Prompt:
Human: We will be discussing results that were released yesterday after the close.
To listen online, please go to the stewart.com website to access the link for this conference call.
Because such statements are based on an expectation of future financial operating results and are not statements of fact, actual results may differ materially from those projected.
In a minute, David will take you through the details of this quarter's financial results.
But before then, I'd like to discuss Stewart's operational evolution to date and the continued execution of our long-term strategy.
two years ago, we started a journey here at Stewart, a journey to become the premier title services company.
We knew it would take some time, but we also knew we had a valued brand, strong balance sheet and associates that were ready and willing to have and to make an impact.
Between then and now, we have navigated the dramatic impacts of COVID-19 life as well as historic real estate market that continues to have momentum.
So where are we on the journey?
And what have been the main areas of focus and progress?
We've made significant improvement on our operational capabilities by adding greater scale in priority markets, augmenting our core business with essential real estate technology and services, and injecting new talent and energy into a 125-year-old company.
As I like to say, we are a 125-year-old start-up.
Initial goals of achieving double-digit margin have been met and exceeded, albeit with the help of a very robust market.
As David will discuss, Stewart's operating revenues are up almost $240 million or 40% from last year.
And operating income was up over $30 million or 55% in a quarter in which the Mortgage Bankers Association forecasts have purchase originations down 12% year-over-year and overall mortgage originations down 25%.
So we feel we are comfortably outperforming the market and creating some real value.
At this stage of our journey, we can safely say much has structurally changed and improved, but we have more work to be done.
Through acquisitions, we have grown scale in many critical markets where our size once hindered profitability and prevented the efficient managing of daily operations.
Scale and flexibility are critical in a business that is both seasonal and cyclical.
We accelerated our restructuring in the midst of heavy transaction volume.
We closed offices where we foresaw challenges going forward.
And we entered two markets we believe will be the center of real estate activity in the future.
On the topic of talent, we are becoming a destination for some very special talent.
On the -- of the top people at Stewart, what we call our senior leadership team, 50% are new or have been promoted.
Our aggressive entrepreneurial actions have attracted great talent, not just from the title operations but across the real estate services spectrum.
And in real estate technology, given our investment, our commitment and nimbleness, many talented leaders have joined us.
This investment and improvement and talent will support our journey for years to come.
Most importantly, we have become more valuable to our customers by building ease into the customer experience.
For our larger lender partners, we have added technology and services that bring greater efficiency and usefulness, both in the current market and as well as a more digitally transformed marketplace.
For our smaller customers, they see the value in our ability to make their daily life easier through tools, technology, service and security.
The last component being of vital importance is wirefraud has become a critical issue for agents and the very reason we have partnered with Certified.
I will leave with you a couple of thoughts.
First, while our operational performance has benefited from the historic real estate market we are in, here at Stewart, we are focused on building a business that will thrive through the full real estate cycle and also be able to take advantage of technology and digitization to further transform the closing process.
We intensely focus on driving the digital innovation required to deliver a superior closing process today and into the future.
And I am confident our investments have positioned us for the current and future success.
Second, while it is critical to build toward a vision of fully automated and digitized closing process in the future for now, at its core, title insurance remains a technology-enabled but execution-driven business, in which the clearing of title removes risk from customers who are ultimately making the largest purchase of their lifetime.
This is a very important reality.
Our journey continues, and we are a quarter closer to our goal.
And David will now update everyone on the results of the quarter.
Although we are entering a seasonally slower real estate period, real estate markets remain strong, driven by demand and favorable interest rates.
Commercial is showing good recovery, particularly in industrial, energy and multifamily.
There are going to continue to be several watch items that could impact future business performance, including Fed and government policy and action, improving yet historically high mortgage delinquency and forbearance, a lingering virus, rising inflation, and slower supply chains.
Consistent with our strategy and Fred's comments, we continue to focus on the areas that will have the most meaningful and durable impact on our long-term operating performance: gaining scale in attractive direct markets; improving scale and geographic focus on agency and commercial operations; broadening and scaling lender services offerings; and throughout our business, improving service and digital capabilities to provide ease of use and better user experience.
For the third quarter of 2021, Stewart yesterday reported net income of $89 million and diluted earnings per share of $3.26 on total operating revenues of $830 million.
The adjustments to our third quarter net income were primarily driven by a gain relating to an acquisition contingent liability adjustment.
Compared to last year, total title revenues for the quarter increased $205 million or 37% due to solid results from our residential agency and commercial operations.
The title segment generated pre-tax income of $119 million, which is $37 million higher than last year's quarter as a result of this revenue growth and continued management focus.
Pretax margin for the segment also improved 90 basis points to 15% compared to last year.
With respect to our direct title business, residential revenues increased $55 million or 23%, driven by higher purchase transactions and improving scale.
