UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO
|--- | ---------------------------------------------------------------------------------------------------------------------------

Commission file number 025751

CompuCredit Corporation

(Exact name of registrant as specified in its charter)

Georgia(State or other jurisdiction
of incorporation or organization)

58-2336689(IRS Employer Identification No.)245 Perimeter Center Parkway, Suite 600, Atlanta, Georgia(Address of principal executive offices)

30346(Zip Code)


(770) 206-6200(Registrant's telephone number, including area code)

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 /x/  No / /

The
number of shares outstanding of the issuer's only class of Common Stock, no par value, (the "Common Stock"), as of May 11, 2001 was 46,514,639 shares.

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COMPUCREDIT CORPORATION  FORM 10-Q  TABLE OF CONTENTS

March 31,
2001

|                              |                                                           |                                                                                       | Page
|----------------------------- | --------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|                              |                                                           |                                                                                       |     
|PART I. FINANCIAL INFORMATION
|                              | Item 1.                                                   | Financial Statements (Unaudited)                                                      |     
|                              | Condensed Consolidated Balance Sheets                     |                                                                                       | 1   
|                              | Condensed Consolidated Statements of Income               |                                                                                       | 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 |     
|                              | Item 3.                                                   | Quantitative and Qualitative Disclosures About Market Risk                            |     
|PART II. OTHER INFORMATION   
|                              | Item 1.                                                   | Legal Proceedings                                                                     |     
|                              | Item 2.                                                   | Changes in Securities and Use of Proceeds                                             |     
|                              | Item 3.                                                   | Defaults Upon Senior Securities                                                       |     
|                              | Item 4.                                                   | Submission of Matters to a Vote of Security Holders                                   |     
|                              | Item 5.                                                   | Other Information                                                                     |     
|                              | Item 6.                                                   | Exhibits and Reports on Form 8-K                                                      |     
|                              | Signatures                                                |                                                                                       | 23  

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Part I  FINANCIAL INFORMATION

Item 1. Financial Statements

CompuCredit Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

|                                                                                                                                     |  | (Unaudited) |         | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ------- | 
|
|
|Assets                                                                                                                               |  |             |         | 
|Cash and cash equivalents                                                                                                            |  | $           | 73,246  | 
|Retained interests in credit card receivables securitized                                                                            |  |             | 328,681 | 
|Accrued interest and fees                                                                                                            |  |             | 25,572  | 
|                                                                                                                                     |  |             |         | 
|Net credit card receivables                                                                                                          |  |             | 354,253 | 
|Amounts due from securitization                                                                                                      |  |             | 11,900  | 
|Deferred costs, net                                                                                                                  |  |             | 7,915   | 
|Software, furniture, fixtures and equipment, net                                                                                     |  |             | 17,609  | 
|Prepaid expenses                                                                                                                     |  |             | 608     | 
|Other assets                                                                                                                         |  |             | 6,142   | 
|                                                                                                                                     |  |             |         | 
|Total assets                                                                                                                         |  | $           | 471,673 | 
|                                                                                                                                     |  |             |         | 
|Liabilities                                                                                                                          |  |             |         | 
|Accrued expenses                                                                                                                     |  | $           | 17,025  | 
|Deferred revenue                                                                                                                     |  |             | 5,082   | 
|Income tax liability                                                                                                                 |  |             | 39,009  | 
|                                                                                                                                     |  |             |         | 
|Total liabilities                                                                                                                    |  |             | 61,116  | 
|Shareholders' equity                                                                                                                 |  |             |         | 
|Common stock, no par value, 150,000,000 shares authorized, 46,514,639 issued and outstanding at March 31, 2001 and December 31, 2000 |  |             |        | 
|Additional paid-in capital                                                                                                           |  |             | 239,789 | 
|Retained earnings                                                                                                                    |  |             | 170,768 | 
|                                                                                                                                     |  |             |         | 
|Total shareholders' equity                                                                                                           |  |             | 410,557 | 
|                                                                                                                                     |  |             |         | 
|Total liabilities and shareholders' equity                                                                                           |  | $           | 471,673 | 
|                                                                                                                                     |  |             |         | 

See accompanying notes.

1

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CompuCredit Corporation and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)

|                                               |                                                                       | For the Three
Months Ended
March 31, |       
|---------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------ | ------
|
|
|Interest income                                |                                                                       | $                                    | 1,009 
|Other operating income:                        |                                                                       |                                      |       
|                                               | Securitization income, net                                            |                                      |       
|                                               | Income from retained interests in credit card receivables securitized |                                      |       
|                                               | Servicing income                                                      |                                      |       
|                                               | Other credit card fees                                                |                                      |       
|                                               | Interchange fees                                                      |                                      |       
|                                               | Ancillary products                                                    |                                      |       
|                                               |                                                                       |                                      |       
|Total other operating income                   |                                                                       |                                      | 49,042
|Other operating expense:                       |                                                                       |                                      |       
|                                               | Salaries and benefits                                                 |                                      |       
|                                               | Credit card servicing                                                 |                                      |       
|                                               | Marketing and solicitation                                            |                                      |       
|                                               | Professional fees                                                     |                                      |       
|                                               | Data processing                                                       |                                      |       
|                                               | Net occupancy                                                         |                                      |       
|                                               | Ancillary product expense                                             |                                      |       
|                                               | Other                                                                 |                                      |       
|                                               |                                                                       |                                      |       
|Total other operating expense                  |                                                                       |                                      | 40,242
|Income before income taxes                     |                                                                       |                                      | 9,809 
|Income tax expense                             |                                                                       |                                      | (3,433
|                                               |                                                                       |                                      |       
|Net income                                     |                                                                       | $                                    | 6,376 
|                                               |                                                                       |                                      |       
|Net income attributable to common shareholders |                                                                       | $                                    | 6,376 
|                                               |                                                                       |                                      |       
|Net income per common share  basic            |                                                                       | $                                    | 0.14  
|                                               |                                                                       |                                      |       
|Net income per common share  diluted          |                                                                       | $                                    | 0.14  
|                                               |                                                                       |                                      |       

See accompanying notes.

