---

---

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

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 MARCH 31, 2002.
|- | --------------------------------------------------------------------------------------------------------------------------------------

or

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

---

|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 April 30, 2002 was 46,559,165 shares.

---

---

---

COMPUCREDIT CORPORATION        FORM 10-Q        TABLE OF CONTENTSMarch 31, 2002

|         |  |                       |  |                                                                                       |  |                                                           |  | 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 |  | 11                                                       
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 32                                                       
|PART II. |  | OTHER INFORMATION     |  |                                                                                      
|         |  | Item 1.               |  | Legal Proceedings                                                                     |  | 33                                                       
|         |  | Item 2.               |  | Changes in Securities and Use of Proceeds                                             |  | 33                                                       
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                       |  | 33                                                       
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                   |  | 33                                                       
|         |  | Item 5.               |  | Other Information                                                                     |  | 34                                                       
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                      |  | 34                                                       
|         |  |                       |  | Signatures                                                                            |  | 35                                                       

---



CompuCredit Corporation and Subsidiaries  Consolidated Balance Sheets

|                                                             |                                                                                                                                       | March 31,
2002 |         | December 31,
2001 |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------- | ----------------- | -
|
|
|Assets                                                       |                                                                                                                                       |                |         |                   |  
|Cash and cash equivalents                                    |                                                                                                                                       | $              | 48,060  |                   | $
|Restricted cash                                              |                                                                                                                                       |                | 10,000  |                   |  
|Retained interests in credit card receivables securitized    |                                                                                                                                       |                | 349,000 |                   |  
|Accrued interest and fees                                    |                                                                                                                                       |                | 29,961  |                   |  
|                                                             |                                                                                                                                       |                |         |                   |  
|Net credit card receivables                                  |                                                                                                                                       |                | 378,961 |                   |  
|Amounts due from securitization                              |                                                                                                                                       |                | 15,049  |                   |  
|Deferred costs, net                                          |                                                                                                                                       |                | 14,400  |                   |  
|Software, furniture, fixtures and equipment, net             |                                                                                                                                       |                | 33,021  |                   |  
|Prepaid expenses                                             |                                                                                                                                       |                | 1,407   |                   |  
|Other assets                                                 |                                                                                                                                       |                | 11,765  |                   |  
|                                                             |                                                                                                                                       |                |         |                   |  
|Total assets                                                 |                                                                                                                                       | $              | 512,663 |                   | $
|                                                             |                                                                                                                                       |                |         |                   |  
|Liabilities                                                  |                                                                                                                                       |                |         |                   |  
|Accounts payable and accrued expenses                        |                                                                                                                                       | $              | 22,473  |                   | $
|Notes payable                                                |                                                                                                                                       |                |        |                   |  
|Deferred revenue                                             |                                                                                                                                       |                | 13,306  |                   |  
|Income tax liability                                         |                                                                                                                                       |                | 28,459  |                   |  
|                                                             |                                                                                                                                       |                |         |                   |  
|Total liabilities                                            |                                                                                                                                       |                | 64,238  |                   |  
|Shareholders' equity                                         |                                                                                                                                       |                |         |                   |  
|Preferred stock, no par value, 10,000,000 shares authorized: |                                                                                                                                       |                |         |                   |  
|                                                             | Series A preferred stock, 30,000 and 30,000 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively       |                |         | 30,103            |  
|                                                             | Series B preferred stock, 10,000 and 10,000 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively       |                |         | 10,247            |  
|Common stock, no par value:                                  |                                                                                                                                       |                |         |                   |  
|                                                             | 150,000,000 shares authorized, 46,559,165 and 46,559,165 issued and outstanding at March 31, 2002 and December 31, 2001, respectively |                |         |                  |  
|Additional paid-in capital                                   |                                                                                                                                       |                | 240,352 |                   |  
|Note issued to purchase stock                                |                                                                                                                                       |                | (500    | )                 |  
|Retained earnings                                            |                                                                                                                                       |                | 168,223 |                   |  
|                                                             |                                                                                                                                       |                |         |                   |  
|Total shareholders' equity                                   |                                                                                                                                       |                | 448,425 |                   |  
|                                                             |                                                                                                                                       |                |         |                   |  
|Total liabilities and shareholders' equity                   |                                                                                                                                       | $              | 512,663 |                   | $
|                                                             |                                                                                                                                       |                |         |                   |  

See
accompanying notes.

1

---

CompuCredit Corporation and Subsidiaries  Consolidated Statements of Operations (Unaudited)

|                                               |                                                                       | For the three months ended March 31, |       
|---------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------ | ------
|
|
|Interest income                                |                                                                       | $                                    | 365   
|Interest expense                               |                                                                       |                                      | 60    
|                                               |                                                                       |                                      |       
|Net interest income                            |                                                                       |                                      | 305   
|                                               |                                                                       |                                      |       
|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                   |                                                                       |                                      | 40,267
|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                  |                                                                       |                                      | 37,322
|Income before income taxes                     |                                                                       |                                      | 3,250 
|Income taxes                                   |                                                                       |                                      | (1,138
|                                               |                                                                       |                                      |       
|Net income                                     |                                                                       | $                                    | 2,112 
|                                               |                                                                       |                                      |       
|Net income attributable to common shareholders |                                                                       | $                                    | 1,108 
|                                               |                                                                       |                                      |       
|Net income per common sharebasic              |                                                                       | $                                    | 0.02  
|Net income per common shareassuming dilution  |                                                                       | $                                    | 0.02  

See
accompanying notes.

