First Albany Reports Third Quarter 2005 Financial Results

Overview of Quarterly Results

First Albany's 2005 third quarter net revenues from continuingoperations were $37.2 million, compared to $37.1 million for the 2004third quarter. A $3.5 million increase in Investment Banking revenueand a $6.6 million improvement in investment income related to thevalue of the Company's investment portfolio during the quarter wereoffset by net revenue declines of $9.5 million in Sales and Trading.For the 2005 third quarter, the Company reported a net loss fromcontinuing operations of $3.0 million compared to a net loss of $6.0million for the same period in 2004. Results for the 2005 thirdquarter include $0.5 million in costs, net of tax, incurred inconsolidating the Company's New York City offices, while results forthe 2004 third quarter include, net of tax, $2.1 million forrestructuring costs associated with staffing reductions, asoftware-related asset impairment, legal expenses and documentingcompliance with Section 404 of the Sarbanes-Oxley Act. The 2005 thirdquarter net loss per diluted share from continuing operations was$0.21 compared to a net loss of $0.45 per diluted share in the thirdquarter of 2004. Consolidated net loss was $ 2.9 million for the 2005third quarter compared to a net loss of $6.4 million for the sameperiod in 2004. Diluted earnings per share on a consolidated basis forthe 2005 third quarter was a net loss of $0.21 per share compared to anet loss of $0.48 in the third quarter of 2004.

For the nine months ended September 30, 2005, net revenues fromcontinuing operations were $102.3 million, compared to $120.1 millionfor the same period in 2004. A strong performance in Fixed Incomeinvestment banking and an increase in investment income related to thevalue of the Company's investment portfolio were offset by lower netrevenues in sales and trading for both Equities and Fixed Income.Results for the nine months were negatively impacted by $1.7 millionin severance costs, net of tax, related to staffing reductions and$0.5 million in expenses, net of taxes, incurred as part of theCompany's effort to consolidate its offices in New York City.Including these charges, the Company reported a net loss fromcontinuing operations of $12.9 million for the first nine months of2005 compared to a net loss from continuing operations of $ 4.5million for the same period in 2004. The 2004 results were negativelyimpacted by charges totaling $3.7 million, net of tax, including:restructuring costs associated with staffing reductions, asoftware-related asset impairment, legal expenses, and documentingcompliance with Section 404 of the Sarbanes-Oxley Act. Earnings perdiluted share from continuing operations for the nine months endedSeptember 30, 2005 was a net loss of $0.94 compared to a net loss of$0.37 per diluted share for the same period in 2004. The Companyreported a consolidated net loss of $13.2 million for the nine monthsended September 30, 2005, compared to a consolidated net loss of $5.6million for the same period in 2004. Consolidated diluted earnings pershare for the nine months ended September 30, 2005, was a net loss of$0.96 compared to a net loss of $0.46 for the same period of 2004.

"We experienced weakness in our taxable fixed income products, hada strong performance from Public Finance, and the third quarter, netrevenue for Investment Banking doubled over the second quarter of thisyear," said Alan Goldberg, President and Chief Executive Officer ofFirst Albany. "We expect improved sequential results in the fourthquarter, and will continue to reduce costs and lower our breakeven sothat increases in revenue can more readily affect profitability."

Operational Highlights

Fixed Income

-- Fixed Income net revenue was $19.6 million for the 2005 third quarter, compared to $23.4 million for the 2004 third quarter. For the nine months ended September 30, 2005, Fixed Income net revenue was $60.4 million compared to $61.9 million for the same period in 2004.

-- Public Finance net revenue was $8.5 million for the 2005 third quarter compared to $2.5 million for the 2004 third quarter. For the nine months ended September 30, 2005, public finance net revenue was $20.3 million compared to $11.9 million for the same period in 2004, due primarily to an increase in underwriting revenue.

-- The third quarter of 2005 was a difficult quarter in fixed income sales and trading. A flattening yield curve and low market volatility contributed to the year-over-year declines in revenue in the Company's taxable products.

-- Mortgage-backed net revenue was $3.5 million for the 2005 third quarter compared to $5.9 million for the 2004 third quarter. The Company's acquisition of Descap Securities in May of 2004 resulted in a 30.7 percent, or $3.3 million, year-over-year increase in mortgage-backed net revenue for the nine months ended September 30, 2005.

-- Corporate bond net revenue was $3.1 million compared to $5.9 million for the 2004 third quarter. For the nine months ended September 30, 2005, corporate bond net revenue was $9.7 million compared to $17.9 million for the same period in 2004. Spread compression continues to negatively impact secondary corporate bond activity.

-- Municipal sales and trading revenue was $3.4 million compared to $4.3 million for the 2004 third quarter. For the nine months ended September 30, 2005, municipal sales and trading net revenue was $9.4 million compared to $12.3 million for the same period in 2004. The drop in revenue was primarily due to a decline in principal transaction revenue.