2

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CompuCredit Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity (Unaudited)
For the Three Months Ended March 31, 2001 and 2000

|                           |                          | Common Stock |           |   |   |   |   |        
|-------------------------- | ------------------------ | ------------ | --------- | - | - | - | - | -------
|
|
|
|Balance at January 1, 2000 |                          | 41,834,725   |           | $ |  |   | $ | 93,374 
|                           | Issuance of common stock |              | 4,600,000 |   |   |  |   |        
|                           | Net income               |              |          |   |   |  |   |        
|                           |                          |              |           |   |   |   |   |        
|Balance at March 31, 2000  |                          | 46,434,725   |           | $ |  |   | $ | 238,616
|                           |                          |              |           |   |   |   |   |        
|Balance at January 1, 2001 |                          | 46,514,639   |           | $ |  |   | $ | 239,789
|                           | Net income               |              |          |   |   |  |   |        
|                           |                          |              |           |   |   |   |   |        
|Balance at March 31, 2001  |                          | 46,514,639   |           | $ |  |   | $ | 239,789
|                           |                          |              |           |   |   |   |   |        

See accompanying notes.

3

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

|                                                                                  |                                              | For the Three Months Ended
March 31, |        
|--------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------ | -------
|
|
|Operating activities                                                              |                                              |                                      |        
|Net income                                                                        |                                              | $                                    | 6,376  
|Adjustments to reconcile net income to net cash provided by operating activities: |                                              |                                      |        
|                                                                                  | Depreciation expense                         |                                      |        
|                                                                                  | Amortization expense                         |                                      |        
|                                                                                  | Securitization income                        |                                      |        
|                                                                                  | Retained interests income adjustment, net    |                                      |        
|                                                                                  | Changes in operating assets and liabilities: |                                      |        
|                                                                                  |                                              | Restricted cash                      |        
|                                                                                  |                                              | Accrued interest and fees            |        
|                                                                                  |                                              | Amounts due from securitization      |        
|                                                                                  |                                              | Deferred costs                       |        
|                                                                                  |                                              | Prepaid expenses                     |        
|                                                                                  |                                              | Accrued expenses                     |        
|                                                                                  |                                              | Deferred revenue                     |        
|                                                                                  |                                              | Income tax liability                 |        
|                                                                                  |                                              | Other                                |        
|                                                                                  |                                              |                                      |        
|Net cash provided by operating activities                                         |                                              |                                      | 16,202 
|Investing activities                                                              |                                              |                                      |        
|Net loans originated or purchased                                                 |                                              |                                      | (91,497
|Recoveries of loans previously charged off                                        |                                              |                                      | 5,794  
|Net proceeds from securitization of loans                                         |                                              |                                      | 75,510 
|Proceeds from retained interests in credit card receivables securitized           |                                              |                                      | 3,284  
|Purchases of and development of software, furniture, fixtures and equipment       |                                              |                                      | (5,027 
|                                                                                  |                                              |                                      |        
|Net cash used in investing activities                                             |                                              |                                      | (11,936
|Financing activities                                                              |                                              |                                      |        
|Net proceeds from issuance of common stock                                        |                                              |                                      |       
|                                                                                  |                                              |                                      |        
|Net cash provided by financing activities                                         |                                              |                                      |       
|Net increase in cash                                                              |                                              |                                      | 4,266  
|Cash and cash equivalents at beginning of period                                  |                                              |                                      | 68,980 
|                                                                                  |                                              |                                      |        
|Cash and cash equivalents at end of period                                        |                                              | $                                    | 73,246 
|                                                                                  |                                              |                                      |        

See accompanying notes.

4

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CompuCredit Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2001

1. Organization and Basis of Presentation

The condensed consolidated financial statements include the accounts of CompuCredit Corporation and its subsidiaries (collectively, the "Company"). All
significant intercompany balances and transactions have been eliminated for financial reporting purposes. The Company was formed for the purpose of offering unsecured credit cards and fee based
products and services to a specialized segment of the consumer credit market. The Company markets unsecured general purpose credit cards through direct mail, television, telemarketing and on the
Internet through its wholly owned subsidiary, AspireCard.com. The Company has a contractual arrangement with a third party financial institution pursuant to which the financial institution issues
general purpose credit cards, and the Company purchases the receivables relating to such accounts. We also market to our cardholders other fee-based products including card registration,
memberships in preferred buying clubs, magazines, 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 for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes 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 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, payment and discount rates have a significant impact on the gains recorded on securitizations and the value of retained interests in credit card
receivables securitized. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results for the year ended December 31, 2001. The notes to the
financial statements for the year ended December 31, 2000 contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission should be
read in conjunction with these condensed consolidated financial statements.

Certain
amounts in prior period financial statements have been reclassified to conform to the current period presentation.

2. Significant Accounting Policies

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

Asset Securitization

The Company has securitized a substantial portion of its credit card receivables. When the Company sells receivables in securitizations, it retains certain
undivided ownership interests, interest-only strips and servicing rights. Although the Company continues to service the underlying credit card accounts and maintains the client
relationships, these transactions 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. Amounts Due from Securitization include payments recently received on the securitized

5

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receivables that are still held by the securitization structure but are payable to the Company within the next 30 days.

Under
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement
No. 140"), gains are recognized at the time of each sale. These gains are based on the estimated fair value of the retained interests, which are based on the estimated present value of the cash
flows the Company expects to receive over the estimated outstanding life of the receivables. These cash flows 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
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"). Certain estimates used in the
determination of the gains 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 in the near term.