2

---



CompuCredit Corporation and Subsidiaries  Consolidated Statements of Shareholders' Equity (Unaudited)  For the three months ended March 31, 2002 and 2001

|                             |                                            | Common Stock |   |   |   |   |   |         |   |   |        |      |  
|---------------------------- | ------------------------------------------ | ------------ | - | - | - | - | - | ------- | - | - | ------ | ---- | -
|
|
|
|Balance at December 31, 2000 |                                            | 46,514,639   |   | $ |  |   | $ | 239,789 |   | $ |       |      |  
|                             | Net income                                 |              |  |   |   |  |   |         |  |   |        |     |  
|                             |                                            |              |   |   |   |   |   |         |   |   |        |      |  
|Balance at March 31, 2001    |                                            | 46,514,639   |   | $ |  |   | $ | 239,789 |   | $ |       |      | $
|                             |                                            |              |   |   |   |   |   |         |   |   |        |      |  
|Balance at December 31, 2001 |                                            | 46,559,165   |   | $ |  |   | $ | 240,352 |   | $ | 39,512 |      | $
|                             | Issuance costs of Series A preferred stock |              |  |   |   |  |   |         |  |   |        | (140 | )
|                             | Preferred dividends                        |              |  |   |   |  |   |         |  |   |        |     |  
|                             | Accretion of preferred dividends           |              |  |   |   |  |   |         |  |   |        | 978  |  
|                             | Net income                                 |              |  |   |   |  |   |         |  |   |        |     |  
|                             |                                            |              |   |   |   |   |   |         |   |   |        |      |  
|Balance at March 31, 2002    |                                            | 46,559,165   |   | $ |  |   | $ | 240,352 |   | $ | 40,350 |      | $
|                             |                                            |              |   |   |   |   |   |         |   |   |        |      |  

See accompanying notes.

3

---

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

|                                                                                  |                                           | For the three months ended
March 31,                   |        
|--------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------------ | -------
|
|
|Operating activities                                                              |                                           |                                                        |        
|Net income                                                                        |                                           | $                                                      | 2,112  
|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 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                           |        
|                                                                                  |                                           | Decrease in accrued expenses                           |        
|                                                                                  |                                           | Decrease in deferred revenue                           |        
|                                                                                  |                                           | (Decrease) increase in income tax liability            |        
|                                                                                  |                                           | Other                                                  |        
|                                                                                  |                                           |                                                        |        
|Net cash provided by operating activities                                         |                                           |                                                        | 2,560  
|Investing activities                                                              |                                           |                                                        |        
|Net loan payments (net loans originated or purchased)                             |                                           |                                                        | 57,316 
|Recoveries of loans previously charged off                                        |                                           |                                                        | 7,757  
|Net (distributions to) proceeds from securitization                               |                                           |                                                        | (56,594
|Purchases of and development of software, furniture, fixtures and equipment       |                                           |                                                        | (2,069 
|                                                                                  |                                           |                                                        |        
|Net cash provided by (used in) investing activities                               |                                           |                                                        | 6,410  
|Financing activities                                                              |                                           |                                                        |        
|Preferred stock issuance costs                                                    |                                           |                                                        | (140   
|Repayment of short-term borrowings                                                |                                           |                                                        | (16,516
|                                                                                  |                                           |                                                        |        
|Net cash used in financing activities                                             |                                           |                                                        | (16,656
|Net (decrease) increase in cash                                                   |                                           |                                                        | (7,686 
|Cash and cash equivalents at beginning of period                                  |                                           |                                                        | 55,746 
|                                                                                  |                                           |                                                        |        
|Cash and cash equivalents at end of period                                        |                                           | $                                                      | 48,060 
|                                                                                  |                                           |                                                        |        
|Supplemental cash flow information                                                |                                           |                                                        |        
|Cash paid for interest                                                            |                                           | $                                                      | 116    
|Cash paid for income taxes                                                        |                                           | $                                                      | 4,000  
|Accretion of preferred stock dividends                                            |                                           | $                                                      | 978    

See
accompanying notes.

4

---



CompuCredit Corporation and Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)  March 31, 2002

1. Organization and Basis of Presentation

The 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 specialized segment of the consumer credit market. The Company markets unsecured general purpose credit
cards through direct mail, telemarketing, television and on the internet. All significant intercompany balances and transactions have been eliminated for financial reporting purposes. 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. The Company also markets to its 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 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, 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, 2002 are not necessarily indicative of the results for the year ended December 31, 2002. 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 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 all 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 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.

5

---

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. 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 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 their 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"). 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.

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

3. Securitizations

The Company securitizes a substantial portion of its Company issued credit card receivables 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 securitized two purchased portfolios of credit card receivables through
a securitization structure with a third party commercial paper conduit administered by national banking institutions. Generally Accepted Accounting Principles require the Company to treat the
transfers as sales and the receivables are removed from the 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:



6

---



The
securitization transactions do not affect the relationship the Company has with its customers and the Company continues to service the credit card receivables. The Company either
performs the servicing or contracts with third party service providers.

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

For the quarter ended March 31,2002

2001(In thousands)Securitization Activity:Gross amount of receivables securitized at period end (total managed loans)

$
1,809,070

$
1,589,584Proceeds from securitizations


3,907

$
78,794Excess cash flows received on retained interests


52,368


53,274Pretax securitization income





266Income from retained interests in credit card receivables securitizated


5,702


15,445


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

7

---

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

March 31,
2002

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

$
95,915

$
84,390Servicing liability


(43,108
)

(38,123
)Net I/O strip


52,807


46,267Fair value of Seller's Interest


296,193


312,622Retained interests in credit card receivables securitized

$
349,000

$
358,889


The
Company's net I/O strip is comprised of the I/O strip and the related servicing liability. The I/O strip reflects the fair value of the Company's rights to future income from the
portfolio. The servicing liability is recorded because the compensation for servicing certain portfolios is not expected to adequately compensate the Company for the costs of servicing certain
portfolios. The change in the servicing liability is included in income from retained interests in credit card receivables securitized.

Changes
in any of these assumptions used to value our retained interests 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 period are presented below:

March 31,
2002

December 31,
2001Payment rate (monthly)

7.1
%
8.0
%Expected credit loss rate (annualized)

16.7

16.7Residual cashflows discount rate

34.9

34.9Servicing liability discount rate

14.1

14.0


At
March 31, 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 ($ in thousands):

Credit card
loansPayment rate (monthly)


7.1
%Impact on fair value of 5% adverse change

$
(741
)Impact on fair value of 10% adverse change

$
(1,681
)Expected credit loss rate (annualized)


16.7
%Impact on fair value of 5% adverse change

$
(7,536
)Impact on fair value of 10% adverse change

$
(15,069
)Residual cashflows discount rate


34.9
%Impact on fair value of 5% adverse change

$
(3,590
)Impact on fair value of 10% adverse change

$
(7,060
)Servicing discount rate


14.1
%Impact on fair value of 5% adverse change

$
(133
)Impact on fair value of 10% adverse change

$
(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

8

---

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

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 of the Company. Therefore, they are not included in the Company's consolidated balance sheets. The principal balances outstanding as of March 31, 2002 and
December 31, 2001, were $1.7 billion and $1.7 billion, respectively. The following table summarizes the balances included in the CompuCredit's managed loan portfolio.