Residential fee per file was approximately $2,400, a 24% improvement compared to last year's average fee per file due to a higher purchase mix.
Domestic commercial revenues improved $28 million or 76% due to increased transaction volume and higher average fee per file, which was $15,400 versus $9,700 in last year's quarter.
Total international revenues increased $17 million or 49%, primarily due to improved volumes in our Canadian operations.
Total opened and closed orders in the third quarter decreased 13% and 3% respectively due to lower refinancing transactions consistent with the market trend.
However, commercial and purchase closed orders increased 11% and 8% respectively compared to the third quarter of 2020.
In line with our direct title business, agency operations generated a strong quarter, with revenues improving 42% to $402 million versus $283 million last year.
The agency remittance rate for the third quarter was 17.9% compared to 18.2% last year.
On a year-to-date basis, it was 17.8% for both '21 and '20.
On title losses, total title loss expense increased $2 million or 7% primarily as a result of higher title revenues, partially offset by favorable claims experience.
As a percentage of title revenues, the title loss expense in the third quarter was 4% compared to 5% in the prior year quarter.
In regard to operating expenses, which consist of employee and other operating costs, total operating expenses increased primarily in relation to higher revenues.
Employee costs as a percentage of operating revenues improved to 24% from 26% last year, while other operating expenses increased to 18% from 17% last year primarily due to increased pass-through appraisal and service costs.
Excluding these costs, our overall other operating expense ratio would have been similar to last year.
On other matters, regarding Informative Research, the transaction closed at the end of September.
At that point, the company had $85 million in run rate revenues and a 15%-plus pre-tax margin, with new customers to be onboarded and a good pipeline of future business that should grow both the top and bottom line going forward.
Our financial position remains very strong to support our customers, employees and the real estate market.
Our total cash and investments on the balance sheet are approximately $585 million over regulatory requirements, and we had about $74 million on our existing line credit facility.
Stockholders' equity attributable to Stewart increased to $1.2 billion at September 30, 2021, with a book value of approximately $45 a share.
Lastly, net cash provided by operations for the third quarter increased to $107 million compared to $91 million from last year's quarter.
We remain grateful for and inspired by our customers and associates, advocates for everyone's improved safety and prosperity, and confident in our support of real estate markets.
 Assistant:

Chosen response: qtrly diluted earnings per share of $3.26 ($3.17 on an adjusted basis).


Prompt:
Human: With that, I'll now turn things over to Mike.
Let me start with an update on our ongoing response to the COVID-19 pandemic.
We continue to take all necessary measures to ensure the health and safety of our workforce and have implemented policies and procedures that follow the guidelines established by the CDC, OSHA, and local health and governmental authorities to protect our workforce and contractors.
Our COVID-19 task force continually monitors and evaluates the evolving situation and responds and adjusts as the environment develops.
Turning to our third quarter performance.
Cokemaking operations performed well despite operating at turndown levels.
All of our facilities demonstrated excellent cost discipline and delivered results in line with our expectations despite the challenging macro environment.
Another significant achievement for SunCoke during the quarter was the extension of the Haverhill II contract with AK Steel for an additional two years.
That contract now expires on June 30, 2025.
This extension further illustrates the strength and long-term nature of our relationships with our customers.
During our previous quarter's earnings call, we announced that SunCoke would enter the foundry coke market.
The testing, development and capital deployment activities necessary for profitable foundry coke market production are going well, and we are excited to enter this new market with a high-quality product.
We have tested our foundry coke in Cupolas with a number of potential customers, and the results have been very encouraging.
We are now well positioned to profitably enter the foundry coke market in 2021.
We continue to execute on our revised 2020 objectives and are well positioned to achieve our full year adjusted EBITDA guidance.
Moving on to third quarter performance.
As you could see on slide four, diluted earnings per share was a loss of $0.03 per share in the third quarter of 2020 compared to a loss of $1.81 per share in the third quarter of 2019.
The prior year period included $1.94 per share impairment charge related to our logistics goodwill and long-lived assets at CMT. Excluding this noncash charge, earnings per share was down quarter-over-quarter by $0.16, mainly due to lower volumes across the segments.
Looking at adjusted EBITDA, this came in at $47.8 million in the third quarter of 2020 versus $66.7 million in the third quarter of 2019.
Adjusted EBITDA from the coke operations decreased $11.8 million compared to the prior year period.
Domestic sales volumes were approximately 190,000 tons lower than the prior year due to customer turndowns.
The volume shortfall was partially offset by lower operating costs.
Adjusted EBITDA from the Logistics segment decreased by $5.3 million versus third quarter of 2019.
The throughput volumes at CMT and the domestic terminals were lower by approximately 1.4 million tons versus the prior year.
Slide five bridges the third quarter 2019 adjusted EBITDA to the third quarter 2020 adjusted EBITDA.
