Good afternoon. Thank you for joining Portfolio Recovery Associates Fourth Quarter 2012 Earnings Call. Speaking to you today will be Steve Fredrickson, PRA's Chairman, President and Chief Executive Officer; Kevin Stevenson, Chief Financial and Administrative Officer; and Neal Stern, Executive Vice President, Chief Operations Officer. We will begin with prepared comments then follow up with a question-and-answer period. Before we begin I'd like to everyone to please take note of PRA's Safe Harbor language. Statements on this call which are not historical including Portfolio Recovery Associates' or management's intentions, hopes, beliefs, expectations, representation, projections, plans or predictions of the future, including with respect to PRA's future portfolio's performance, opportunities, future revenue and earnings growth, future cash collections, future space and staffing requirements, future productivity of collectors and future contributions of its subsidiaries to earnings are forward-looking statements. These forward-looking statements are based upon PRA management's beliefs, assumptions and expectations of the company's future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to PRA. Actual events or results may differ from those expressed or implied in any such forward-looking statements as a result of various factors including the risk factors and other risks that are described from time to time in PRA's filings with the Securities and Exchange Commission, including but not limited to its annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K filed with the Securities and Exchange Commission and available through PRA's website, which contain a more detailed discussion of the company's business including risks and uncertainties that may affect future results. Due to such uncertainties and risks, PRA cautions you not to place undue reliance on any forward-looking statements which speak only as of the date thereof. PRA expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in PRA's expectations with regard thereto or reflect any change in events, conditions or circumstances on which any such forward-looking statements are based in whole or in part. Now, here's Steve Fredrickson.

Good evening and thank you all for joining us. Today PRA is pleased to report record operating results for the fourth quarter and full year 2012, an exceptional concluding quarter to an equally exceptional year. Our results once again demonstrated the strength of PRA's business model focused on diverse revenue and earnings from our bankruptcy business, our core debt purchase and collections operations and our business in government service subsidiaries. As we ended 2012, our record results coincided with the substantial strengthening of our financial position as we entered into a new $600 million credit facility and acquired new bankruptcy assets and investment expertise from National Capital Management or NCM. Today PRA is in an excellent position to continue to grow and prosper during 2012 and beyond. Let me take you through highlights of our record Q4 and full year results. Cash collections including those in the UK were $229 million, up 27% from the fourth quarter of 2011 and up 29% for full year 2012 to $909 million. Revenues were up 31% year-over-year to a record $154 million during Q4 and increased 29% to $593 million for the full year. Net income increased 35% year over year to a record $35.8 million, translating into diluted earnings per share of $2.10 compared with $1.54 in the fourth quarter of 2011. For all of 2012, net income grew 26% to $127 million and earnings per share grew 26% to $7.39. Return on equity of 20.6% exceeded our 20% benchmark in Q4. For full year 2012, I'm pleased to report that return on equity rose to 19.6% from 18.5% in 2011. In Q4 we acquired $1.9 billion in face value of finance receivables for a total purchase price of $199.1 million including $69 million purchased from NCM. These receivables were purchased at…

Thanks, Steve. The quarter-to-quarter comparisons I'm about to make are between Q4 2012 and Q4 2011 unless otherwise noted. Also you'll recall that our UK business is acquired in 2012, thus the results of the UK operation are included in PRA's 2012 financial statements but not in our 2011 statements. As Steve noted, Q4 2012 was an exceptional quarter. Cash collections, revenue and net income grew 27%, 31% and 35%, respectively. Our net income margin was 23% for the quarter and 21% for the year. Since going public in 2002, PRA has delivered a 20% net income margin every year except 2008 and 2009 while net income margins were still north of 16%. We are very proud of this performance. Let me now move to some specifics in our financial statements. Our Q4 revenue of $154.3 million is comprised of $138.1 million in net financial receivables, or NFR revenues, and $16.2 million in fee revenue. Financial receivable revenue for the quarter was comprised of $93 million in core portfolio revenue including our UK operation and net of an allowance reversal of $2.1 million. Net core portfolio revenue increased 46%. Bankruptcy portfolio revenue was $45.1 million net of allowance charge of $4.3 million, the vast majority of which was recorded in the Q4 2007 through Q3 2008 pools. Net bankruptcy portfolio revenue increased 16%. Fee revenue of $16.2 million increased 5% with our UK operation driving that increase. Fee revenue accounted for 10% of the company's revenue. Operating expenses for the quarter increased on pace with our revenue growth at 31%. Operating expenses included a $9.1 million increase in personnel related expenses, $8.1 million increase in legal costs and fees related to PRA's expanded focus on legal collections, and the inclusion of the UK business in our 2012 financial results. The…