March 31,
2002

December 31,
2001(In thousands)Total managed principal balance

$
1,652,200

$
1,739,922Total managed finance charge balance


156,870


151,920Total managed loans

$
1,809,070

$
1,891,842Loans delinquent60 or more days

$
220,942

$
210,382


4. Earnings Per Share

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

For the three months ended March 31,2002

2001(In thousands, except per share data)Numerator:Net income

$
2,112

$
6,376Preferred stock dividends


(1,004
)

Income attributable to common shareholders

$
1,108

$
6,376Denominator:Denominator for basic earnings per shareweighted-average shares outstanding


46,559


46,515Effect of dilutive stock options


7


83Denominator for diluted earnings per shareadjusted weighted-average shares


46,566


46,598Basic earnings per share

$
0.02

$
0.14Diluted earnings per share

$
0.02

$
0.14


The
Company's preferred shares, plus dividends that have been accreted, are convertible into approximately 4.5 million shares of common stock at $9.14 per share as of
March 31, 2002. These shares were not included in the computation of diluted EPS for the three months ending March 31, 2002, because including these shares would have been
anti-dilutive. Additionally, for the three months ended March 31, 2002, no stock options were included in the diluted earnings per share calculation because their inclusion would
have been anti-dilutive.

5. Borrowings

Until January 2002, the Company had a $25.0 million one-year revolving credit facility, of which, $15.0 million was outstanding
under this facility and $10.0 million was reserved for a letter of credit in

9

---

favor of a third party servicer. This agreement expired in January 2002 and was paid in full. During the first quarter of 2002, the Company entered into an irrevocable standby letter of credit
agreement for $10.0 million with a bank. The agreement contains provisions allowing the third party servicer of the receivables to draw under the letter of credit as needed. The Company is
required to maintain a cash balance of $10.0 million with the lender. Such cash has been disclosed as "Restricted cash" on the face of the balance sheet.

6. Subsequent Events

Together with a group of purchasers, the Company has agreed to acquire a portfolio of credit card receivables from Providian National Bank. The approximate size
of the portfolio is $1.3 billion but is expected to decline through normal attrition between now and the anticipated closing date in June 2002.

The
credit card receivables being acquired will actually be sold by Providian into a securitization structure. A wholly owned subsidiary of the Company will be investing in a limited
liability company with other investors. This limited liability company will acquire certain notes issued in the securitization and will acquire the retained interest in the securitization. The face
amount of the receivables underlying the securitization for which the Company plans to invest is approximately $1.3 billion. The Company expects to have a 50% ownership in the limited liability
company that is making the investment. The Company expects that the cost of its investment in the limited liability company should be approximately $36 million and is dependent on the balance
of the receivables and the performance of the receivables between now and the closing date.

The
receivables being sold by Providian are subprime and are currently charging off at rates in excess of 35%. The receivables are being sold by Providian to the securitization structure
at a substantial discount.

Following
a transition period, the Company will be servicing the purchased receivables. In exchange for servicing the receivables, the Company will receive a servicing fee from the
securitization structure.

10

---



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 "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 experience 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 credit cards through direct mail, telemarketing, television and the internet.

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

Securitization
income is gain or loss we recognize at the time of each sale. Income from retained interests in credit card receivables securitized is the income we receive from the
credit card receivables we have securitized. See "Credit Card Securitization andResults of Operations" for additional information. Servicing income consists of the gross fees
we receive from our securitization structures for servicing the various portfolios of credit card loans. Other credit card fee income includes annual fees, over-limit fees, cash advance
fees and other fees assessed to our cardholders. These fees have increased as our managed loans have grown. Interchange fees are the portion of the merchant fees assessed by Visa and MasterCard and
passed on to us and are a function of the purchase volume of
our cardholders. Ancillary products revenue consists of the fees earned by selling various fee-based products including various memberships, insurance, subscription and other products. See
"Results of Operations" and "Other Operating Income" for additional information on these revenues. Our primary expenses are the costs of funding our receivables, credit
losses and operating expenses, including employee compensation, account solicitation and marketing expenses, data processing, servicing expenses and income taxes.

We
originate our receivables portfolio through the use of our target marketing system to originate customers through direct mail, television, telemarketing and internet campaigns. We
also add accounts by purchasing portfolios of credit card receivables. Absent 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 receivables portfolio may not grow and may even decline. We have reduced our marketing growth plans for 2002 as compared to 2001. We believe this is
prudent for us given our concerns relating to the availability of financing, general economic conditions and uncertainty regarding credit quality of accounts we historically have targeted. We intend
to pursue portfolio acquisitions that have appropriate returns for our business. We also intend to grow our existing portfolio through marketing campaigns during 2002, although at a much slower rate
than 2001. During 2001 we added between 125,000 and 200,000 accounts per quarter, while in 2002 we intend to add approximately 25,000 to 50,000 accounts per quarter, excluding any portfolio
acquisitions.

Our
income is dependent upon the size and the quality of the credit card receivables in the credit card accounts underlying our securitizations. When we reduce our marketing, we add
fewer accounts

11

---

and this decreases the size of our expected growth in the portfolio of the credit card receivables. The result of not adding accounts that we otherwise were planning to add cannot be predicted with
certainty and would be very subjective to estimate; however we believe that when there is less growth in the portfolio, there will be less growth and possibly a reduction in our net income as compared
to years with higher growth.

We
have decreased our expectation of growth in credit card receivables during 2002 as a result of the decrease in our marketing plans. We believe that our managed loan portfolio, absent
any portfolio acquisitions, will not grow during 2002 and at the end of 2002 will be fairly comparable to the balance at the end of 2001. We believe our managed loan portfolio may also decrease in the
first six months of 2002 as payments may exceed purchases on the accounts. Our experience is that typically during the first quarter of the year, consumers spend less and make higher payments,
possibly due to bonuses or tax refunds. We have found that consumers spend more in the fall, prior to the start of the school year and during the holidays.