Recently Issued Accounting Standards

In September 2000, the FASB issued Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, that replaces, in its entirety, FASB Statement 125. Although Statement 140 has changed many of the rules regarding securitizations, it continues to require an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered in accordance with the criteria provided in the
statement. As required, the Company will apply the new rules prospectively to transactions beginning after March 31, 2001. Adoption of this Statement will not have a material impact on the
Company's financial statements.

On
January 1, 2001 the Company adopted Financial Accounting Standard ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement
establishes new accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities on the
balance sheet and measure those derivatives at fair value. The accounting for the gains or losses resulting from changes in the value of those derivatives will depend on the intended use of the
derivative and whether it qualifies for hedge accounting. FAS 133, as amended by statement 138, was required to be adopted for fiscal years beginning after June 15, 2000. Adoption of
this Statement did not have a material impact on the Company's financial statements.

On
January 1, 2001 the Company adopted Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. This SAB explains how the SEC staff believes
existing Revenue Recognition rules should be applied. In June 2000, the SEC issued SAB 101B, which delays the implementation date of SAB 101 until no later than the fourth fiscal quarter of
fiscal years beginning after December 15, 1999. Adoption of this Standard did not have a material impact on the Company's financial statements.

3. Securitizations

The Company securitizes a substantial portion of its Company issued credit card receivables through the CompuCredit Credit Card Master Note Business Trust and
the CompuCredit Credit Card

6

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Master Note Business Trust II (collectively, the "Master Trust"). Credit card receivables are transferred to the Master Trust, which issues notes representing undivided ownership interests in the
assets of the Master Trust. The Company also securitized two purchased portfolios of credit card receivables through securitization structures with third party commercial paper conduits. Generally
Accepted Accounting
Principles ("GAAP") require the Company to treat the transfers as sales and the receivables are removed from the consolidated balance sheet. The securitization transactions do not affect the
relationship the Company has with its customers and the Company continues to service the credit card receivables. As of March 31, 2001, the Company receives servicing fees equal to either the
cost of servicing the portfolio plus 0.1% per year of the securitized principal receivables or 5% of cash collected, depending on the securitization. The Company either performs the servicing or
contracts with third party service providers.

The
table below summarizes the Company's securitization activity:

For the Three Months Ended
March 312001

2000(In thousands)Proceeds from securitizations

$
78,794

$
132,027Excess cash flows received on retained interests


49,904


44,016Pretax securitization income


266


1,789


The
investors in the Company's securitization transactions have no recourse against the Company for its clients' 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.

As
an additional credit enhancement on CompuCredit's securitization structures associated with its purchased receivables, CompuCredit pays a portion of the excess cash collected on
the receivables to the investors as an accelerated amortization payment. This excess cash that the Company paid to the investors totaled $3.3 million and $4.7 million for the three
months ended March 31, 2001 and 2000, respectively. The decrease in 2001 is due to a reduction in the amortization payments required under its agreements and due to the decrease in the
purchased portfolio receivables outstanding. The Company's valuation of its retained interests incorporates this credit enhancement, and the Company estimates that it takes approximately three to five
years from the inception of each securitization structure to completely repay the investors using excess cash collected on the receivables. Once the investors are repaid, any remaining receivables and
funds held in the securitization structure will be payable to the Company.

The
pretax securitization income recorded by the Company and the measurement of the Company's interest-only strips 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 loan becomes 180 days past due, although earlier charge-offs may occur specifically related to accounts of bankrupt or

7

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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 estimated fair market value with changes in fair value included in income as they are classified as trading
securities. Since quoted market prices are generally not available, the Company estimates fair value based on the estimated present value of future cash flows using management's best estimates of key
assumptions. Changes in any of these assumptions could impact the fair value estimates and the realization of future cash flows. The weighted average key assumptions used to estimate the fair value of
the Company's retained interests as of the end of each three-month period are presented below:

March 312001

2000Payment rate (monthly)

9.0
%
8.2
%Expected credit loss rate (annualized)

11.8

10.4Residual cash flows discount rate

16.4

18.3


The
return to the investors in the securitizations is based on management's estimates of forward yield curves. The changes in the weighted average assumptions from March 31,
2000 to March 31, 2001 are
primarily due to the change in the mix of CompuCredit's originated and purchased receivables. Since the receivables originated by CompuCredit have historically performed better than the purchased
portfolio, the significant growth experienced in the originated portfolio has caused the weighted average assumptions of the payment rate and the residual cash flows discount rate to improve as of
March 31, 2001. The expected credit loss rate (annualized) has increased as the originated portfolio matures.

The
Company's managed loan portfolio is comprised of retained interests in loans securitized and the investors' share of securitized credit card loans. The investors' share of
securitized credit card loans is not an asset to the Company. Therefore, the company does not show it on the consolidated balance sheets. The following table summarizes the balances included in the
managed loan portfolio.

March 312001

2000(In thousands)Retained interests in loans securitized(Seller's Interest)

$
297,081

$
193,642Investors' interests in loans securitizedNot included on Balance Sheet


1,292,503


832,457Total managed loans

$
1,589,584

$
1,026,099


8

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At
March 31, 2001, 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 ($ in thousands):

Credit card
loansPayment rate (monthly)


9.0
%Impact on fair value of 5% adverse change

$
(2,748
)Impact on fair value of 10% adverse change

$
(5,222
)Expected credit loss rate (annualized)


11.8
%Impact on fair value of 5% adverse change

$
(6,033
)Impact on fair value of 10% adverse change

$
(10,282
)Residual cashflows discount rate


16.4
%Impact on fair value of 5% adverse change

$
(2,909
)Impact on fair value of 10% adverse change

$
(3,266
)


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

4. Earnings Per Share

The following table sets forth the computation of earnings per share:

For the Three Months Ended
March 31,2001

2000(In thousands, except per share data)Numerator:Net income

$
6,376

$
23,991Denominator:Denominator for basic earnings per shareWeighted-average shares outstanding


46,515


44,109Effect of dilutive stock options


83


200Denominator for diluted earnings per shareAdjusted weighted-average shares


46,598


44,309Basic earnings per share

$
0.14

$
0.54Diluted earnings per share

$
0.14

$
0.54


In
February 2000, the Company issued 4,600,000 shares of common stock at $33.50 per share in a follow-on offering.

