Portfolio Recovery Associates Reports Fourth Quarter and Full Year 2005 Results

Portfolio Recovery Associates, Inc., a company that purchases and manages portfolios of defaulted consumer receivables and provides a broad range of accounts receivable management services, yesterday reported net income of $9.4 million, or $0.58 per diluted share, for the quarter ended December 31, 2005.

The Company’s fourth-quarter 2005 earnings represent growth of 22% from net income of $7.7 million, or $0.48 per diluted share, in the same period a year earlier.

Total revenue increased 24% to $39.3 million in the fourth quarter of 2005 from $31.7 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 fourth quarter of 2005, the Company applied 26.7% of cash collections to reduce the carrying basis of its owned debt portfolios. This included a $200,000 allowance charge against a portfolio of accounts acquired in 2001. This particular portfolio has greatly exceeded the Company’s expectations to date, but performed under our expectations during the fourth quarter of 2005.

“Portfolio Recovery Associates performed well in the fourth quarter, completing a noteworthy year in which we continued to grow earnings, revenue and cash collections, purchased RDS — our second corporate acquisition in two years — and enjoyed the benefits of our disciplined approach to growth and portfolio acquisition. We did in fact make an extraordinary level of debt purchases during the quarter. At $92.3 million, we spent more in the fourth quarter of 2005 than in any prior full-year period. This was due, at least in part, to the recent changes in bankruptcy law that triggered a surge in bankruptcy filings and resulting charge offs. Although still competitive, pricing was better than we have seen in some time. On the operating front, collector-force productivity remained solid, even in the face of the seasonally slow fourth quarter and significant hiring,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

For full-year 2005, net income grew 34% to $36.8 million, or $2.28 per diluted share, from $27.5 million, or $1.73 per diluted share, in 2004. Total revenue increased 31% to $148.5 million in 2005 from $113.4 million in 2004. During 2005, the Company applied 29.6% of its cash collections to reduce the carrying basis of its owned debt portfolios, compared with 30.7% in 2004.

Financial and Operating Highlights

• Cash collections rose 16% to $47.2 million in the fourth quarter of 2005, up from $40.7 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 $133.39 for full- year 2005, up 13% from $117.59 for all of 2004.

• The Company purchased $2.84 billion of face-value debt during the fourth quarter of 2005 for $92.3 million. This debt was acquired in 58 pools from 19 different sellers. The Company purchased $5.31 billion of face value debt for $149.6 million during full-year 2005.

• The Company’s fee-for-service businesses generated revenue of $4.7 million in the fourth quarter of 2005, up from $3.3 million in the same period a year ago.

• The Company’s cash balances were $16.0 million as of December 31, 2005, down from $67.4 million as of September 30, 2005, reflecting the strong fourth quarter debt purchases. During the 2005 fourth quarter, the Company made a $15 million draw on its newly expanded $75 million line of credit. The $15 million remained outstanding at year end.

“In the fourth quarter, Portfolio Recovery Associates demonstrated the value of its long-term, disciplined approach to portfolio acquisitions — building cash when profitable deals are scarce in order to take advantage of significant market opportunities when they arise. Our record fourth-quarter portfolio purchases of $92.3 million provide us with substantial raw material to drive cash collections, revenue and earnings for years to come. Despite this spending, our newly increased line of credit and expanded network of lenders positions the Company well to be able to continue aggressively purchasing new debt portfolios as attractive opportunities arise,” said Kevin P. Stevenson, Chief Financial and Administrative Officer.

Conference Call Information
The Company will hold a conference call with investors today, February 14, 2006, at 5:30 p.m. EST to discuss its fourth quarter and full-year results. Investors can access the call live by dialing 866-356-4281 for domestic callers or 617-597-5395 for international callers using the pass code 42256959.

In addition, investors may listen to the call via a taped replay, which will be available for seven days, by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers using the pass code 20722563. The replay will be available approximately two hours after today’s conference call ends. Investors may also listen via webcast, both live and archived, at the Company’s website, www.portfoliorecovery.com.