Reducing
our marketing plans also allowed us to make staff reductions in our marketing and professional services departments in January 2002 as we focused on reducing our
operating expenses. If we see improvements in the financial markets, we may increase our marketing plans during 2002, which would in turn increase our receivables portfolio. Additionally, any
portfolio acquisitions during 2002 also would increase our receivables portfolio.

Together
with a group of purchasers, we agreed to acquire a portfolio of credit card receivables from Providian National Bank. The approximate size of the portfolio is
$1.3 billion but is expected to decline through normal attrition between now and the anticipated closing date in June 2002.

The
credit card receivables being acquired will be sold by Providian into a securitization structure. A wholly owned subsidiary of the Company will be investing in a limited liability
company with other investors. This limited liability company will acquire certain notes issued in the securitization and will acquire the retained interest in the securitization. The face amount of
the receivables underlying the securitization for which we plan to invest is approximately $1.3 billion. We expect to have a 50% ownership in the limited liability company that is making the
investment. We expect that the cost of its investment in the limited liability company should be approximately $36 million and is dependent on the balance of the receivables and the performance
of the receivables between now and the closing date.

The
receivables being sold by Providian are subprime and are currently charging off at rates in excess of 35%. The receivables are being sold by Providian to the securitization structure
at a substantial discount.

Following
a transition period, we will service the purchased receivables. In exchange for servicing the receivables, we will receive a servicing fee from the securitization structure.

Credit Card Securitizations

We began marketing and servicing credit card accounts in February 1997. 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. Each day, we in turn sell our interest in the receivables to trusts or to multi-seller commercial
paper conduits administered by national banking institutions. The trust 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 closing date of any particular series of notes and ends at the beginning of the amortization period. At the end of the revolving
period, the investment of

12

---

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. As of
March 31, 2002, none of our securitizations were in an amortization period. The revolving periods have coincided with the maturity dates of each series which are either 364 days for
series issued to commercial paper
conduits or three years for our series placed with other investors. The maturity date for each series is included in our "Liquidity, Funding and Capital Resources" section.

All
collections received from the cardholders underlying each securitzation are included in the securitization trusts. This includes collections from the cardholders for 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 for their interest on their outstanding notes, to us as the seller to fund new purchases during the revolving
period and to the investors to repay any portion of their outstanding notes that become due and payable. 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 that we are responsible for includes the unauthorized use of the credit cards including identity theft or purchases on lost or stolen cards or account numbers. These
fraud losses are expensed by us in Other Operating Expenses. To date, we have experienced very little fraud for unauthorized use of the credit cards.

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 overcollateralization, which means that we sell the receivables for cash and a retained interest. Since the retained interest is subordinate to the investor's
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.

The
investors in the securitized receivables have no recourse against us for our cardholders' failure to pay their credit card loans; however, substantially all 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.

Our
securitizations are treated as sales under Generally Accepted Accounting Principles. 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.
These amounts are recorded as income from retained interests in credit card receivables securitized. The fair value of our seller's interests are based on the estimated present value of the future
cash flows using management's best estimates of key assumptions. 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 its life. The excess cash flow is the excess of the finance charges and late fees generated by the securitized receivables over

13

---

the 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.

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.

Securitizations
are accounted for under 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 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 as they are recorded as securitization income or
loss in our income statement. Gains or losses on the 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.

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. As of March 31, 2002 and 2001, respectively, we received servicing fees equal to either 0.1% per year of the securitized principal receivables or 5%
of cash collected, depending on the securitization. We recognize a servicing liability when the compensation for servicing a portfolio is not adequate compensation for the costs of servicing the
portfolio. 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 accounts
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 cashflows during the revolving
period, we expect that the total cash received, inclusive of both the servicing revenue and the excess cashflows, will exceed our servicing costs. Although separately accounted for and valued from our
interest-only strip, this amount is reported with our interest-only strip on our balance sheet for financial reporting purposes. See "Net Securitization Income and
Income from Retained Interests" 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, which represent collections on the accounts in excess of the interest paid to the investors, the
servicing fees paid to us as servicer, and required amortization payments. Since we receive the residual or excess cashflows 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.

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 form 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

14

---

a facility associated with our portfolios that we purchased in 1998 that was structured to use a percentage of cashflows 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.

The
table below summarizes our securitization activity.

For the quarter ended
March 31,2002

2001(In thousands)Securitization Activity:Gross amount of receivables securitized at period end (total managed loans)

$
1,809,070

$
1,589,584Proceeds from securitizations


3,907

$
78,794Excess cash flows received on retained interests


52,368


53,274Pretax securitization income





266Income from retained interests in credit card receivables securitizated


5,702


15,445


The
trusts or the conduits purchase receivables from us by raising proceeds from investors. The proceeds raised are part of series of notes issued by the trust or issued by the conduits.
The proceeds from the investors are then remitted to us as part of the purchase price of the receivables. We had the following total commitments and outstanding notes in our securitizations for each
period presented:

As of March 31,2002

2001(In millions)Total commitments from investors

$
2,037

$
1,810Total outstanding amounts


1,456


1,293


The
maturities of these notes vary and are more fully detailed in "Liquidity, Funding and Capital Resources." We try to structure our securitization funding source 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 the 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 and by also having excess capacity if one particular series
of notes is not renewed at its maturity date. One of the reasons we have slowed our growth plans for 2002 is because we do not have any assurance that when any series of notes mature, they will be
renewed on terms that are favorable to us, or at all. This is more fully discussed in "Liquidity, Funding and Capital Resources."

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 us and the trustees of the trusts. 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 that we hold in the trust 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.

15

---

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 loans 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 redemption, 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 not be able to sell additional receivables into our securitization structures and we may cause an early redemption event.
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 redemption
event in any of our securitizations.