9

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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.

General

CompuCredit Corporation 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 credit cards through direct mail, television, telemarketing and the Internet.

Consumer
credit product revenues consist of (1) interest income and late fees on outstanding revolving credit card receivables, (2) credit card fees, including annual
membership, cash advance, over-limit and other credit card fees, and (3) interchange fees, which 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. Non-interest income includes securitization income, income from retained interests in credit card receivables securitized,
servicing income and fee-based product revenues. Our primary expenses include the costs of funding our receivables, credit losses and operating expenses, including employee compensation,
account solicitation and marketing expenses, data processing and servicing expenses and income taxes.

On
April 13, 2000, the Company acquired Citadel Group, Inc. ("Citadel") of Daytona Beach, Florida. The transaction was accounted for as a pooling of interests through
the exchange of 1,783,333 shares of the Company's common stock for all of the outstanding stock of Citadel. All amounts have been restated to reflect the financial position, results of operations and
cash flows of the respective companies as though the companies were combined for all periods presented. Citadel currently markets fee-based products and services to CompuCredit's
cardholders.

Credit Card Securitizations

We have securitized a substantial portion of our credit card receivables. Our securitization transactions involve the sale of our credit card receivables to a
separate entity. The entity is either a corporation or
a trust that has been created by us exclusively to purchase receivables. The entity purchases the receivables from us using cash generated from selling interests in the receivables to investors.

We
have entered into agreements with investors which specify the conditions and price of each sale including the total amount of receivables the investor is committing to purchase
from us. The agreements include terms and conditions that are similar to those included in bank loan agreements and define our duties to service the securitized receivables. We are required by the
agreements to remit collections on the receivables to the investors in the securitizations. The agreements also include representations and warranties regarding the receivables and financial
performance measures that must be met in order for us to continue to securitize receivables and in order for us to receive any additional cash from the collections of the receivables. 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 such accounts.

After
an initial purchase 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. 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 amortization period may begin at a specific point in time determined under the agreements or it may be caused by specified events
including deterioration in the quality of

10

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the receivables purchased or a material adverse change in our financial condition. A breach of a representation or warranty made by us could also cause an amortization period to begin.

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 less than, or at a discount from, their outstanding balances. 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 Seller's Interest. The investors in the securitized receivables have no recourse against us for our cardholders' failure to pay their credit card loans; however, most of our Seller's
Interests are subordinated to the investors' interests until the investors have been fully repaid. This means that our Seller's Interests will first absorb any losses due to cardholders' failure to
repay their balances 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 rates, fees and other charges paid on the receivables, and their delinquency and loss rates. In each securitization, we receive cash, retain a Seller's Interest, retain
the rights to receive cash in the future and service the accounts. Securitizations are treated as sales under Generally Accepted Accounting Principles ("GAAP"). As such, we remove the securitized
loans 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
subordinated interest after payments to investors are made. The collections received are recorded as Income from Retained Interests in Credit Card Receivables Securitized. The Seller's Interest equals
the amount of assets included in the securitization structure less the investors' ownership. Additionally, we recognize an "interest-only" ("I/O") strip, which is the present value of the
projected excess cash flows the receivables will produce during its life. The excess cash flow is the excess of the finance charges and late fees generated by the securitized receivables over the
related credit losses, interest paid to investors, servicing costs and certain other expenses. The income resulting from the I/O strip is recorded as Securitization Income on our Income Statement. The
I/O strip and the Seller's Interest are included in Retained Interests in Credit Card Receivables Securitized on our Consolidated Balance Sheet. Amounts Due from Securitization on our balance sheet
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.

All
of our securitization transactions were accounted for under Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("Statement No. 125") and after March 31, 2001, will be accounted for under Financial Accounting Standards No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement No. 140"). Under Statement No. 140 and its predecessor, Statement No. 125, gains are recognized at
the time of each sale. These gains are based on the estimated fair value of the I/O strip.

The
securitization transactions do not affect the relationship we have with our customers, and we continue to service the credit card receivables. As of March 31, 2001, we
received servicing fees equal to either the cost of servicing the portfolio plus 0.1% per year of the securitized principal receivables or 5% of cash collected, depending on the securitization. We
either provide the servicing or contract with third party service providers.

11

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The table below summarizes our securitization activity.

For the Three Months Ended March 312001

2000(In thousands)Proceeds from securitizations

$
78,794

$
132,027Excess cash flows received on retained interests


49,904


44,016Pretax securitization income


266


1,789


Finance
charges and past due fees collected in excess of servicing fees and periodic interest payments are available to absorb the investors' share of credit losses. Investors bear
the risk of credit losses on the underlying receivables to the extent that credit losses, servicing fees and periodic interest payments required by the investors exceed finance charges and past due
fees earned on the receivables and our retained interests in the receivables pool. Investors in our securitization programs are generally entitled to receive principal payments either through monthly
payments during an amortization period or in one lump sum from the proceeds of issuances of additional notes or participation interests in the receivables pool.

As
additional credit support on our securitization structures associated with our purchased receivables, we pay a portion of the excess cash collected to the investors as an
accelerated amortization payment. This excess cash totaled $3.3 million for the three months ended March 31, 2001 and $4.7 million for the three months ended March 31,
2000. The decrease in 2001 is due to a reduction in the amortization payments required under our agreements and due to the decrease in the size of the purchased portfolios. Once the investors are
repaid, any remaining receivables and funds held in the buying entity are payable to us.