As we discussed on our second quarter conference call, in response to a challenging and unprecedented environment, we partnered with our coke customers to address their near-term coke needs.
In exchange for the extension of several coke contracts, we agreed to reduce our coke production in 2020 by approximately 550,000 tons.
Substantially all of this reduction will occur in the third and fourth quarters of 2020.
This volume decrease contributed to lower adjusted EBITDA from coke operations in the third quarter of 2020 as compared to the prior year.
Strong cost control partially offset the impact of these lower volumes.
The logistics operations were $5.3 million lower quarter-over-quarter due to lower volumes and lower pricing, which was again offset by lower operating costs.
Corporate expenses in the quarter includes foundry-related research and development costs of approximately $1 million.
And we're also impacted by period-over-period mark-to-market adjustments in deferred compensation, driven by changes in the company's share price.
Slide six details the Domestic Coke operating performance.
We sold 868,000 tons of coke in the quarter.
Sales volumes for all facilities were impacted by the volume relief provided to our customers.
Q3 2020 adjusted EBITDA per ton was approximately $56 per ton compared to $57 per ton in Q3 of 2019.
The decrease in adjusted EBITDA per ton was due to lower sales volume but was largely offset by favorable cost recovery and strong cost management.
Our plants have been diligent in lowering costs where possible by managing supplies and services, overtime, contractor usage, postponing capital work and various other efforts.
Moving to slide seven.
Logistics adjusted EBITDA was $4.3 million in Q3 of 2020 versus $9.6 million in Q3 of 2019.
CMT contributed $1.7 million to Q3 2020 adjusted EBITDA as compared to $7.4 million in Q3 2019 on comparable volume.
The deterioration of adjusted EBITDA at CMT is due largely to lower pricing.
The domestic terminals handled approximately 2.2 million tons in Q3 of 2020 versus 3.4 million tons in Q3 of 2019.
The lower volumes at domestic logistics terminals were more than offset by the measures taken to reduce costs, including a meaningful workforce reduction.
Moving on to the next slide.
You could see on the chart that our cash balance at the end of the quarter was $86 million.
In the quarter, cash flow from operations generated $74.5 million, and we had capex of $16.5 million.
We paid down a portion of the revolver borrowing as working capital charges were a source of cash this quarter.
We expect working capital to reverse in the fourth quarter as we build coal inventories going into the winter and as we prepare for an increase in production for 2021.
Additionally, we paid a $0.06 per share dividend in the quarter, which was a use of cash of $5 million and today, announced the declaration of the third quarter dividend.
We established the dividend at a rate that we believe is sustainable even during challenging market conditions.
And while this is a decision made quarterly by our Board of Directors, we believe we have ample liquidity to maintain this dividend.
At the end of the quarter, on an LTM basis, our gross leverage was 3.37 times, and our net leverage was 2.98 times.
We intend to continue executing on our long-term capital allocation priorities with the primary focus on reducing gross leverage to three times or lower.
To that end, we repurchased $7.5 million face value of SXCP notes in the third quarter and an additional $33.2 million here in Q4.
Wrapping up on slide nine.
As we continue to operate during these extraordinary times, our first priority continues to be the safety and well-being of our employees and contractors.
We will continue to do everything possible to ensure that they are well-positioned, are well-protected and able to perform their jobs with confidence.
We remain focused on our core businesses and how to best-optimize our operations, including our logistics assets.
As we announced in the previous quarter, we have made significant progress in reducing our cost structure and adding near-term stability by working collaboratively with our customers to address both current market challenges and longer-term supply requirements.
We also continue to maintain our asset base to ensure that we are able to operate efficiently in the long term, even as operating levels may fluctuate in the near term.
We are proud of the investments we have made, creating the highest quality assets in the industry, which we are committed to fully utilizing and maintaining.
Finally, we are confident in the revised financial targets we have put forward and our entire organization is focused on achieving these results.
With that, we can open up for Q&A.
 Assistant:

Chosen response:
compname reports q3 loss per share $0.03.
q3 loss per share $0.03.


Prompt:
Human: This information can be accessed by going to the Investor Relations section of the website.
During the call, we will refer to non-GAAP financial measures in discussing the company's performance.
You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.
Finally, Synchrony Financial is not responsible for and does not edit or guarantee the accuracy of our earnings teleconference transcripts provided by third parties.
The power of Synchrony's model continued to show through in our third quarter financial results.
We continued to reach and serve more partners and customers.
New accounts grew 17% to 6.2 million and average active accounts increased 5% to 67.2 million during the period.
This is in large part attributable to the powerful combination of our data driven insights, our seamless customer experiences, and our industry-leading product suite, which resonates deeply with customers.
Synchrony's omnichannel capabilities enable our partners and customers to connect wherever and whenever they want to be met and the variety of financing options and value propositions we offer empowers them with choice.
