Portfolio Recovery Associates Reports Strong Q2 Results

NORFOLK, VA – Portfolio Recovery Associates, Inc. (NasdaqNM: PRAA), a company that purchases, collects and manages portfolios of defaulted consumer receivables, today reported net income of $9.1 million, or $0.56 per diluted share, for the quarter ended June 30, 2005.

The Company’s second-quarter 2005 earnings represent growth of 34% from net income of $6.8 million, or $0.43 per diluted share, in the same period a year earlier.

Total revenue increased 28% to $35.9 million in the second quarter of 2005 from $28.1 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 second quarter of 2005, the Company applied 30.7% of cash collections to reduce the carrying basis of its owned debt portfolios. This ratio was 29.9% for the quarter ended June 30, 2004.

“Portfolio Recovery Associates posted another strong performance in the second quarter, with continued improvement in collector-force productivity driving record cash collections. On the portfolio-acquisition side, we spent a sizable $23 million on paper despite a continued, competitive environment from a pricing perspective. PRA continues to focus on achieving steady, disciplined growth through all market conditions and the second quarter of 2005 is a fine example of that strategy in action,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

The Company’s first-half 2005 earnings totaled $18.0 million, or $1.12 per diluted share, compared with $12.8 million, or $0.81 per diluted share, for the first six months of 2004. First-half 2005 revenue was $71.7 million, compared with $53.4 million in the first half of 2004.

Financial and Operating Highlights

• Cash collections rose 27% to a record $48.8 million in the second quarter of 2005 from $38.4 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 a record $137.02 for the first six months of 2005, compared with $117.59 for all of 2004 and $135.62 for the first quarter of 2005.

• The Company purchased $1.36 billion of face-value debt during the second quarter of 2005 for $23.1 million. This debt was purchased in 35 pools from 12 different sellers.

• The Company’s fee-for-service businesses generated revenue of $2.1 million, up from $1.3 million in the same period a year ago.

• The Company’s cash balances were $68.5 million as of June 30, 2005, up from $61.1 million as of March 31, 2005. The Company continues to have no debt outstanding under its $25 million revolving line of credit.

“In the second quarter, Portfolio Recovery Associates once again demonstrated its ability to generate strong results with a conservative capital structure, while laying the foundation for an ever more profitable future. We finished the quarter with $68.5 million in cash, which is up more than 10% from March 31, 2005, with no credit-line usage. This was accomplished even as we were able to increase spending on portfolio acquisitions to $23.1 million, up 30% from the first quarter of this year,” said Kevin P. Stevenson, Chief Financial Officer.