Equities

-- Equity Capital Markets reported year-over-year declines in net revenue for the third quarter of 2005 primarily as a result of lower customer volumes in sales and trading and a decline in advisory fee revenue in Investment Banking. Net revenue was $16.0 million for the 2005 third quarter compared to $19.1 million for the 2004 third quarter. For the nine months ended September 30, 2005, Equity Capital Markets net revenue was $43.2 million compared to $58.1 million the same period in 2004.

-- Investment banking net revenue was $5.6 million for the 2005 third quarter compared to $8.1 million for the 2004 third quarter on lower advisory fee revenue. During the 2005 third quarter, the Company completed nine transactions, acting as a co-manager on four public offerings, a placement agent on two private offerings, and an advisor on three transactions. For the nine months ended September 30, 2005, Investment Banking net revenue was $11.5 million compared to $17.4 million for same period in 2004 as result of a decline in underwriting activity and lower advisory fee revenue.

-- Sales and Trading net revenue was $10.4 million for the 2005 third quarter compared to $11.0 million for the 2004 third quarter, with a six percent drop in Nasdaq net revenue and a five percent drop in Listed net revenue. For the nine months ended September 30, 2005, Sales and Trading net revenue was $31.6 million compared to $40.5 million the same period in 2004.

Other

-- Other net revenue was $1.5 million for the 2005 third quarter compared to net loss of $5.4 million for the third quarter of 2004. The year-over-year increase in revenue was the result of an improvement in investment income related to the change in value of Company's investment portfolio.
First Albany Companies
Operational Highlights
(Unaudited)

Three Months Ended Nine Months Ended
September 30 September 30
2005 2005
V V
2005 2004 2004 2005 2004 2004
-------- --------- ----- --------- --------- -----
(Dollars in
Thousands)
Net Revenues:

Equities $15,996 $ 19,139 -16% $ 43,173 $ 58,121 -26%
Fixed Income 19,635 23,367 -16% 60,439 61,917 -2%
Other 1,528 (5,442) 128% (1,273) 111 n/m
-------- --------- ----- --------- --------- -----

Total $37,159 $ 37,064 0% $102,339 $120,149 -15%
-------- --------- ----- --------- --------- -----

Pre-Tax Operating
Income (Loss):

Equities $ (389) $ 678 -157% $ (5,188) $ 3,937 -232%
Fixed Income 816 5,114 -84% 5,988 9,900 -40%
Other (5,653) (16,243) 65% (23,503) (26,505) 11%
-------- --------- ----- --------- --------- -----

Total $(5,226) $(10,451) 50% $(22,703) $(12,668) -79%
======== ========= ===== ========= ========= =====


Capital Markets (Fixed
Income & Equities)
Three Months Ended Nine Months Ended
September 30 September 30
2005 2005
V V
2005 2004 2004 2005 2004 2004
-------- --------- ----- --------- --------- -----
(Dollars in
Thousands)
Net Revenues:

Institutional
Sales & Trading
Equities $10,387 11,017 -6% $ 31,605 $ 40,539 -22%
Fixed Income 10,979 19,849 -45% 37,713 47,554 -21%
-------- --------- ----- --------- --------- -----

Total Institutional
Sales & Trading 21,366 30,866 -31% 69,318 88,093 -21%
-------- --------- ----- --------- --------- -----

Investment Banking
Equities 5,594 8,067 -30% 11,508 17,393 -34%
Fixed Income 8,533 2,537 236% 20,950 12,454 68%
-------- --------- ----- --------- --------- -----

Total Investment
Banking 14,127 10,604 33% 32,458 29,847 9%
-------- --------- ----- --------- --------- -----

Net Interest
Income 127 928 -86% 1,760 1,855 -5%
Other Income 11 108 -89% 76 243 -69%
-------- --------- ----- --------- --------- -----

Total Net Revenues $35,631 $ 42,506 -16% $103,612 $120,038 -14%
-------- --------- ----- --------- --------- -----

Note: Does not include Discontinued Operations

Other

During the quarter ending June 30, 2005, the Company executed alease for new office space in New York City, which will provide theopportunity to consolidate operations. The Company currentlyanticipates moving into the new space in the first quarter of 2006.The Company's leases for its current office spaces in New York Cityexpire in October 2008 and May 2009. Based upon current marketconditions, the Company has estimated it will incur a charge ofapproximately $2.6 million to $3.0 million, net of anticipatedsublease rental income, when it ceases to use its current officespaces. In addition, the Company has revised the estimated usefullives of leasehold improvements related to its existing space and willrecognize an incremental non-cash charge of approximately $0.5 millionbetween October 1, 2005 and the anticipated cease-use date. Also, inaddition to the rent expense being recognized on the existing officespaces through the cease-use date, the Company will also recognizerent expense related to the new space. In the third quarter of 2005,the Company recognized $0.4 million of the non-cash charge and $0.3million in additional rent expense.

Shareholders' Equity

Shareholders' equity as of September 30, 2005 was $79.7 million,compared to $80.2 million on June 30, 2005. Book value per share as ofSeptember 30, 2005 was $5.96, as compared to $6.03 on June 30, 2005.