In
our securitization structure associated with our portfolios which we purchased during 1998, each month a percentage of the excess cash collected from the cardholders is paid to the
investors to decrease their remaining invested amount. This excess cash totaled $3.1 million for the quarter ended March 31, 2002, and $3.3 million for the quarter ended
March 31, 2001. Under the terms of the securitization, the investors are paid with the percentage of the cash collected less servicing fees that we receive to service the accounts and less
collections used to fund new purchases. The percentage varies each month and ranges from 0% to 75% and may increase to 100% during the second quarter of 2002. Since the inception of the structure, a
percentage of the cashflows has been used to pay down the amounts outstanding. The structure was negotiated in this manner with the investors since the portfolio was decreasing very rapidly as most of
the accounts were making payments in excess of purchases at the time we acquired the portfolio and no new accounts were being added to the portfolio. Once the investors are repaid, all cash collected
on any remaining receivables is payable to us.

Results of Operations

Net income for the three months ended March 31, 2002 was $2.1 million, or $0.02 per diluted share, compared to net income of $6.4 million, or
$0.14 per diluted share for the three months ended March 31, 2001. During the three months ended March 31, 2002, we earned less in interest income and other operating income as compared
to the three months ended March 31, 2001. The decrease in our income was also due to the seasoning of the receivables underlying our securitizations, as the average growth rate during 2002 has
decreased as compared to 2001. Our operating expenses for the three months ended March 31, 2002 were less than the comparable period in 2001.

Other
operating income includes income from retained interests in credit card receivables securitized. This decreased to $5.7 million for the three months ended March 31,
2002 compared to

16

---

$15.4 million for the three months ended March 31, 2001 due primarily to a reduction in the net interest margin on the receivables and an increase in charge offs on the portfolio. The
reduction in margins is due to the increase in our charge offs. This is due to a larger percentage of our receivables being more than twelve months old. When credit card receivables are first
originated, they tend to have artificially low charge off rates in their first twelve months. The charge off rate then dramatically increases during year two and them moderates in year three and
beyond. We have seen this trend in the performance of our receivables and believe that it is typical in other credit card portfolios in the industry. We further describe the receivables portfolio in
"Selected Credit Card Data." Additionally, we did not earn any securitization income during the three months ended March 31, 2002 (compared to securitization
income during the three months ended March 31, 2001 of $266,000) because our portfolio decreased in size. See our discussion under "Net Securitization Income and Income from Retained Interests"
below.

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, it is a
product of our marketing 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. During the first quarter of 2002, our managed receivables declined by approximately 4.4%. This is less than the growth rate of 4.0% during the first quarter of 2001. Our
receivables growth rate decreased because we added fewer accounts. During the first quarter of 2002, we added approximately 36,000 new accounts compared to approximately 199,000 new accounts during
the first quarter of 2001.

Growth
in the number of accounts is a product of several factors, primarily the level of our marketing efforts, our competition and the general economy. Our marketing and solicitation
expenses decreased from $12.1 million during the three months ended March 31, 2001 to $2.6 million for the three months ended March 31, 2002. We decreased our marketing in
2001 because we believed that (1) the profitability of the accounts that we could add given the economic circumstances of late 2001 did not justify the marketing expense, and (2) we had
limited access to liquidity and we did not want our portfolio to grow beyond what we could fund.

Other
operating income, excluding securitization income and income from retained interests in credit card receivables securitized, increased to $34.6 million for the three months
ended March 31, 2002 from $33.3 million for the three months ended March 31, 2001. This increase is due primarily to the increase in other credit card fees, which includes annual
membership, over-limit, cash advance, insufficient funds, maintenance, and other miscellaneous fees. The revenue associated with these fees increased as a result of the growth of our
managed loans from the March 31, 2001 quarter.

Other
operating expenses decreased to $37.3 million for the three months ended March 31, 2002 from $40.2 million for the three months ended March 31, 2001.
The decrease is due primarily to the decrease in our marketing and solicitation expenses, offset by increases in the cost of operations associated with the growth in our business, including additional
servicing and collection costs. During the three months ended March 31, 2002, we implemented cost cutting initiatives that we believe will reduce our cost of operations during the second half
of 2002 as a percentage of average managed loans.

Net Interest Income

Net interest income consists of interest income earned on cash and cash equivalents less interest expense. Net interest income totaled $0.3 million for the
three months ended March 31, 2002 and $1.0 million for the three months ended March 31, 2001. The decrease in net interest income of

17

---

$0.7 million during 2002 is attributable to the reduction of the prime rate, as well as a reduction in our average cash and cash equivalents.

Until
January 2002, $15.0 million was outstanding under our $25.0 million one-year revolving credit facility and $10.0 million was reserved for a
letter of credit in favor of a third party servicer. The revolving credit facility expired in January 2002 and was paid in full. During the three months ended March 31, 2001, we did not
have any interest expense.

Net Securitization Income and Income 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 at estimated fair market value in accordance with Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("Statement No. 115"). See "Credit Card Securitizations."

Net
securitization 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 strip). We did not earn any net securitization income during the three months ended March 31, 2002 because our portfolio
decreased in size. Net securitization income was $0.3 million for the three months ended March 31, 2001.

Income
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. Income from retained interests in credit card receivables securitized for the three months ended March 31, 2002
was $5.7 million, compared to $15.4 million for the three months ended March 31, 2001. The decrease in our income from retained interests in credit card receivables securitized is
due to a decline in our net interest margin on the receivables and an increase in charge offs on the portfolio.

The
fair value of our retained interests in credit card receivables securitized 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. These rates have historically been reflective of (i) average rates disclosed by our peers
and (ii) average rates we have reviewed from transactions where the total interest rate to the investor has been disclosed. We also sold two retained interests during the fourth quarter of
2001. Because quoted market prices are generally not available, 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, 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

18

---

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:

|                                       |  | At or for the Three Months Ended |  
|-------------------------------------- |  | -------------------------------- | -
|
|
|
|Assumptions                            | 
|Payment rate (monthly)                 |  | 7.1                              | %
|Expected credit loss rate (annualized) |  | 16.7                             | %
|Residual cash flows discount rate      |  | 34.9                             | %
|Servicing liability discount rate      |  | 14.1                             | %

The
payment rate declined from 8.0% at December 31, 2001 to 7.1% at March 31, 2002 due to slower growth and seasoning of the portfolio and stronger payments in the fourth
quarter of 2001 due to the events of September 11, 2001. We compare historical loss rates on each vintage of our portfolio at comparable points in their lives to project our expected credit
loss rate. 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. Estimated default and discount
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.