Managed Loan Portfolio

We analyze our financial performance on a "managed loan" portfolio basis, as if the receivables securitized were still on our balance sheet, because the
performance of our securitized receivables will affect the future cash flows we receive on the receivables.

The
table set forth below indicates our net interest margin and our operating ratio on a managed loan basis as if the receivables securitized were still on our Balance Sheet. The
table also indicates the
ending and average managed loans and the number of managed accounts. Interest income for us on a managed loan basis includes all net interest and late fee income on all outstanding receivables less
all costs associated with securitizations, including the interest expense paid to the investors. Our operating ratio includes all expenses associated with our business on a managed basis, other than
marketing expenses and ancillary product expenses, and is expressed as a percentage of average managed loans.

During
1998, we purchased two portfolios of credit card receivables with outstanding receivables balances at the time of purchase of $579.7 million. The presented managed loan
data excludes certain of these receivables and the related accounts which, at the time of purchase, were closed accounts in a certain delinquency status. Management believes that these accounts 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. As a result, management believes that it would have had very little
opportunity to influence the delinquency or default rates of these accounts prior to charge-off. We therefore excluded these accounts, the receivables and any activity in the accounts
since the date of purchase from any managed loan data presented. At the time of the purchases, there were approximately 52,000 such accounts, representing 25.9% of the accounts purchased and
$137.2 million of the $579.7 million outstanding receivables purchased.

12

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The portfolios acquired during 1998 were purchased at substantial discounts. A portion of the discount at the time of purchase related to the credit quality of the remaining loans in
the portfolio and reflects the difference between the purchased face amount of the receivables and the future cash collections management expects to receive with respect to the purchased face amount.
The substantial discount we received on the purchased portfolio exceeds the discount we ascribed to the credit quality of the purchased receivables. We are reporting this excess discount as additional
interest income over the life of the portfolio for managed loan reporting and are amortizing it into interest income using the interest method.

|                                                 |  | At or for the Quarter Ended |        
|------------------------------------------------ |  | --------------------------- | -------
|
|
|Period-end total managed loans                   |  | $                           | 898,691
|Period-end total managed accounts                |  |                             | 1,181  
|Total average managed loan portfolio             |  | $                           | 769,624
|Net interest margin on managed loans, annualized |  |                             | 23.6   
|Operating ratio                                  |  |                             | 8.7    

Our net interest margins are influenced by a number of factors, including the timing and size of portfolio purchases and the level of our
charge-offs. Purchased portfolios typically have lower interest rates and late fees until we convert the accounts to our credit card. When we convert accounts to our credit card, we
reprice the accounts to interest rates and fees that are similar to those on accounts we have originated through our solicitation process. We typically convert the accounts within six months of
purchase. Fluctuations in our charge-off ratios also affect our net interest margins. At charge-off, the
interest and late fees on an account are deducted from interest income in the current period, which is why net interest margin decreased during the fourth quarter of 2000 and the first quarter of
2001.

Our
operating ratio includes all costs of operating our business on a managed loan basis, other than marketing expenses and ancillary product expenses. Our operating ratio increased
1.2% from December 30, 2000 to March 31, 2001 as we spent more on our infrastructure, our personnel, our collections operations, our Internet technology, our credit card servicing and
our database management system to accommodate our operational needs and anticipated portfolio growth.

Results of Operations

Net income for the three months ended March 31, 2001 was $6.4 million, or $0.14 per share on a diluted basis, a decrease of approximately
$17.6 million from net income of $24.0 million for the three months ended March 31, 2000. The decrease in net income was primarily the result of the decrease in income from
retained interests in credit card receivables securitized of approximately $17 million. Income from retained interests in credit card receivables securitized decreased because of an increase in
charge offs during the quarter. The increase in charge offs is due to the seasoning of the originated portfolio. The seasoning of a portfolio takes place as the average age of the portfolio increases.
Delinquency rates can be expected first to increase, then peak and finally decrease and stabilize thereafter.

The
largest component of our income comes from the profit generated from our managed receivables. Growth in managed receivables cannot be predicted with certainty. In general,
receivables growth is a product of our marketing and other strategic efforts. However, it is also dependent upon a number of factors that we are not able to control, such as levels of consumer
spending, competition and general economic circumstances.

Other
operating income, excluding securitization income and income from retained interests in credit card receivables securitized, increased $10.1 million from
$23.2 million for the three months ended March 31, 2000 to $33.3 million for the three months ended March 31, 2001. The increases are

13

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primarily due to the increase in other credit card fees, which includes annual membership, over-limit and cash advance fees. The revenue associated with these fees increased as a result of
the growth of our managed loans and an increase in our number of managed accounts.

Other
operating expenses increased to $40.2 million for the three months ended March 31, 2001, from $24.0 million for the three months ended March 31,
2000, an increase of approximately $16.2 million. These increases primarily reflect the increase in the cost of operations associated with the growth in
our business, including additional marketing and solicitation expenses, additional servicing costs and ancillary product expenses.

Interest Income

Interest income consists of interest income earned on cash and cash equivalents. Interest income totaled $1.0 million for the three months ended
March 31, 2001 and totaled $1.4 million for the three months ended March 31, 2000. The decrease in interest income is attributable to the usage of the cash proceeds we received
from our first quarter 2000 follow-on public offering to increase the number of accounts in our portfolios and improve infrastructure.

Net Securitization Income and Income from Retained Interests in Credit Card Receivables Securitized

Retained Interests in Credit Card Receivables Securitized are calculated in accordance with the provisions of Statement No. 125 (See Recent Accounting
Pronouncements for additional information concerning Statement No. 125). These retained interests are subsequently accounted for as trading securities and reported at estimated fair market
value in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("Statement No. 115"). See "Credit Card
Securitizations."

