First Albany Reports Second Quarter 2006 Results

First Albany's 2006 second quarter net revenues from continuingoperations were $41.1 million, compared to $32.5 million for thesecond quarter of 2005. Excluding investment gains and losses, netrevenues from continuing operations were $39.9 million, up 13 percentcompared to the same period in 2005. For the second quarter of 2006,the Company reported a loss from continuing operations before incometaxes of $3.9 million compared to a loss of $4.1 million for thesecond quarter of 2005. Results for the quarter include $4.6 millionin costs associated with the Company's retention program. The Companyreported a net loss of $6.2 million, or $0.40 per diluted share, forthe second quarter of 2006, compared to a net loss of $3.4 million, or$0.24 per diluted share, for the second quarter of 2005.

For the six months ended June 30, 2006, First Albany's netrevenues from continuing operations were $66.6 million compared to$56.3 million for the same period in 2005. Excluding investment gainsand losses, net revenues from continuing operations were $71.5million, up 14 percent compared to the first six months of 2005. TheCompany reported a loss from continuing operations before income taxesof $16.1 million for the first six months of 2006 compared to a lossfrom continuing operations of $15.2 million for the first six monthsof 2005. The Company reported a net loss of $18.4 million, or $1.20per diluted share, for the first six months of 2006, compared to a netloss of $10.3 million, or $0.76 per diluted share, for the same periodin 2005.

Business Highlights

-- Led by record revenues in Equity Investment Banking, our Equities division reported net revenue of $19.6 million for the second quarter of 2006, up 49 percent compared to the second quarter of 2005. During the second quarter of 2006, Equity Investment Banking completed fifteen transactions and reported $10.4 million in net revenue which was an increase of 273 percent, compared to the second quarter of 2005.

-- Our Municipal division reported net revenue of $10.7 million for the second quarter of 2006, an increase of five percent compared to the same period a year ago, led by a nine percent increase in Public Finance, which reported net revenue of $7.3 million for the second quarter of 2006.

-- Descap Securities reported net revenue of $8.5 million for the second quarter of 2006, an increase of 35 percent from the same period last year.

-- The Company recognized a $5.2 million gain on its private investments included in its investment portfolio for the second quarter of 2005, of which approximately $4.2 million related to an increase in the valuation of an FATV portfolio company.

-- FA Technology Ventures invested $5.4 million and added one new portfolio company for the second quarter of 2006.

-- The Company ceased operations in the Taxable Fixed Income division in the second quarter of 2006 due to a changing business environment and continued revenue declines. The Company recorded a $1.7 million charge to close the business, which is reflected as discontinued operations.

"We're pleased with the progress we have made on increasing thefinancial flexibility of the balance sheet and restructuring ouroperations to focus our resources on our core franchises," said PeterMcNierney, Chief Executive Officer of First Albany Companies."Operating highlights for the quarter include Investment Bankingreporting its best quarter in the history of the firm and DescapSecurities generating its strongest quarterly revenues since it wasacquired in 2004. Our operating results, however, continue to beimpacted by our efforts to streamline our business and by fluctuationsin our investment portfolio.

The following table presents the impact of these significantitems:
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------
(Dollars in Thousands) 2006 2005 2006 2005
----------------------------------------------------------------------
Loss from continuing
operations before taxes $ (3,934) $ (4,112) $(16,096) $(15,208)
Employee severance and
retention costs 4,926 1,201 6,811 2,037
Investment losses (Gains) (1,196) 2,847 4,947 6,645
Legal Settlements 939 - 939 -
Office consolidation costs 67 387 744 387
Debt Refinancing Costs - - 935 -
---------------------------------------- --------- --------- ---------
$ 802 $ 323 $ (1,720) $ (6,139)
======================================================================

"With the continued support of our clients and commitment by ourprofessionals, we believe we are positioned for success in the secondhalf of 2006."

Net Revenues

Investment Banking

Investment Banking reported a record quarter with net revenue of$17.9 million compared to $9.8 million for the second quarter of 2005,an increase of 84 percent. For the six months ended June 30, 2006,Investment Banking net revenue was $29.4 million compared to $18.1million for the same period in 2005, an increase of 63 percent.