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

March 31,
2002

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

$
95,915

$
84,390Servicing liability


(43,108
)

(38,123
)Net I/O strip


52,807


46,267Fair value of Seller's Interest


296,193


312,622Retained interests in credit card receivables securitized

$
349,000

$
358,889


Our
net I/O strip is comprised of the I/O strip and the related servicing liability. The I/O strip reflects the estimated fair value of our rights to future income from the portfolio.
The servicing liability reflects the estimated fair value of the cost to service the portfolio above and beyond the servicing income we expect to receive from the securitization. The change in the
servicing liability is included in income from retained interests in credit card receivables securitized. The decrease in our retained interests from December 31, 2001 to March 31, 2002
is a function of the decrease in the total receivables securitized at the end of each of the stated periods.

19

---

Other Operating Income

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

Three Months Ended March 31,2002

2001(In thousands)Gross servicing income

$
1,285

$
1,687Other credit card fees


24,840


18,713Interchange fees


3,957


5,361Ancillary products


4,483


7,570Total other operating income

$
34,565

$
33,331


The
increase in other operating income to $34.6 million for the three months ended March 31, 2002 from $33.3 million for the three months ended March 31, 2001
relates to the increase in our managed receivables, which increased to $1.8 billion at March 31, 2002 from $1.6 billion at March 31, 2001. A substantial portion of the
servicing income relates to our purchased portfolios. As the size of these purchased portfolios decreases, there is a corresponding decrease in servicing income. Other credit card fees increased to
$24.8 million from $18.7 million due to increases in annual, over-limit, cash advance, insufficient funds, maintenance and other miscellaneous fees. These fees are a function
of the increase in our managed loans. Interchange fees are the portion of the merchant fee assessed by Visa and passed on to us on the purchase volume on our credit card receivables. Interchange fees
decreased to
$4.0 million from $5.4 million due to a decrease in the purchase volume on our managed receivables. Ancillary product revenue decreased to $4.5 million from $7.6 million
due to fewer customers purchasing our products and because we have decreased our growth in new accounts during the past two quarters.

Our
total other operating income is primarily a function of the size of our average credit card receivables portfolio. We have decreased our growth projections for the remainder of 2002,
compared to 2001, and as a result our other operating income may decline in 2002 as compared to 2001. Additionally, our ancillary product income is very sensitive to our new account growth as sales of
our fee-based products are higher to new customers than to existing cardholders. As we have decreased our growth plans for new accounts in 2002, our ancillary product income may continue
to decline in 2002.

20

---

Other Operating Expense

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

Three Months Ended March 31,2002

2001(In thousands)Salaries and benefits

$
3,596

$
2,283Credit card servicing


20,070


14,129Marketing and solicitation


2,624


12,131Professional fees


783


982Data processing


1,600


2,841Net occupancy


1,192


805Ancillary product expense


1,999


3,967Other


5,458


3,104Total other operating expense

$
37,322

$
40,242


Other
operating expense for three months ended March 31, 2002 decreased to $37.3 million from $40.2 million for the three months ended March 31, 2001. This
decrease is due primarily to a decrease in marketing and solicitation expenses, data processing expenses and ancillary product expenses, offset by increases in credit card servicing, salaries and
benefits, and other expenses. Credit card servicing costs primarily include collections and customer service expenses. These expenses include certain in-house collections and customer
service representatives as well as costs associated with corresponding with our cardholders. Servicing expense also includes certain outsourced collections and customer service representatives. Credit
card servicing costs increased due to an increase in our managed receivables.

During
2001, based on anticipated growth in our managed receivables, we increased our infrastructure, customer service and collection personnel. Salaries and benefits, net occupancy and
other expenses increased as our operations expanded to service the increase in managed loans. Marketing and solicitation costs decreased due to reduced levels of direct mail, television, telemarketing
and internet campaigns. We have reduced our growth plans for 2002 and we are implementing certain cost cutting initiatives that we believe will reduce our cost of operations during the second half of
2002. Data processing expenses decreased due to the realization of certain cost cutting efforts implemented in January of 2002. We reduced our marketing and solicitation efforts during the second half
of 2001 and for the three months ended March 31, 2002 as a result of concerns relating to the availability of financing, general economic conditions and uncertainty regarding credit quality of
accounts we historically have targeted. Our expected growth rate in 2002 will be negatively impacted by this reduction in marketing. 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. 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
was approximately 0.19% of the average managed receivables for the three months ended March 31, 2002 and approximately 0.12% for the three months ended March 31, 2001.

21

---

Income Taxes

Income taxes were $1.1 million for the three months ended March 31, 2002 and $3.4 million for the three months ended March 31, 2001.
Our effective tax rate was 35.0% for each of the three months ended March 31, 2002 and 2001. Substantially all of our income tax liabilities at March 31, 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 service the accounts. Securitizations are treated as sales under GAAP. As such, we remove the securitized loans from our consolidated
balance sheet. 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 for the credit card
receivables that we have securitized.

|                            |  | At or for the Three Months Ended |          
|--------------------------- |  | -------------------------------- | ---------
|
|
|
|Period-end managed loans    |  | $                                | 1,809,070
|Period-end managed accounts |  |                                  | 2,057    
|Average managed loans       |  | $                                | 1,860,209
|Net interest margin         |  |                                  | 16.9     
|Operating ratio             |  |                                  | 9.0      

The net interest margin includes all net interest and late fee income on all outstanding loans, less the interest expense paid to the investors
and finance charge charge offs. Our operating ratio includes all expenses associated with our business, other than marketing and solicitation and ancillary product expenses, and is expressed as a
percentage of average managed loans.

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 March 31, 2002 was 16.9% as compared to 19.0% for the three months ended December 31, 2001. The decrease in
our net interest margin is due to a decrease in the finance charge and late fee income billed to our cardholders and an increase in the finance charge charge offs on the portfolio. These decreases
were slightly offset by a reduction in the average cost of funds of the portfolio.