Net
securitization income is recognized at the time the receivables are securitized under Statement No. 125. The income is based on the estimated fair value of the I/O strip.
Net securitization income for the three months ended March 31, 2001 was $266,000, compared to $1.8 million for the three months ended March 31, 2000. Net securitization income
decreased due to the seasoning of the originated portfolio.

The
I/O strip is estimated by discounting the expected future cash flows from the receivables that have been securitized at rates which we believe are consistent with those that would
be used by an independent third party. Since quoted market prices are generally not available for the I/O strip, the fair value is based on the estimated present value of future cash flows using
management's best 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
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 the I/O strip as well as the
realization of expected future cash flows:

At March 312001

2000Payment rate (monthly)

9.0
%
8.2
%Expected credit loss rate (annualized)

11.8

10.4Residual cash flows discount rate

16.4

18.3


The
changes in the weighted average assumptions from March 31, 2000 to March 31, 2001 are primarily due to the change in the mix of our originated and purchased
receivables. The seasoning of the originated portfolio has caused the weighted average assumption for credit loss rate to increase as of March 31, 2001. 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

14

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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 our credit risk models. The returns to the investors in the securitizations are based on management's estimates of forward yield curves.

Other Operating Income

Other operating income, excluding securitization income and income from retained interests in credit card receivables securitized, consists of the following
for the periods indicated:

For the Three Months Ended
March 312001

2000(In thousands)Servicing income

$
1,687

$
2,214Other credit card fees


18,713


9,908Interchange fees


5,361


4,093Ancillary products


7,570


7,005Total other operating income

$
33,331

$
23,220


The
increase in other operating income to $33.3 million for the three months ended March 31, 2001 from $23.2 million for the three months ended March 31,
2000 relates to the increase in our managed receivables, which increased from $1.026 billion at March 31, 2000 to $1.590 billion at March 31, 2001. The number of accounts
increased from 1.4 million at March 31, 2000 to 2.3 million at March 31, 2001. Strong growth in new customers, an increase in the number of customers purchasing our
fee-based products and an increase in credit card fees, such as annual, late, over-limit and cash advance fees resulted in the increase in other operating income.

A
substantial portion of the servicing income relates to our purchased portfolios. Because the size of our purchased portfolios decreased, there was a corresponding decrease in
servicing income. Interchange fees are the portion of the merchant fee assessed by Visa and Mastercard and passed on to us based on the purchase volume on our credit card receivables.

Other Operating Expense

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

For the Three Months Ended
March 312001

2000(In thousands)Salaries and benefits

$
2,283

$
1,201Credit card servicing


14,129


5,087Marketing and solicitation


12,131


11,774Professional fees


982


704Data processing


2,617


1,155Net occupancy


805


242Ancillary product expense


3,967


1,862Other


3,328


1,237Total other operating expense

$
40,242

$
23,262


Other
operating expense for the three months ended March 31, 2001 increased to $40.2 million from $23.3 million for the three months ended March 31, 2000
due primarily to increases in credit card

15

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servicing, salaries and benefits and data processing expenses. Servicing costs increased due to the increase in our managed receivables. Salaries and benefits, professional fees, data processing, net
occupancy and other expenses increased as our operations expanded to service the increased number of accounts. Ancillary product expenses increased due to the additional sales of products and
services, including insurance products and memberships, that took place during the three months ended March 31, 2001 as compared to the three months ended March 31, 2000.

Income Taxes

Income tax expense for the three months ended March 31, 2001 was $3.4 million and for the three months ended March 31, 2000 was
$11.5 million. Our effective tax rate was 35.0% for the three months ended March 31, 2001 and 32.5% for the three months ended March 31, 2000.

Asset Quality

Our delinquency and net loan 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 affects the stability of delinquency and loss rates of the portfolio.

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

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 accrue interest and fee income on all credit card accounts, except in limited circumstances, until the account and all related loans, interest
and other fees are charged off. See "Net Charge-Offs."

The
following table presents the delinquency trends of our credit card receivables portfolio on a managed loan portfolio basis:

At the Quarter Ended(Dollars in thousands)

|                  |               | December 31,
1999 |        | March 31,
2000 |     | June 30,
2000 |   | September 30,
2000 |        | December 31,
2000 |     | March 31,
2001 |        
|----------------- | ------------- | ----------------- | ------ | -------------- | --- | ------------- | - | ------------------ | ------ | ----------------- | --- | -------------- | -------
|
|Loans Delinquent: |               |                   |        |                |     |               |   |                    |        |                   |     |                |        
|                  | 30 to 59 days |                   | $      | 29,700         |     | 3.3           | % | $                  | 31,270 |                   | 3.0 | %              | $      
|                  | 60 to 89 days |                   |        | 20,573         |     | 2.3           |   |                    | 23,995 |                   | 2.4 |                |        
|                  | 90 or more    |                   |        | 37,061         |     | 4.1           |   |                    | 46,554 |                   | 4.5 |                |        
|                  |               |                   |        |                |     |               |   |                    |        |                   |     |                |        
|Total 30 or more  |               | $                 | 87,334 |                | 9.7 | %             | $ | 101,819            |        | 9.9               | %   | $              | 125,836
|                  |               |                   |        |                |     |               |   |                    |        |                   |     |                |        
|Total 60 or more  |               | $                 | 57,634 |                | 6.4 | %             | $ | 70,549             |        | 6.9               | %   | $              | 85,580 
|                  |               |                   |        |                |     |               |   |                    |        |                   |     |                |        

