Portfolio Recovery Associates Reports 48% Increase in First Quarter Earnings

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 $8.9 million, or $0.55 per diluted share, for the quarter ended March 31, 2005.

The Company’s first-quarter 2005 earnings represent growth of 48% from net income of $6.0 million, or $0.38 per diluted share, in the first quarter of 2004.

Total revenue increased 42% to $35.8 million in the first quarter of 2005, compared with $25.3 million a year earlier. Total revenue consists of cash collections, which are reduced by certain amounts applied to the Company’s owned debt portfolios, plus commissions from its fee-for-service businesses. During the quarter ended March 31, 2005, the Company applied 32.6% of cash collections to reduce the carrying basis of its owned debt portfolios. This ratio was 32.7% for the quarter ended March 31, 2004.

“Portfolio Recovery Associates reported strong growth once again in the first quarter, driven by a 15% improvement in collector productivity. This performance is a testament to both the quality and drive of our experienced collections and portfolio management staff and our continued investment in state-of-the-art systems. The Company’s financial results for the quarter, highlighted by 35% growth in cash collections, came as we made a very solid $17.8 million in portfolio acquisitions. This is up 19% from a year ago and represents a nice start to the year, despite a market that remains quite competitive in terms of pricing,” said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

Financial and Operating Highlights

• Cash collections rose 35% to $47.8 million in the first quarter of 2005, up from $35.5 million in the year-earlier period.

• Productivity, as measured by cash collections per hour paid, the Company’s key measure of collector performance, totaled $135.62 for the first quarter of 2005, compared with $117.59 for all of 2004.

• The Company purchased $659.9 million of face-value debt during the first quarter of 2005 for $17.8 million, representing a blended rate of 2.69%. This debt was purchased in 22 pools from 12 different sellers.

• The Company’s fee-for-service businesses together generated revenue of $3.5 million, up from $1.4 million in the same period a year ago.

• The Company’s cash and investment balances were $61.1 million as of March 31, 2005, up from $48.5 million at the end of 2004. The Company continues to have no debt outstanding under its $25 million revolving line of credit.

“Portfolio Recovery Associates’ first-quarter results were built on a foundation of strong operating competence. This is supported by our collector recruitment and training programs, continued investments in technology and new skills, and the development and refinement of our highly disciplined, quantitative approach to portfolio acquisition and management. Our business model is flexible enough to yield strong results in varied operating environments, as demonstrated by our first-quarter performance. Importantly, we accomplished this while remaining essentially debt free and building the Company’s cash and investments balance to $61.1 million, up more than 25% from the end of 2004,” said Kevin P. Stevenson, Chief Financial Officer.