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 credit card data
excludes some of these receivables and the related accounts which at the time of purchase were closed accounts in a late delinquency status. Management believed 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 believed 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 credit card 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. We purchased these accounts and the receivables as part of the entire portfolio purchase as the seller desired to sell everything up to but not including charged off accounts
and related receivables. We did not ascribe any value to these receivables because they were so close to charge off, which is why we have excluded them from our selected credit card data. We received
the same representations and warranties from the sellers on these receivables that we received on the entire

22

---

portfolio; however, the seller did not provide any representations or warranties as to the ability or willingness of the cardholders to pay their accounts. We do not have any recourse to the seller
in the event the cardholders simply do not pay on the accounts that we acquired.

The
portfolios acquired during 1998 were purchased at substantial discounts. The total discount was approximately $284.5 million, of which $137.2 million of the discount
was described above. An additional $87.5 million of the discount related to the credit quality of the remaining receivables and was calculated as the difference between the face amount of the
receivables purchased, less the $137.2 million in receivables described above, and the expected future cash flows that management estimated would be collected. The balance of the discount of
approximately $59.8 million is not needed for credit quality of the purchased loans. This $59.8 million is referred to as the accretable yield. The accretable yield is being amortized,
using the interest method, as additional interest over the life of the portfolio for purposes of reporting our Selected Credit Card Data. As of March 31, 2002, approximately $6.2 million
of the accretable yield remained.

Each
quarter, we re-underwrite our portfolio to price our products to appropriately reflect the level of our customer's credit risks. 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. We expect our net interest margin to continue to decrease during the second quarter of 2002 due primarily to expected increases
in finance charge charge offs for the remainder of 2002. The increase in finance charge charge offs is based on the current economic environment as well as the expected seasoning of the credit card
accounts. We believe that our net interest margin may also decline in 2002 if the finance charges and late fees billed on our portfolio continue to decline, or if our weighted average cost of funds
increases. We expect to mitigate part of the expected decline in our net interest margin by actively repricing some accounts as part of our underwriting process mentioned above.

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 loan
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 decreased to 9.0% during the three months ended March 31, 2002 as compared to 9.8% during the three months ended December 31, 2001 as we implemented cost cutting
initiatives, including automation projects and staff reductions. We expect to continue to reduce our operating ratio as a percentage of average managed loans during the second half of 2002. Included
in our operating expenses for the first quarter of 2002 was approximately $3.0 million paid to our primary subservicer to reimburse them for servicing fewer accounts than previously projected.

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 also 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

23

---

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 or for the Three Months Ended |        
|------------------------------------------ |  | -------------------------------- | -------
|
|
|
|Loans delinquent:                          |  |                                  |        
|30 to 59 days past due                     |  | $                                | 68,423 
|60 to 89 days past due                     |  |                                  | 57,227 
|90 or more days past due                   |  |                                  | 163,715
|                                           |  |                                  |        
|Total 30 or more days past due             |  | $                                | 289,365
|Total 60 or more days past due             |  | $                                | 220,942
|Loans delinquent as % of period-end loans: |  |                                  |        
|30 to 59 days past due                     |  |                                  | 3.8    
|60 to 89 days past due                     |  |                                  | 3.2    
|90 or more days past due                   |  |                                  | 9.0    
|                                           |  |                                  |        
|Total 30 or more days past due             |  |                                  | 16.0   
|Total 60 or more days past due             |  |                                  | 12.2   

The following table separately reports our loan delinquency trends for our originated portfolio and for our purchased portfolio:

|                               |  | At or for the Three Months Ended |  
|------------------------------ |  | -------------------------------- | -
|
|
|
|Originated Portfolio           |  |                                  |  
|Loans Delinquent:              |  |                                  |  
|30 to 59 days past due         |  | 3.7                              | %
|60 to 89 days past due         |  | 3.2                              |  
|90 or more days past due       |  | 9.3                              |  
|                               |  |                                  |  
|Total 30 or more days past due |  | 16.2                             | %
|Total 60 or more days past due |  | 12.5                             | %
|Purchased Portfolio            |  |                                  |  
|Loans Delinquent:              |  |                                  |  
|30 to 59 days past due         |  | 4.8                              | %
|60 to 89 days past due         |  | 2.9                              |  
|90 or more days past due       |  | 5.7                              |  
|                               |  |                                  |  
|Total 30 or more days past due |  | 13.4                             | %
|Total 60 or more days past due |  | 8.6                              | %

24

---



In general, as the average age of an originated credit card receivables portfolio increases, delinquency rates can be expected to first be artificially 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. Our delinquency rates have increased due primarily to the seasoning of significant growth in new receivables that occurred during 2000 and 1999 and the
general economic conditions that prevailed during 2001 and the three months ended March 31, 2002. The increase in delinquencies of 90 or more from December 31, 2001 to March 31,
2002 is due primarily to the result of successful collection efforts, which have prevented accounts from charging off; however, the payments made have not been sufficient to bring the accounts
current. Additionally, the decrease in the 30 to 59 day delinquency bucket are the result of strong payments being made by individuals in this bucket. We believe our delinquency rates have been
impacted by the worsening economy; however, it would be speculative to quantify.

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 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 and subsequent confirmation, if applicable.

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 reflected the
difference between the purchased face amount and the future cash collections management expected to receive with respect to the purchased
face amount. For purposes of reporting adjusted charge off ratios on managed loans below, this discount related to credit quality and was utilized to offset a portion of actual net charge offs. This
amount was fully amortized as of June 30, 2001 and therefore, beginning with the quarter

25

---

ended September 30, 2001, the actual and adjusted charge off ratios will be the same. The following table presents our net charge offs for the periods indicated on a managed loan portfolio
basis:

|                                |  | 2002 |         | 2001 |   | 2000    |  
|------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|
|Gross yield ratio               |  |      | 32.3    | %    |   | 32.8    | %
|Other credit card income ratio  |  |      | 7.4     | %    |   | 8.5     | %
|Combined gross charge offs      |  | $    | 129,251 |      | $ | 122,753 |  
|Net charge offs                 |  | $    | 68,407  |      | $ | 70,207  |  
|Adjusted charge offs            |  | $    | 68,407  |      | $ | 70,207  |  
|Combined gross charge off ratio |  |      | 27.8    | %    |   | 26.7    | %
|Net charge off ratio            |  |      | 14.7    | %    |   | 15.3    | %
|Adjusted charge off ratio       |  |      | 14.7    | %    |   | 15.3    | %

As described above under delinquencies, as our portfolio matures, we expect charge off rates to also increase and then stabilize. Our charge off
ratio increased during 2001 and 2000 due primarily to seasoning of our portfolio and a general slowing of the economy. 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. We expect our charge off rates to continue to increase as our
portfolio seasons. 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.