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The following table separately reports our loan delinquency trends for our originated portfolio and for our purchased portfolio on a managed
loan portfolio basis:

|                     |               | % of Total
At the Quarter Ended |    
|-------------------- | ------------- | ------------------------------- | ---
|
|Originated Portfolio |               |                                 |    
|Loans Delinquent:    |               |                                 |    
|                     | 30 to 59 days |                                 | 2.6
|                     | 60 to 89 days |                                 | 1.8
|                     | 90 or more    |                                 | 3.0
|                     |               |                                 |    
|Total 30 or more     |               | 7.4                             | %  
|                     |               |                                 |    
|Total 60 or more     |               | 4.8                             | %  
|                     |               |                                 |    
|Purchased Portfolio  |               |                                 |    
|Loans Delinquent:    |               |                                 |    
|                     | 30 to 59 days |                                 | 5.4
|                     | 60 to 89 days |                                 | 3.7
|                     | 90 or more    |                                 | 7.1
|                     |               |                                 |    
|Total 30 or more     |               | 16.2                            | %  
|                     |               |                                 |    
|Total 60 or more     |               | 10.8                            | %  
|                     |               |                                 |    

In general, as the average age of an originated credit card receivables portfolio increases, delinquency rates can be expected first to
increase, then peak and finally decrease and stabilize thereafter. From December 31, 1999 to December 31, 2000, our delinquency rates have increased primarily due to the significant
growth in receivables that continue to season. For the quarter ended March 31, 2001 compared to the previous quarter, the delinquency rate decreased slightly which is consistent with
management's expectation. We are using our account management strategies on our originated portfolio, which are intended to reduce the delinquency rates as our originated portfolio matures.

The
purchased portfolio delinquency rate decreased during the March 31, 2001 quarter compared to the December 31, 2000 quarter primarily due to seasonality. We continue
to aggressively manage account activity using behavioral scoring, credit file data and our proprietary risk evaluation models.

Net Charge-Offs.Net charge-offs include the principal amount of losses from customers
unwilling or unable to pay their loan balance, as well as bankrupt and deceased customers, less current period recoveries. Net charge-offs exclude accrued finance charges and fees, 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 operating expenses. We generally charge off loans when the loan becomes 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.

Approximately
$87.5 million of the discount on our portfolio purchases during 1998 related to the credit quality of the remaining loans in the portfolio and reflects the
difference between the purchased face amount and the future cash collections management expects to receive with respect to the purchased face amount. For purposes of reporting pro forma
charge-off ratios on managed loans below, this discount related to credit quality has been utilized to offset a portion of actual net charge-offs. The

17

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following table presents our net charge-offs for the periods indicated on a managed loan portfolio basis:

|                                        |  | For the Quarter Ended |        
|--------------------------------------- |  | --------------------- | -------
|
|Total Managed Loan Portfolio:           |  |                       |        
|Average managed loan portfolio          |  | $                     | 769,624
|Net charge-offs                         |  |                       | 17,985 
|Pro forma net charge-offs               |  |                       | 10,828 
|Net charge-off ratio (annualized)       |  |                       | 9.3    
|Pro forma charge-off ratio (annualized) |  |                       | 5.6    

As described above under delinquencies, as our portfolio matures, we expect charge-off rates to also increase and then stabilize.
Our pro forma charge-off ratio has increased from March 31, 2000 to March 31, 2001, due to seasoning of our portfolio. Typically, as our accounts mature or season, 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. From
March 31, 1999 to March 31, 2000 over one million accounts were booked and these receivables are now going through the seasoning process, resulting in the increased
charge-off rates. Another reason for the increased charge-off ratio in the first
quarter of 2001 was a slower account balance growth, primarily attributable to revised growth plans and a general slowdown in consumer spending. We plan to 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.

Credit Losses.For securitized receivables, anticipated credit losses are reflected in the calculations of net
securitization income and 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.
Substantially all of our credit card receivables have been securitized. As we have securitized our receivables we have removed them from our balance sheet.

Interest Rate Sensitivity and 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 affects us directly in our lending and borrowing activities, as well as indirectly as interest rates may impact the
payment performance of our customers.

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

18

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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
March 31, 2001, all of our credit card receivables and other interest-bearing assets had variable rate pricing, with receivables carrying annual percentage rates at a spread
over the prime rate, subject to certain interest rate floors. At March 31, 2001, our securitizations had $1.293 billion in variable rate, interest-bearing liabilities, payable to our
investors compared to $832 million as of March 31, 2000. Since both our managed interest-earning assets and our managed interest-bearing liabilities reprice 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.

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.

We
finance our business through cashflows from operations, asset securitizations and the issuance of equity. During September 2000, we completed a floating rate
three-year term securitization totaling approximately $600 million.

A
significant source of liquidity for us has been the securitization of credit card receivables. We received proceeds of $132.0 million during the three months ended
March 31, 2000 and $78.8 million during the three months ended March 31, 2001 from sales of our credit card receivables through securitizations. As of March 31, 2001, we
had total securitization facilities of $1.810 billion and had used approximately $1.293 billion of these facilities. As of March 31, 2000, we had total securitization facilities
of $1.068 billion and had used approximately $832 million of these facilities. We believe that securitizations will continue to be an important source of funding but can give no
assurance that securitizations will provide sufficient funding.

The
maturity terms of our securitizations vary with the exception of the three year securitization described above, most are one year securitizations. Once repayment begins, payments
from customers on credit card receivables are accumulated for the special purpose entities' 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 certain events may also cause the securitization transactions to amortize earlier than scheduled. In the case
of our Master Trust, a decline in the
portfolio's annual yield or a decline in the payment rate, in each case, below certain rates, or an increase in delinquencies above certain rates, will cause early amortization. The portfolio's annual
yield typically includes finance charges and past due fees earned on the receivables, less servicing fees and credit losses. In the case of our other securitization programs, such events include an
increase in the charge-off rates above a certain rate or a decline in the payment rates below a certain rate. These events would accelerate the need to utilize alternative funding sources.
Under each of our securitization structures, there has not been an early amortization period.