Thanks, Kevin. Our Q4 collections provided an appropriately strong end to a strong 2012. The key contributors to our success were an increase in the number of monthly payments augmented by the rate at which our US customers are maintaining their payment plans, an end to a multiyear trend in which our average payment size is in decline, strong call center productivity results, legal collection performance that exceeded our expectations, and continued improvements in the productivity of our UK operations. Let me expand on these points. The number of US payments collected on our debt portfolios in the fourth quarter represented a 25% increase over the same quarter in 2011. For the full year 2012, payments increased by 27% to a record 8 million payments. The growth of these payments has been on a steep rise for several years. Since 2009, our monthly payments from customers are up by an impressive 204%. I'm extremely proud of our team's work with customers that generated more than 8 million payments this year, 90% plus of which can be attributed to customers that have made a prior payment to us. If fact, more than 60% of the payments we received were from customers that have made six or more prior payments to us. When payment plans are reasonable, they provide a mechanism for customers to eliminate debt as well as a low-cost recurring cash collection stream for PRA. Doing this properly requires the hard work and patient approach that our team has consistently delivered. That patient and reasonable approach is also central to our commitment to compliance and is an important of the dialogue we have had and seek to have with the CFPB. During the fourth quarter PRA continued to meet with the CFPB to discuss aspects of the debt-buying market and…

Thanks, Neal. Before I turn the call over to your questions, I'd like to thank our more than 3,000 employees for PRA's exceptional record 2012 growth. As a reminder, this growth follows 23% growth in 2011 revenue and 37% growth in 2011 net income which followed 33% growth in 2010 revenue and 66% growth in 2010 net income. In just three years, we've more than doubled revenue and have almost tripled net income for our shareholders. This is an extraordinary track record by an equally extraordinary team of employees. Our operator will now open up the call to your questions.

[Operator Instructions]. The first question comes from Hugh Miller from Sidoti & Company. Hugh Miller – Sidoti & Co.: Hi. Good afternoon.

Hi, Hugh. Hugh Miller – Sidoti & Co.: Hi. I had a couple of housekeeping questions to start with. One was, if you have it, what was the fee-based business margin dilution during the quarter?

I actually looked it down before I came into this call because I knew you'd ask that question. Hugh Miller – Sidoti & Co.: Right.

About 350 basis points. Hugh Miller – Sidoti & Co.: Three-hundred-fifty, great. And as we think about -- you gave us some great color on the NCM portfolio, obviously it's a higher quality -- or maybe that's not the right way to look at it, but more secured asset class relative to the BK paper you buy that often at times isn't cash flowing, and how should we be thinking about the purchase price multiple on that particular portfolio?

You know, it's buried in because it's part of the Q4 buying. Hugh Miller – Sidoti & Co.: Right.

I think the Q4 buying multiple is in the 135 range, off the top of my head, if you look at just that plain Q4 quarter. Hugh Miller – Sidoti & Co.: So, NCM is probably lowering that a touch relative to the normalized 1.4 to 1.6 range?

Probably so. And it's, again, we did book it. It's a big deal. It's got flavor of a new asset class for us, so we probably put it on at a little bit of a discount just to make sure we know where things are going, and then we'll watch that curve. And if things look more like kind of the original expectations, we'll start moving it up over time. Hugh Miller – Sidoti & Co.: Okay. And as you think about, obviously solid capital deployment even, you know, excluding the NCM purchase during the quarter, but can you just give us a feel, you know, it seems like you guys continue to point towards just very competitive pricing. I'm not sure if that's solely in the direct paper market, but what are you seeing there, and are you kind of seeing the opportunities -- it seems like there's going to be opportunities for you guys to buy receivables from competitors that are exiting the space because of how competitive the environment is.

