Portfolio Recovery Associates Reports Increased Earnings for Q3

Portfolio Recovery Associates, Inc. (NasdaqNM: PRAA), a company that purchases and manages portfolios of defaulted consumer receivables and provides a broad range of accounts receivable management services, today reported net income of $9.3 million, or $0.58 per diluted share, for the quarter ended September 30, 2005.

The Company’s third-quarter 2005 earnings represent growth of 34% from net income of $7.0 million, or $0.44 per diluted share, in the same period a year earlier.

Total revenue increased 33% to $37.5 million in the third quarter of 2005 from $28.3 million in the year-earlier period. Total revenue consists of cash collections reduced by amounts applied to the Company’s owned debt portfolios plus commissions from its fee-for-service businesses. During the third quarter of 2005, the Company applied 28.4% of cash collections to reduce the carrying basis of its owned debt portfolios. This ratio was 30.3% for the quarter ended September 30, 2004.

“Portfolio Recovery Associates performed well in the third quarter with solid results across the board. Debt purchases totaled $16.5 million, despite a market that continues to be quite competitive from a pricing perspective. Collector-force productivity approached record levels. New marketing efforts by our IGS and Anchor fee-for-service businesses began to yield results, and the integration of newly acquired Alatax proceeded even more smoothly than expected. At PRA, we remain focused, as always, on producing steady, disciplined growth regardless of market conditions. The third quarter of 2005 demonstrates once again our ability to execute on this strategy,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

The Company’s earnings through the first nine months of 2005 totaled $27.3 million, or $1.69 per diluted share, compared with $19.7 million, or $1.25 per diluted share, for the first nine months of 2004. Nine month 2005 revenue was $109.2 million, compared with $81.7 million in the first nine months of 2004. For the year to date, the Company has applied 30.6% of its cash collections to reduce the carrying value of its owned debt portfolios, compared with a ratio of 30.9% for the same period in 2004.

Financial and Operating Highlights

• Cash collections rose 22% to $47.5 million in the third quarter of 2005, up from $38.8 million in the year-ago period.

• Productivity, as measured by cash collections per hour paid, the Company’s key measure of collector performance, stands at $136.18 for the first nine months of 2005, compared with $117.59 for all of 2004.

• The Company purchased $445 million of face-value debt during the third quarter of 2005 for $16.5 million. This debt was acquired in 29 pools from 13 different sellers. The Company purchased $2.47 billion of face value debt for $57.3 million during the first nine months of 2005, and bought $3.14 billion of face value debt for $79.8 million during the trailing 12 months ended September 30, 2005.

• The Company’s fee-for-service businesses generated revenue of $3.5 million, up from $1.2 million in the same period a year ago.

• The Company’s cash balances were $67.4 million as of September 30, 2005, down slightly from $68.5 million as of June 30, 2005. During the quarter, the Company used $32.6 million of cash, both to fund the acquisition of Alatax and purchase new debt portfolios. Portfolio Recovery Associates continues to have no debt outstanding under its $25 million revolving line of credit.

“In the third quarter, Portfolio Recovery Associates displayed once again our ability to generate significant amounts of cash, deploy that cash intelligently, and exploit our competitive strengths in both debt buying and collection by opportunistic diversification through acquisition and organic growth. We enter the final quarter of 2005 with plenty of cash, ample bank lines, strong cash flow, and solid levels of raw material resulting from our strong debt purchases over the past 12 months. From this position, we look forward to continued success in the fourth quarter and into 2006,” said Kevin P. Stevenson, Chief Financial Officer.