Conference Call Information

First Albany Companies will hold a conference call today,Thursday, November 3, 2005, at 4:15 P.M. (EST). This call will bewebcast and can be accessed on the Investor Relations portion of theFirst Albany Companies website at www.firstalbany.com, as well asbeing distributed through the Thomson StreetEvents Network. Individualinvestors can listen to the call at www.earnings.com, Thomson'sindividual investor portal, powered by StreetEvents. Institutionalinvestors can access the call via Thomson StreetEvents(www.streetevents.com), a password-protected event management site. Toparticipate on the call, please dial 800.362.0595 and request theFirst Albany earnings call. A recording of the call will be availablefor seven days by dialing 800.839.2383.

About First Albany

Founded in 1953, First Albany is a leading institutionally focusedindependent investment bank that serves the institutional market, thegrowing corporate middle market and public institutions by providingclients with strategic, research-based, innovative investmentopportunities. First Albany offers a diverse range of products throughits Equities division, Fixed Income division and Venture Capitaldivision, FA Technology Ventures Inc. First Albany is traded on NASDAQunder the symbol FACT with offices in major business and commercialmarkets.

This press release contains "forward-looking statements," whichare subject to various risks and uncertainties, including theconditions of the securities markets, generally, and acceptance of theCompany's services within those markets and other risks and factorsidentified from time to time in the Company's filings with theSecurities and Exchange Commission. These statements are nothistorical facts but instead represent only the Company's beliefregarding future events, many of which, by their nature, areinherently uncertain and outside of the Company's control. It ispossible that the Company's actual results and financial condition maydiffer, possibly materially, from the anticipated results andfinancial condition indicated in these forward-looking statements.
FIRST ALBANY COMPANIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)


THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
---------------------------------------------------------------------
(In thousands of
dollars except for
per share amounts
and shares
outstanding) 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues:
Commissions $ 4,355 $ 4,963 $ 13,586 $ 16,121
Principal
transactions 17,026 24,485 56,337 69,616
Investment banking 14,359 11,994 32,613 32,184
Investment gains 398 (6,204) (6,247) (2,341)
Interest 3,832 2,972 11,485 6,895
Fees and other 647 663 3,564 1,794
---------------------------------------------------------------------
Total revenues 40,617 38,873 111,338 124,269
Interest expense 3,458 1,809 8,999 4,120
---------------------------------------------------------------------
Net revenues 37,159 37,064 102,339 120,149
---------------------------------------------------------------------
Expenses (excluding
interest):
Compensation and
benefits 29,881 32,254 87,919 91,916
Clearing, settlement
and brokerage costs 2,375 1,577 7,180 5,011
Communications and
data processing 3,598 3,587 10,965 11,369
Occupancy and
depreciation 3,460 2,417 9,143 6,982
Selling 1,719 1,966 5,234 5,671
Impairment - 1,375 - 1,375
Restructuring - 750 - 750
Other 1,352 3,589 4,601 9,743
---------------------------------------------------------------------
Total expenses
(excluding interest) 42,385 47,515 125,042 132,817
---------------------------------------------------------------------
Income (loss) before
income taxes (5,226) (10,451) (22,703) (12,668)
---------------------------------------------------------------------
Income tax (benefit)
expense (2,274) (4,458) (9,791) (8,188)
---------------------------------------------------------------------
Income (loss) from
continuing
operations (2,952) (5,993) (12,912) (4,480)
---------------------------------------------------------------------
Income (loss) from
discontinued
operations, net of
taxes 41 (378) (249) (1,147)
---------------------------------------------------------------------
Net income (loss) $ (2,911)$ (6,371)$ (13,161)$ (5,627)
=====================================================================

Per share data:
Basic earnings:
Continued operations$ (0.21)$ (0.45)$ (0.94)$ (0.37)
Discontinued
operations (0.00) (0.03) (0.02) (0.09)
---------------------------------------------------------------------
Net Income (Loss) $ (0.21)$ (0.48)$ (0.96)$ (0.46)
=====================================================================
Diluted earnings:
Continued operations$ (0.21)$ (0.45)$ (0.94)$ (0.37)
Discontinued
operations (0.00) (0.03) (0.02) (0.09)
---------------------------------------------------------------------
Net Income (Loss) $ (0.21)$ (0.48)$ (0.96)$ (0.46)
=====================================================================

Weighted average
common and common
equivalent shares
outstanding:
Basic 13,973,462 13,148,611 13,699,739 12,275,353
Dilutive (a) 14,798,686 13,848,167 14,601,776 13,471,907
=====================================================================

(a) Amount includes, for the three months and nine months of 2005,
0.8 million and 0.9 million, respectively, and for the three
months and nine months of 2004, 0.7 million and 1.2 million,
respectively, common equivalent shares that were excluded from
the computation of dilutive earnings per share because they
were anti-dilutive.