Portfolio Recovery Associates Sees Increased Profit in Second Quarter

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, today reported net income of $11.1 million, or $0.69 per diluted share, for the quarter ended June 30, 2006.

The Company’s second-quarter 2006 earnings represent growth of 23% from net income of $9.1 million, or $0.56 per diluted share, in the same period a year earlier.

Total revenue increased 29% to $46.2 million in the second quarter of 2006, up from $35.9 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 2006, the Company applied 32.0% of cash collections to reduce the carrying basis of its owned debt portfolios. This included a $200,000 allowance charge against two pools of accounts.

“Portfolio Recovery Associates demonstrated the value of strong execution once again in the second quarter. Cash collections rose 22% to $59.4 million during an impressive quarter for collector productivity, while our fee-for-service business produced a near-record $5.8 million in revenue. Despite a competitive pricing environment, the Company invested a sizeable $27.9 million in portfolio acquisitions with a combination of forward flow, bankruptcy and normal spot buying. Our successful buying was driven by our ability to look at all sectors of the market, a strategy we expect to pursue further in the quarters to come,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

The Company’s first-half 2006 earnings totaled $21.8 million, or $1.36 per diluted share, compared with $18.0 million, or $1.12 per diluted share, for the first six months of 2005. First-half 2006 revenue was $91.5 million, compared with $71.7 million in the first half of 2005.

Financial and Operating Highlights

• Cash collections rose 22% to $59.4 million in the second quarter of 2006, up from $48.8 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 $148.74 for the first six months of 2006, up from $133.39 for all of 2005. Excluding the impact of trustee remittances from purchased bankrupt accounts, the comparison is $136.14 for the first six months of 2006 vs. $128.02 for all of 2005.
• The Company purchased $1.66 billion of face-value debt during the second quarter of 2006 for $27.9 million. This debt was acquired in 40 pools from 12 different sellers.
• The Company’s fee-for-service businesses generated revenue of $5.8 million in the second quarter of 2006, up from $2.1 million in the same period a year ago.
• The Company’s cash balances were $25.2 million as of June 30, 2006, up from $23.4 million as of March 31, 2006. During the 2006 second quarter, the Company made no use of its $75 million line of credit. No amount was outstanding on the line as of June 30, 2006.

“Portfolio Recovery Associates has continued to thrive in an environment marked by tough competition and elevated portfolio pricing — and our second-quarter results bear this out. Driving our performance was our continued commitment to making significant investments in people, information and technology. Our overall strategy is to continually improve operating effectiveness, underwriting competency and cost efficiency. This is an approach that has served us well since our inception, and we remain confident as ever in its ability to drive future growth,” said Kevin P. Stevenson, Chief Financial and Administrative Officer.