Yeah. We continue to see a fair amount of portfolio activity from people either exiting the space or selling down portfolios, and that's been on both the core and the bankruptcy side. And we've been fairly careful making sure that we've got enough dry powder to take advantage of those opportunities as they come available. It's one of the reasons why we haven't been more aggressive on the share repurchase today. We're keeping a close eye on that amount of dry powder. Hugh Miller – Sidoti & Co.: Okay. And obviously with the limited purchasing within the UK business, I realize that Mackenzie, as you talked about, it is a niche type of buyer and you need to gain a comfort level with how the curves are for general asset category in that region. But how should we be thinking about the duration of time that you think is going to be -- take you to get comfortable before you can start to kind of, I guess, get a little bit more aggressive with capital deployment in that area?

Yeah. We're looking at it as a long-term play. We had quarters where we've deployed, relative to our experience over there, a fair amount of cash. And as in this quarter we've had others where we didn't deploy as much. So we're just taking it slow and measured approach, and as we said in the script, calibrating those models and making sure that we're understanding exactly how this stuff is performing. So we don't think the opportunity there is going away anytime soon and we're very happy to take it slow and steady. Hugh Miller – Sidoti & Co.: Okay. And given the delay we've seen in the tax return season this particular quarter, do you expect that to really have an influence on your cash collections in 1Q?

So far we don't see any evidence of that. Hugh Miller – Sidoti & Co.: Okay. And one last question, just on the regulatory front, with regards to some of the recent rulings about recess appointments. Do you expect that to really have any influence over your relationship with the CFPB and how they go about regulating the industry as we look into 2013?

I think both the CFPB and us look at things as business-as-usual, and if the courts decide differently, then we'll react at that point in time. Hugh Miller – Sidoti & Co.: Okay. Thank you very much.

Your next question comes from Bob Napoli from William Blair. Bob Napoli – William Blair & Co.: Thank you. Good evening. The NCM deal, I just want to make sure I understood. In the buying for the quarter, there was $69 million from NCM and then $30 million due from seller. What does that -- is that $30 million portfolio to be delivered?

No, no, no. That's like, again, a stubbed [ph] period cash that would be moved over, so it's like -- think about it like a receivable almost. Bob Napoli – William Blair & Co.: Okay. So all you bought from them was $69 million then in the quarter?

Yeah, $69 million NFR and then we had $15 million of goodwill -- Bob Napoli – William Blair & Co.: Right. Yeah.

Yup. Bob Napoli – William Blair & Co.: Okay. Now, is the -- are the margins and the returns, the return on equity or returns in that business, similar to the rest of your business?

Yeah, absolutely. Bob Napoli – William Blair & Co.: Okay. And I guess you said you are seeing additional opportunities. You've been able to buy additional paper in that market?

That's right. Having now the expertise and the data set that we've obtained from the employee group and from the assets that we bought in that deal, we can underwrite these secured bankruptcy assets with a much higher degree of confidence than we have been able to in the past. And as a result, we're competitive in that market and have been able to do some additional buying. Bob Napoli – William Blair & Co.: Okay. Who else competes in that market?

You know, a number of the -- a number of guys that we'd compete against in the normal unsecured bankruptcy market, but there's a couple of I guess nuanced buyers that are in there as well. It's not a huge market, Bob. Obviously it's a segment of a segment, so it's not a huge market. Bob Napoli – William Blair & Co.: Okay. The UK business, I'm sorry I missed, how much did you purchase in the quarter?

$2.6 million, in US dollars. Bob Napoli – William Blair & Co.: Okay. And I mean as far -- just I understand taking the long view and I agree the market's not going away anytime soon, but is there, you know, is the activity, are you seeing more portfolios in that market, or I mean, what does the flow look like? And do you have access, are you tied in to all the flow that is out there?

Yeah, there is significant flow in the UK. In fact, there's very significant opportunities; the deals, however, are large. And I would say at this point in time we just don't have the confidence level to do a single large deal in an asset class in which we are not really well-steeped in terms of being able to understand our operational capability as well as our underwriting capability. So in our view, we'd rather let opportunities like that go by and not make a mistake. And again, there's going to be plenty of opportunity there. The charge-offs in the UK aren't going away. Bob Napoli – William Blair & Co.: But you saw, you know, I mean you had a pretty, you know, a very hefty buying quarter x the NCM, and given it's only about $2.6 million from the UK, in the US, are you seeing, is that broad? Are you seeing that, when you saw real strong comeback of paper, is that continuing in the first quarter?