In
January 2000, we entered into an agreement providing for a one year, $25.0 million revolving credit facility under which we may request advances from time to time
which will bear interest at

19

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floating rates based on LIBOR. Advances under the facility will be secured by our assets other than credit card receivables and other assets relating to our securitization transactions. As of
March 31, 2001, no advances were outstanding under this facility, however, $5 million is reserved for a letter of credit in favor of a third party servicer. This agreement was renewed in
January 2001 for one year.

We
believe that our asset securitizations, cash flow from operations, and equity issuance will provide adequate liquidity for meeting anticipated cash needs, although we cannot give
assurance to that effect.

Recent Accounting Pronouncements

Effective January 1, 2001 we adopted Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("Statement No. 133"). This Statement established new accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities on the balance sheet and measure those derivatives at fair value. The accounting for the gains or losses resulting from changes in the value of those derivatives will
depend on the intended use of the derivative and whether it qualifies for hedge accounting. Statement No. 133, as amended by Statement No. 138, is required to be adopted for fiscal years
beginning after June 15, 2000. The effect of adoption of this standard was immaterial.

Effective
January 1, 2001 we adopted the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. This
SAB explains how the SEC staff believes existing Revenue Recognition rules should be applied. In June 2000, the SEC issued SAB 101B, which delays the implementation date of SAB 101 until no
later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The effect of adoption of this standard was immaterial.

In
September 2000, the FASB issued Financial Accounting Standard No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("Statement No. 140"), that replaces, in its entirety, Statement No. 125. Although Statement No. 140 has changed many of the rules regarding securitizations, it continues to
require an entity to recognize the financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered in accordance
with the criteria provided in the Statement. As required, we will apply the new rules prospectively to transactions beginning in the second quarter of 2001. The effect of adoption of this standard
will be immaterial.

Forward-Looking Information

This report includes "forward-looking statements." The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions
are intended to identify such forward-looking statements; however, this report also contains other forward-looking statements that may not be so identified. Forward looking statements include our
expectations with respect to delinquency rates, charge-off rates, our efforts to manage our portfolio and the information under "Liquidity, Funding and Capital Resources." Forward-looking
statements are subject to a number of risks and uncertainties, many of which are beyond CompuCredit's control. Actual results may differ materially from those suggested by the forward-looking
statements. Accordingly, there can be no assurance that such indicated results will be realized. Among the important factors that could cause actual results to differ materially from those indicated
by such forward-looking statements are (1) the effect of any disruption of our outsourcing relationship with Columbus Bank and Trust and its affiliates, including Total Systems
Services, Inc., (2) our ability to evaluate the creditworthiness of our customers and price our credit products accordingly, (3) the effect of increases in interest rates on our
cost of funds and the payment performance of our customers, (4) compliance with and changes in laws and regulations, including consumer protection laws, laws relating to the interest rates,
charges or terms and conditions of our credit card accounts or other laws regulating the credit card, consumer loan or financial services

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industry, (5) the impact of intense competition for credit card customers on CompuCredit's efforts to market our credit cards, (6) the ability of CompuCredit to continue to securitize
receivables and to otherwise access the capital markets on acceptable terms to fund its operations and future growth, (7) the impact of unexpected economic changes and other factors on the
performance of our credit card receivables and securitizations, and the factors set forth under the caption "Risk Factors" in the Company's Form 10-K for the year ended
December 31, 2000 filed with the Securities and Exchange Commission. By making these forward-looking statements, CompuCredit Corporation expressly disclaims any obligation to update them in any
manner except as may be required by its disclosure obligations in filings it makes with the Securities and Exchange Commission under Federal securities laws.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The information required under this item is provided under the caption "Interest Rate Sensitivity and Market Risk" under Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

In November 2000, CompuCredit and David Hanna, our Chief Executive Officer, were named defendants in a series of purported class action lawsuits filed
in the Federal District Court for the Northern District of Georgia. These lawsuits arise from the decline in the market value of our common stock on October 25, 2000, and allege that prior to
that date CompuCredit and Mr. Hanna made false and misleading statements in violation of Federal securities laws. On May 7, 2001, Brett Samsky, our Chief Financial Officer from our
inception in 1996 until January 2001, was added as a defendant. In general, the lawsuits seek compensatory monetary damages and legal fees. We do not believe that these lawsuits have any merit and we
intend to defend them vigorously. We do not believe that the lawsuits filed are reasonably likely to have a material adverse effect on CompuCredit's financial position or results of operations. In
addition, we could become involved in litigation from time to time relating to claims arising out of the ordinary course of business.

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.

None.

Item 5. Other Information.

None.

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

|3.1 |     | Amended and Restated Articles of Incorporation of CompuCredit Corporation (incorporated by reference to Exhibit 3.1 to CompuCredit's Registration Statement on Form S-1 (File No. 333-62327)), filed with the Commission on
August 27, 1998.      
|--- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 | (a) | Amendment to Amended and Restated Articles of Incorporation of CompuCredit Corporation (incorporated by reference to Exhibit 3.1(a) of CompuCredit's Form 10-Q for the quarter ended June 30, 2000), filed with the
Commission on August 14, 2000.
|3.2 |     | Second Amended and Restated Bylaws of CompuCredit Corporation (incorporated by reference to Exhibit 3.2 to CompuCredit's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, filed with the Commission on
November 14, 2000). 
|4.1 |     | Form of certificate representing shares of the Registrant's common stock (incorporated by reference to Exhibit 4.1 to CompuCredit's Registration Statement on Form S-1 (File No. 333-69879)).                                                     

None.

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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
|------------ |  | -----------------------
|May 15, 2001 |  | By:                    

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