-- Equity Investment Banking with net revenue of $10.4 million drove the increase in Investment Banking net revenue for the second quarter. During the quarter the Company acted as a manager on ten public offerings, a placement agent on three private transactions, and an advisor on two transactions. For the six months ended June 30, 2006, Equity Investment Banking net revenue was $18.6 million compared to $5.9 million for the same period in 2005.

-- Fixed Income Investment Banking net revenue was $7.5 million for the second quarter of 2006, an increase of eight percent compared to the second quarter of 2005 and an increase of 124 percent compared to the first quarter of 2006. Public Finance net revenues of $7.3 million for the second quarter 2006 represented a year-over-year increase of nine percent, or $0.6 million compared to the second quarter of 2005. For the six months ended June 30, 2006, Fixed Income Investment Banking net revenue was $10.9 million compared to $12.1 million for the same period in 2005.

Institutional Sales & Trading

Institutional Sales & Trading net revenue was $21.5 million forthe second quarter of 2006 compared to $22.2 million for the secondquarter of 2005. For the six months ended June 30, 2006, InstitutionalSales & Trading net revenue was $42.0 million, compared to $39.5million for the same period in 2005.

-- Equity Sales & Trading net revenue for the second quarter of 2006 was $9.2 million compared to $10.4 million for the second quarter of 2005, a decrease of 11 percent. Declines in customer activity for both Listed and Nasdaq were partially offset by improved trading loss ratios related to market making activities in both groups. For the six months ended June 30, 2006, equity sales and trading net revenue was $20.3 million compared to $21.2 million for the same period in 2005.

-- Mortgage-backed net revenue was $8.4 million for the second quarter of 2006 compared to $5.2 million for the second quarter of 2005. The increase was the result of several large customer trades executed during the quarter. For the six months ended June 30, 2006, mortgage-backed net revenue was $11.8 million compared to $9.0 million for the same period in 2005.

-- Municipal Sales & Trading net revenue of $3.5 million for the second quarter of 2006 remained relatively unchanged compared to the second quarter of 2005. For the six months ended June 30, 2006, Municipal Sales & Trading net revenue was $8.6 million compared to $6.1 million for the same period in 2005.

-- Fixed Income Middle Markets net revenue of $0.3 million for the second quarter represented a decline of $2.8 million compared to the same period in 2005. For the six months ended June 30, 2006, Fixed Income Middle Markets net revenues were $1.3 million compared to $3.3 million for the first six months of 2005.

Other

Other net revenue increased $2.3 million for the second quarter of2006 compared to the same period in 2005. The change was due to anincrease in private investments of $5.6 million, driven by theincrease in valuation of an FATV portfolio company, offset bydecreases of $1.6 million in public investments. Fee and other incomedecreased $1.8 million due to a $1.5 million gain on the sale of theCompany's NYSE seat which was recognized in the second quarter of 2005and a decrease in net interest income of $0.3 million. For the sixmonths ended June 30, 2006, Other net revenues were a loss of $4.0million compared to a loss of $2.8 million for the same period in2005, a decrease of $1.2 million. A reduction in losses related to thecompany's investment portfolio of $1.7 million was offset by areduction in fee and net interest income of $2.9 million.

Expenses

-- Non-interest operating expenses of $45.0 million for the second quarter 2006 increased 23 percent or $8.3 million compared to the second quarter of 2005. For the six months ended June 30, 2006, non-interest operating expenses were $82.7 million, 16 percent higher than in the same period in 2005.

-- Compensation and benefits expenses in the 2006 second quarter were $34.0 million, compared to $24.7 million for the second quarter of 2005. An accrual of $4.6 million for the Company's retention program and an increase in sales related compensation and incentive compensation of $6.2 million due to higher net revenues were offset by a $0.7 million decrease in salary expense. Costs related to the Company's retention program ceased in July 2006. Compensation and benefits for the first six months of 2006 was $60.8 million compared to $49.1 million for the first six months of 2005. Average full time headcount for continuing operations was down ten percent and nine percent year-over-year for the quarter and six months ending June 30, 2006, respectively.

