Portfolio Recovery Associates Reports Second Quarter 2007 Results

Portfolio Recovery Associates, Inc. (NASDAQ: 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 $13.0 million, or $0.80 per diluted share, for the quarter ended June 30, 2007.

The Company's second quarter 2007 earnings represent growth of 17% from net income of $11.1 million, or $0.69 per diluted share, in the same period a year earlier.

Separately, the Company moved forward with its previously announced plan designed to optimize its capital structure. During the second quarter, Portfolio Recovery Associates paid out its announced $1 per share special cash dividend to shareholders and repurchased 100,000 shares at an average price of about $52 a share, as part of its announced 1 million share buyback program.

Total revenue in the second quarter of 2007 increased 19% to $54.8 million, up from $46.2 million in the year-earlier period. Total revenue consists of cash collections reduced by amounts applied to principal on the Company's owned debt portfolios plus commissions from its fee-for-service businesses. During the second quarter of 2007, the Company applied 28.2% of cash collections to reduce the carrying basis of its owned debt portfolios. This included a $90,000 net allowance charge against various pools of finance receivables accounts.

"Portfolio Recovery Associates closed out the first half of 2007 with strong second quarter results in many areas. We turned in our second-largest portfolio buying quarter ever, spending a total of $63.4 million. Cash collections, while impacted by an expected flattening of collections from purchased bankrupt accounts, nevertheless exceeded our buying and accounting expectations. Collector productivity, despite substantial pressure from the initial staffing of our new Jackson, Tennessee office, came in above full-year 2006 levels. In addition, our fee-for-service businesses turned in yet another strong performance," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer.

Financial and Operating Highlights

--  Cash collections rose 9% to $64.6 million in the second quarter of
    2007, up from $59.4 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 $148.52 for the
    first six months of 2007, up from $146.03 for all of 2006.  Excluding the
    impact of trustee remittances from purchased bankrupt accounts, the
    comparison is $134.83 for the first six months of 2007 vs. $132.15 for all
    of 2006.

--  The Company purchased $2.5 billion of face-value debt during the
    second quarter of 2007 for $63.4 million, the second-largest amount the
    Company has spent on debt acquisitions in a single quarter.  This debt was
    acquired in 58 pools from 27 different sellers.

--  The Company's fee-for-service businesses generated revenue of $8.4
    million in the second quarter of 2007, up 45% from $5.8 million in the same
    period a year ago.

--  The Company's cash balances were $15.0 million as of June 30, 2007,
    down from $27.9 million as of March 31, 2007, as a result of the strong
    portfolio buying, special cash dividend payment and share repurchase, all
    during the second quarter.  During the quarter, the Company drew $38.0
    million on its newly expanded $150 million line of credit.
    

"The second quarter of 2007 played out well for Portfolio Recovery Associates, as we followed through on steps designed to add some leverage to our balance sheet. During the quarter, we paid out our previously announced special $1 per share cash dividend, providing tax-advantaged returns to our shareholders, as well as repurchasing the first 100,000 shares of our planned 1 million share buyback program. At the same time, in response to an opportune buying environment we were able to deploy more than $63 million in new purchases of charged-off debt at returns we feel should be greater than we have seen over the past 12 to 18 months. This overall performance demonstrates our ability to both strategically trim our equity account and continue to strongly invest in the future," said Kevin P. Stevenson, Chief Financial and Administrative Officer.

Executive Appointment

The Company also announced today the appointment of Kent McCammon to the new position of Senior Vice President, Strategy and Business Development. McCammon will work to develop a strategic approach to growth initiatives, including merger and acquisition activity for Portfolio Recovery Associates, applying the same type of focused, rigorous review the Company uses for debt portfolios to the analysis of business acquisition opportunities.

Before joining Portfolio Recovery Associates, McCammon was Managing Director at Shamrock Capital Advisors, working as co-head and founder of the Activist Value team. Prior to Shamrock, McCammon held senior roles in business development at Trader Publishing, was an analyst and founding member of Atlantic Capital Management, and served in various investment banking positions.