Our
generally declining other credit card income ratio in the latter part of 2001 and 2002 can be attributed to 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.

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. Substantially all of our credit card receivables have been securitized. As we have securitized our receivables, we have removed them from our
balance sheet.

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

26

---

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. 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
evalution differs from the approach taken by the vast majority of credit grantors that implement collection strategies based on commonly accepted peer group practices.

27

---

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 cash flows from operations, asset securitizations and the issuance of equity:



Maturity Date

Facility Limit(in millions)April 2002

$
212.7May 2002


200.0October 2002


306.0March 2003


250.0September 2003(2)


627.4July 2004(3)


441.5$
2,037.6


---



28

---



During
the first quarter of 2002, we had positive cash flow from operations. Our cash flow from operations is dependent on the performance of our managed portfolio including charge off
rates, net interest margin, payment rates and operating expenses. We currently expect to have lower payment rates, lower net interest margins and higher charge off rates during the second quarter of
2002 as compared to the first quarter. This may result in negative cash flow from operations during the second quarter of 2002. Based on our current expectations of our managed portfolio performance
and our expected growth rates during the third and fourth quarter of this year, we expect to have positive cash flow from operations during these quarters.

During
the fourth quarter of 2001, we needed additional liquidity to fund our operations, pay off our revolving credit facility in January 2002 and to fund the growth in our
retained interests in our securitizations. As previously noted, we sold $40.0 million of preferred stock and we also sold approximately $36.3 million of our retained interest in our
securitizations at a substantial discount. 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 expect to
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. With the exception of the
three-year securitizations that we completed in July 2001 and August 2000, most are one-year securitizations. 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 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 annual yield or a decline in the payment rate, and in each case, below set rates, or an increase in delinquencies or charge offs above set 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. These events would accelerate the need to utilize
alternative funding sources. If our securitization facilities begin to trap cash flows to repay the investors and we are unable to obtain additional sources of liquidity such as other securitization
facilities, other debt or we are unable to issue 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. 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

29

---

information regarding our securitization practice, see the information under the caption "Credit Card Securitizations."

Our
most significant uses of cash are marketing expenses, operating expenses and the purchase of the credit card receivables that arise from 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"). Since 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 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 interests in the trust 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.

Absent
changes in the manner in which we securitize credit card receivables, we believe that our asset securitizations and cash flow from operations 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.

Critical Accounting Policies

Our financial statements are prepared in accordance with Generally Accepted Accounting Principles. 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 Form 10-K for the year ended
December 31, 2001, we discuss the two areas 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, valuation of retained interests and non-consolidation of special purpose
entities, and we urge you to review that discussion. In addition, in Note 3 to the financial statements included in this report we update 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 "predict"), are forward-looking statements. These forward-looking
statements are not guarantees of

30

---

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:



31

---



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
March 31, 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 March 31, 2002, our securitizations had $1.5 billion in variable rate, interest-bearing liabilities, payable to investors
compared to $1.3 billion as of March 31, 2001. Since 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.

32

---



PART IIOTHER INFORMATION

Item 1. Legal Proceedings

CompuCredit and certain officers of CompuCredit were defendants in a class action lawsuit pending in the Federal District Court for the Northern District of
Georgia. The lawsuit arose in connection with the decline in the market value of the common stock of CompuCredit on October 25, 2000. The lawsuit alleged that, prior to that date, CompuCredit
and the chief executive officer and chief financial officer of CompuCredit made false and misleading statements regarding CompuCredit in violation of federal securities laws. On February 19,
2002, the court dismissed the lawsuit. Subsequently, counsel for the plaintiffs indicated that they would not be appealing the dismissal. CompuCredit may become involved in additional litigation from
time to time relating to claims arising in the ordinary course of its 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.

We held our annual shareholders meeting on May 9, 2002 for the purpose of electing nine members of our Board of Directors and to remove the conversion
limitations on the Series A Preferred Stock and the Series B Preferred Stock. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of
1934, and there was no solicitation in opposition to management's solicitations.

(1)  Votes
regarding the election of nine directors to hold office for a term of one year and until their respective successors are elected and qualified were as follows:

DIRECTOR

FOR

ABSTAIN/BROKER
NON-VOTESDavid G. Hanna

39,172,782

3,034,453Peter L. Briger, Jr.

42,158,168

49,067Richard W. Gilbert

39,166,482

3,040,753Frank J. Hanna, III

41,948,468

258,767Richard R. House, Jr.

39,796,082

2,411,153Richard E. Huddleston

42,145,468

61,767Gail Coutcher-Hughes

42,145,468

61,767Mack F. Mattingly

42,157,168

50,067Thomas G. Rosencrants

42,143,968

63,267


(2)  Votes
regarding the removal of conversion limitations on the Series A Preferred Stock and the Series B Preferred Stock were as follows:

FOR

AGAINST

ABSTAIN/BROKER
NON-VOTES36,315,421

216,347

5,675,440


33

---

Item 5. Other Information.

None.

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



None.



Current
Report on Form 8-K dated March 12, 2002, including Exhibit 99.1, which contains certain information regarding Changes in Registrant's Certifying
Accountant.

Current
Report on Form 8-K/A dated March 12, 2002, including Exhibit 99.1, which contains certain information regarding Changes in Registrant's
Certifying Accountant.

Current
Report on Form 8-K/A dated April 1, 2002, including Exhibit 16, which contains certain information regarding Changes in Registrant's Certifying
Accountant.

Current
Report on Form 8-K dated April 19, 2002, including Exhibit 99.1, which contains certain information regarding Changes in Registrant's Certifying
Accountant.

34

---



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                     

35

---



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; and

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.

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

36

---

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; and

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.

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

37

---

QuickLinks