-- Non-compensation expenses in the second quarter of 2006 were $11.0 million, compared to $11.9 million in the second quarter of 2005. For the first six months of 2006, non-compensation expenses were $21.9 million compared to $22.4 million for the same period in 2005.

-- The Company did not recognize any income tax benefit in the second quarter of 2006 due to the valuation allowance related to the Company's deferred tax asset. The valuation allowance was recorded as a result of uncertainties as to the realization of the deferred tax asset and after weighing all positive and negative evidence, including the Company's history of cumulative losses over at least the past two years and the difficulty of forecasting future taxable income. Income tax benefit was $1.8 million for the 2005 second quarter and $6.6 million for the six months ended June 30, 2005.
First Albany Companies
Operational Highlights
(Unaudited)

Three Months Ended Six Months Ended
June 30 June 30
2006 2006
V V
2006 2005 2005 2006 2005 2005
------- ------- ----- -------- -------- -----
(Dollars in
Thousands)
Net Revenues:

Equities $19,616 $13,166 49% $ 38,900 $ 27,177 43%
Fixed Income 19,382 19,590 -1% 31,655 31,923 -1%
Other 2,057 (216) N/M% (3,954) (2,800) -41%
------- ------- ----- -------- -------- -----

Total $41,055 $32,540 26% $ 66,601 $ 56,300 18%
------- ------- ----- -------- -------- -----

Pre-Tax Operating
Income (Loss):

Equities $ 1,688 $(2,876) 159% $ 3,767 $ (4,799) 178%
Fixed Income 3,466 6,215 -44% 3,783 7,441 -49%
Other (9,088) (7,451) -22% (23,646) (17,850) -32%
------- ------- ----- -------- -------- -----

Total $(3,934) $(4,112) 4% $(16,096) $(15,208) -6%
======= ======= ===== ======== ======== =====


Capital Markets (Fixed
Income & Equities)

Three Months Ended Six Months Ended
June 30 June 30
2006 2006
V V
2006 2005 2005 2006 2005 2005
------- ------- ----- -------- -------- -----
(Dollars in
Thousands)
Net Revenues:

Institutional Sales
& Trading
Equities $ 9,225 $10,365 -11% $ 20,344 $ 21,218 -4%
Fixed Income 12,238 11,803 4% 21,692 18,313 18%
------- ------- ----- -------- -------- -----

Total Institutional
Sales & Trading 21,463 22,168 -3% 42,036 39,531 6%
------- ------- ----- -------- -------- -----

Investment Banking
Equities 10,387 2,784 273% 18,560 5,914 214%
Fixed Income 7,513 6,971 8% 10,873 12,139 -10%
------- ------- ----- -------- -------- -----

Total Investment
Banking 17,900 9,755 84% 29,433 18,053 63%
------- ------- ----- -------- -------- -----

Net Interest Income (627) 804 -178% (1,179) 1,450 -181%
Other Income 262 29 803% 265 66 302%
------- ------- ----- -------- -------- -----

Total Net Revenues $38,998 $32,756 19% $ 70,555 $ 59,100 19%
------- ------- ----- -------- -------- -----

Note: Does not include Discontinued Operations

Shareholders' Equity

Shareholders' equity as of June 30, 2006 was $72.8 million,compared to $77.3 million on March 31, 2006. Book value per share asof June 30, 2006 was $4.92, as compared to $5.27 on March 31, 2006.

Non-GAAP Financial Measures

This press release includes non-GAAP financial measures. TheCompany has utilized a non-GAAP calculation of operating income thatis adjusted to aid in understanding and analyzing our financialresults in the second quarter of 2006. The Company believes that thesenon-GAAP measures will allow for a better evaluation of the operatingperformance of our business. Our reference to these measures shouldnot, however, be considered a substitute for results that arepresented in a manner consistent with GAAP.

Conference Call Information

First Albany Companies will hold a conference call today, August3, 2006, at 4:30 P.M. (EDT). This call will be webcast and can beaccessed on the Investor Relations portion of the First AlbanyCompanies website at www.firstalbany.com, as well as being distributedthrough the Thomson StreetEvents Network. Individual investors canlisten to the call at www.earnings.com, Thomson's individual investorportal, powered by StreetEvents. Institutional investors can accessthe call via Thomson StreetEvents (www.streetevents.com), apassword-protected event management site. To participate on the call,please dial 800.362.0571 and request the First Albany earnings call. Arecording of the call will be available for seven days by dialing800.283.8217.