Well, I would say what we saw in Q4 is to a degree continuing in Q1, and it's really two-fold. Number one, we're seeing decent flow of portfolios both in terms of resale and direct from issuer. But this phenomenon of a consolidation in the industry is real and is continuing. And as a result, we have seen our win rate move up slightly, and that's having an impact on the amount of money that we deploy in a quarter. Bob Napoli – William Blair & Co.: And just on the CFPB, as far as kind of the full-fledged audit, is that happening? Are they on site? Or what is the timing of an audit by the CFPB?

You know, we anticipate that we'll have them on-site at some point during the year, but we don't have anything more to report at this point. Bob Napoli – William Blair & Co.: Thanks. And then last question, on your leverage, I mean your leverage, obviously you have a very strong balance sheet and that's a great asset to have. Where are you comfortable as far as leverage? How high would you take leverage? I mean your competitor, one public competitor, is comfortably above you on the debt-to-equity side. Where do you feel comfortable?

You know, in the past there's certainly pre-public and we run the company at an almost two-to-one funded debt-to-equity level. So certainly, you know, a one-five number doesn't give us any pause at all. So that one-five, between one-five and two shouldn't be a problem. Again, assuming you're buying the right NFR assets. Bob Napoli – William Blair & Co.: Right. Great. Thanks. Nice job.

The next question comes from Mark Hughes from SunTrust. Mark Hughes – SunTrust Robinson Humphrey: Yes. Thank you. Good evening.

Hi, Mark. Mark Hughes – SunTrust Robinson Humphrey: Hello. The -- Kevin, you gave us three factors on amortization, two up, one down. How do they net out?

I'd leave that for you to decide. But I can't, you know, we've avoided guidance for years. I just wanted to give you guys, make sure you're thinking about those three factors. I think I couched it pretty well. In summary, I wrote, so in summary, higher pricing and continued bankruptcy buying tend to move rates up, while the contribution of '09 and '11 pools will tend to exert downward pressure. So I think, you know, I can't see '09 and '11 deals driving rates down next year, but it's going to have some influence on it. Mark Hughes – SunTrust Robinson Humphrey: Right. So I guess I would interpret your language as steady.

Might be a good read on that. Mark Hughes – SunTrust Robinson Humphrey: Dramatic pause.

Right. Shuffled the papers too. Mark Hughes – SunTrust Robinson Humphrey: The FTC report, did you -- what was your take on that? The most negative thing seemed to be that maybe a lot of people got contacted, who shouldn't be, erroneously. What do you make of all that?

No. I mean overall, I think our take on the report, that it was fairly benign. It is a bit of a look-back. This data was extracted from a number of folks a while back, and so I think almost everyone, especially over the last couple years, has been moving their regulatory regime along and working hard on compliance issues. So overall I don't think that it was a huge surprise to us other than the fact that it didn't come up with any, at least from our perspective, glaring issues for the industry. Mark Hughes – SunTrust Robinson Humphrey: Right. And then what's your philosophy on stock split? Is there a strong feeling that stock split shouldn't be done, or how should we think about it?

No, it's a topic that we do discuss on an ongoing basis here and it's something that is currently being debated. So I don’t -- we certainly don't have an opinion that's immovable one way or the other. Mark Hughes – SunTrust Robinson Humphrey: Okay. My vote would be to consider that.

Okay. Duly noted. Mark Hughes – SunTrust Robinson Humphrey: Thank you.

The next question comes from Edward Hemmelgarn from Shaker Investments. Edward Hemmelgarn – Shaker Investments: Hi. Just one question about the portfolio that you purchased of bankruptcy, the new company. You said that was secured by auto, or was it secured credit that you bought?

The Chapter 13 bankruptcy accounts that are secured by automobiles -- Edward Hemmelgarn – Shaker Investments: Okay. Anyways, what I was getting at is you would expect those to pay off at a more rapid rate, right?

