 30 days, we believe that the impact of a change in interest rates would not be material to our financial performance.

We
believe we are not exposed to any material foreign currency exchange rate risk or commodity price risk.

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ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation
of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of our "disclosure
controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the "Evaluation Date") within 90 days
before the filing date of this quarterly report, have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made known to our chief executive officer and our chief financial officer by others within those entities.

(b)  Changes
in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls and
procedures subsequent to the Evaluation Date.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

CompuCredit is not presently subject to any material litigation and to our knowledge, no material litigation is threatened against us. Routine litigation arising
from the ordinary course of business is not expected to result in material losses to us.

Item 2. Changes in Securities and Use of Proceeds.



Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of our security holders during the three months ended September 30, 2002.

Item 5. Other Information.

None.

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Item 6. Exhibits and Reports on Form 8-K.



|Exhibit Number |  | Description of Exhibit                                                                                                                                                   |  | Incorporated by reference from CompuCredit's SEC filings unless otherwise indicated:
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------
|10.1           |  | Amendment to Affinity Agreement, dated as of September 23, 2002, among Columbus Bank and Trust Company, CompuCredit Corporation and CompuCredit Acquisition Corporation. |  | November 15, 2002, Form 10-Q, exhibit 10.1                                          
|10.2           |  | Pledge and Security Agreement, dated as of September 23, 2002, between CompuCredit Corporation and Columbus Bank and Trust Company                                       |  | November 15, 2002, Form 10-Q, exhibit 10.2                                          
|10.3           |  | Receivables Purchase and Security Agreement, dated as of September 23, 2002, by and between CFC LLC and Columbus Bank and Trust Company                                  |  | November 15, 2002, Form 10-Q, exhibit 10.3                                          
|10.4           |  | Receivables Purchase and Security Agreement, dated as of September 23, 2002, by and between CFC II LLC and Columbus Bank and Trust Company                               |  | November 15, 2002, Form 10-Q, exhibit 10.4                                          
|10.5           |  | Shareholders Agreement, dated as of September 23, 2002, by and between Columbus Bank and Trust Company and CompuCredit Corporation                                       |  | November 15, 2002, Form 10-Q, exhibit 10.5                                          
|10.6           |  | Employment Agreement between CompuCredit Corporation and J.Paul Whitehead, III                                                                                           |  | November 15, 2002, Form 10-Q, exhibit 10.6                                          
|10.7           |  | First Amendment to Amended and Restated Employment Agreement between CompuCredit Corporation and Ashley L. Johnson                                                       |  | November 15, 2002, Form 10-Q, exhibit 10.7                                          



Current
Report on Form 8-K dated August 14, 2002, including Exhibit 2.1, which contains certain information regarding the purchase of
certain assets from Federated Department Stores by a subsidiary of the Registrant.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|               |  | CompuCredit Corporation
|-------------- |  | -----------------------
|March 24, 2003 |  | By                     

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CERTIFICATIONS

I,
David G. Hanna, certify that:

1.    I
have reviewed this quarterly report on Form 10-Q/A of CompuCredit Corporation;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



5.    The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):



6.    The
registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: March 24, 2003 |  | /s/DAVID G. HANNADavid G. Hanna Chief Executive Officer
and Chairman of the Board
|-------------------- |  | ---------------------------------------------------------------------------------

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I, J.Paul Whitehead, III, certify that:

1.    I
have reviewed this quarterly report on Form 10-Q/A of CompuCredit Corporation;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



5.    The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent function):



6.    The
registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: March 24, 2003 |  | /s/J. PAUL WHITEHEAD, IIIJ. Paul Whitehead, III Chief
Financial Officer
|-------------------- |  | -----------------------------------------------------------------------

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