About First Albany

First Albany Companies Inc. (NASDAQ:FACT) is an independentinvestment bank that serves the institutional market, state and localgovernments and the growing corporate middle market by providingclients with strategic, research-based investment opportunities, aswell as advisory and financing services. First Albany offers a diverserange of products through its Equities and Municipal Capital Marketsdivisions, as well as through Descap Securities Inc., its MBS/ABStrading subsidiary, and FA Technology Ventures, its venture capitaldivision. First Albany maintains offices in major business andcommercial markets.

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 Six Months Ended
June 30 June 30
----------------------------------------------------------------------
(In thousands of dollars
except for per share
amounts and shares
outstanding) 2006 2005 2006 2005
----------------------------------------------------------------------
Revenues:
Commissions $ 3,323 $ 4,614 $ 6,920 $ 9,185
Principal transactions 17,967 17,774 35,333 30,938
Investment banking 18,340 9,770 29,704 17,976
Investment gains 1,196 (2,847) (4,947) (6,645)
Interest 3,578 4,186 6,620 7,446
Fees and other 870 2,181 1,488 2,917
----------------------------------------------------------------------
Total revenues 45,274 35,678 75,118 61,817
Interest expense 4,219 3,138 8,517 5,517
----------------------------------------------------------------------
Net revenues 41,055 32,540 66,601 56,300
----------------------------------------------------------------------
Expenses (excluding
interest):
Compensation and benefits 33,943 24,743 60,807 49,126
Clearing, settlement and
brokerage costs 1,778 3,019 3,486 4,692
Communications and data
processing 3,044 3,163 6,023 6,355
Occupancy and
depreciation 2,333 2,665 5,199 5,111
Selling 1,290 1,565 2,744 3,102
Other 2,601 1,497 4,438 3,122
----------------------------------------------------------------------
Total expenses (excluding
interest) 44,989 36,652 82,697 71,508
----------------------------------------------------------------------
Income (loss) before
income taxes (3,934) (4,112) (16,096) (15,208)
----------------------------------------------------------------------
Income tax (benefit)
expense - (1,800) - (6,604)
----------------------------------------------------------------------
Income (loss) from
continuing operations (3,934) (2,312) (16,096) (8,604)
Income from discontinued
operations, net of taxes (2,240) (1,042) (2,723) (1,646)
----------------------------------------------------------------------
Income (loss) before
cumulative effect (6,174) (3,354) (18,819) (10,250)
Cumulative effect of
accounting change, net of
taxes - - 427 -
----------------------------------------------------------------------
Net income (loss) $(6,174) $(3,354) $(18,392) $(10,250)
======================================================================

Per share data:
Basic earnings:
Continued operations $ (0.26) $ (0.17) $ (1.05) $ (0.64)
Discontinued operations (0.14) (0.07) (0.18) (0.12)
Cumulative effect of
accounting change - - 0.03 -
----------------------------------------------------------------------
Net Income $ (0.40) $ (0.24) $ (1.20) $ (0.76)
======================================================================
Diluted earnings:
Continued operations $ (0.26) $ (0.17) $ (1.05) $ (0.64)
Discontinued operations (0.14) (0.07) (0.18) (0.12)
- - 0.03 -
----------------------------------------------------------------------
Net Income $ (0.40) $ (0.24) $ (1.20) $ (0.76)
======================================================================

Weighted average common
and common equivalent
shares outstanding:
Basic 15,402,424 13,869,064 15,390,043 13,562,878
Dilutive (a) 15,402,424 13,869,064 15,390,043 13,562,878
======================================================================

(a) For the three and six months ended June 30, 2006, 0.4 million and
0.3 million, respectively, and for the three and six months ended
June 30, 2005, 1.0 million and 0.9 million, respectively, common
equivalent shares were excluded from the computation of dilutive
earnings per share because they were anti-dilutive.