I think all things being considered, that's right. Edward Hemmelgarn – Shaker Investments: Because you collect -- in bankruptcy, don't you collect the secured first and then --

Unsecured second, correct. Edward Hemmelgarn – Shaker Investments: Yeah, okay. So we should assume -- okay. Let's see -- okay. That's all for me. Thanks. Congratulations on another good quarter. Thank you.

Thank you.

The next question comes from David Scharf from JMP. David Scharf – JMP Securities: Hi, good afternoon. Steve, just one more follow-up on NCM. Can you give us a little color on just the size of that secured market? My understanding was the portfolio you acquired actually, even though they do have exposure to secured BKs, that that that might actually just be a small portion of it.

The portfolio that we acquired was a strong mix leaning toward secured BKs. NCM had been in the business of buying both types of debt, but again the portfolio we acquired was weighted towards the secured side. David Scharf – JMP Securities: And is there any way for us to just get a feel on the order of magnitude when we compare the amount of claims out there relative to, for example, what you'd seen in the unsecured credit card BK market these past few years?

I think you can find a lot of that data online, David. Clearly when you look at it, the secured filings are enormous, right? But so much of that's already real estate, is real estate based, so you've got to take a big chunk of that out. Then you kind of work your way down to really automotive segment which probably, I think if you really peel the onion back, is probably similar to 13 unsecured, but then only a portion of that trades too because it doesn’t -- a lot that doesn't charge off. So it's the big pot, you got to take out all the real estate, get down to the automobile, which is probably roughly the size of the unsecured market. And then you've got take a fraction of that that actually trades. David Scharf – JMP Securities: Okay, got it. And then lastly, Kevin, I just wanted to make sure I wrote this down correctly. With respect to the upfront court filing costs, 2013 should be roughly flat in terms of absolute dollars, was that what I heard?

Right. Yup. David Scharf – JMP Securities: Okay. Got it. Thanks so much.

[Operator Instructions]. The next question comes from Bob Napoli from William Blair. Bob Napoli – William Blair & Co.: Thank you. Just wanted to follow up on I guess competition in the bankruptcy industry. There was a pretty big trade that your public competitor, one of your public competitors, announced tonight that they had acquired. Is that, I mean what is the -- so you have a new competitor I guess. Is that your view on that situation, a new significant competitor?

Well, I mean, we've always had competition in the bankruptcy space and our view of that competition has been, although maybe not as many in number, they've been pretty sophisticated and have had access to substantial capital. So another competitor in the fray certainly isn't something that we look forward to, but I don't know that it changes the dynamic in that market a whole lot either. We think that we're very, very good underwriters as demonstrated by the track record that we've built over the last eight years or so in the bankruptcy market. And we think that our cost to administer these claims is as low as it gets. I mean we are really proud of the engine that we've built here. And so if people want to compete, we're ready for it. We think we can compete with the best. Bob Napoli – William Blair & Co.: Okay. And then other types of paper, are you taking a harder look or testing close to initiating any different types of paper? I know you had looked at I guess private student loans at one point, and I'm not sure, is there anything else on a diversification front from a buying of paper standpoint?

I don't know that there's many other places to go. We have bought just about every type of paper since we've been in business. Certainly discussions continue to abound in the industry and here about the potential in the student loan market, but to date there's just not a whole lot of transacting going on there yet. But you can be sure that's an area that we're watching closely. Bob Napoli – William Blair & Co.: Any interest in the mortgage market, I guess, is -- maybe through a small acquisition of a platform or something like that or?

I would say that's down on our list. Bob Napoli – William Blair & Co.: Okay. And then I guess I would -- not that I have a vote, but I would vote for a stock split. It might help the liquidity a little bit as well.

Okay.

Two-zero so far.

Yeah, right. Bob Napoli – William Blair & Co.: Thank you.

Thank you.

The next question comes from Hugh Miller from Sidoti & Company. Hugh Miller – Sidoti & Co.: I just had a quick question about the -- did you guys give a stat on the average payment size? I saw the volume, your number, but I didn't catch it if you talked about the average payment size and how that was trending.

It was flat in the quarter and -- for year over year, flat, and flat for the year. So that's a big improvement. In 2011 average payment size was down 7%, and in the year prior it was down 13%, so flat was happy news. Hugh Miller – Sidoti & Co.: Right. Thank you very much.

I am showing no further questions. Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.