As we continue to anticipate and deliver on the needs of our partners and customers, we drive more value and greater utilization.
This translated to an 11% increase in purchase volume per active account during the third quarter and 16% growth in total purchase volume compared to last year.
Of course, this strength in purchase volume was largely offset by the persistently elevated payment rate trends resulting from government stimulus and industrywide forbearance actions, leading to a 2% increase in loans, including loans held for sale.
Net interest margin of 15.45% was 165 basis points higher than last year, primarily reflecting the reduction in excess liquidity.
Operating expenses were down 10% compared to last year and down 7% year-to-date as our cost efficiency initiatives continue as planned.
We remain on track to reduce about $210 million from our expense base by year-end even as we continue to invest in our business.
The efficiency ratio was 38.7% for the quarter largely flat with last year.
Credit continued to perform very well.
Net charge-offs were 2.18% for the third quarter, down 224 basis points from last year.
Net earnings were $1.1 billion or $2 per diluted share and included a $0.33 benefit from the reserve release related to the reclassification of the Gap portfolio to held for sale.
Turning to our balance sheet, deposits were down $3 billion or 5% versus last year, reflecting retail deposit rate actions we took to manage our excess liquidity.
Deposits represented 82% of our funding mix at quarter-end, a slight increase versus last year due to the retirement of debt.
During the quarter, we returned $1.4 billion in capital through share repurchases of $1.3 billion and $124 million in common stock dividends.
We also continue to reinvest in our business.
As we highlighted during our recent Investor Day, our ability to remain nimble and adapt to the ever-changing consumer finance landscape has been driven by our continued investment in our product suite and our innovative digital capabilities.
In fact, if you think about the last decade alone, the introduction of digital wallets, point of sale financing and a greater variety of installment offerings just to name a few has demonstrated the importance of diversity, accessibility, and utility in both products and experience.
And so Synchrony has continuously evolved, adding new financing options, enhancing our technology platform and expanding our channels and distribution networks in order to reach and serve more partners and customers in sustainable ways that drive greater value for all.
In addition to launching new products and partner programs, we are remaining focused on innovative ways to get scale distribution of our product suite.
Last week, we announced our expanded strategic partnership with Fiserv through which small businesses will now be able to access Synchrony products and services and accept private label credit card payments via the Clover point of sale and business management platform from Fiserv.
This will enable accelerated growth for small businesses, empowering merchants to attract more customers and generate more revenue by offering our customers greater flexibility and choice in how they make purchases.
We will also explore additional opportunities to cross-sell Synchrony products to existing Clover merchants.
Importantly, this strategic partnership also deepens Synchrony's ecosystem and reinforces our growth strategy to expand and accelerate innovative product offerings through additional distribution channels.
It builds on our momentum to bring our products to merchants faster and leverages Synchrony's leadership in financing, analytics and services.
We're excited to utilize the point of sale innovations driven by Clover to continue to transform the way people purchase while helping merchants grow.
Furthermore, as we and our partners' endeavor to provide more comprehensive customer access to financial products and resources, we are excited to expand our partnership with PayPal.
As announced in late September, Synchrony will be launching PayPal savings, a new PayPal branded savings account.
This unique opportunity will allow us to expand the distribution of our savings product to a unique set of customers with features and functionality inside the PayPal app delivering an enhanced customer experience while also further diversifying our deposit base at an attractively low cost to acquire.
In addition to our ongoing efforts to expand both our product suite and distribution network, we also seek to enhance partner and customer engagement through customized value propositions and omnichannel capabilities.
We recently launched two industry-first retail health and wellness credit cards.
The myWalgreens Mastercard and myWalgreens private label credit card, which reward customers with savings on future health and wellness purchases.
MyWalgreens credit card holders can earn 10% Walgreens cash rewards on eligible Walgreens branded products and 5% Walgreens cash rewards on other eligible brands and pharmacy purchases.
myWalgreens Mastercard holders can also earn 3% Walgreens cash rewards on eligible grocery and health and wellness purchases everywhere else, including healthcare providers and 1% Walgreens cash rewards on eligible purchases anywhere Mastercard credit cards are accepted.
In a world where consumers are increasingly responsible for a greater proportion of their health-related costs, we believe these value propositions will drive considerable value while also providing greater financing flexibility for health-related needs and enhancing loyalty over time.
Furthermore, Synchrony's digital capabilities allow us to seamlessly engage with customers wherever they are.
We have deep digital integration across the Walgreens web, mobile, and native app channels with the ability for customers to apply and instantly buy through all of these channels.
We've launched frictionless customer experiences, leveraging technology capabilities like QR codes, quick screen [Phonetic], which is a real-time pre-screen of one [Phonetic], customer-initiated pre-qualification, a direct-to-device in-store application process, card servicing integrated seamlessly into the Walgreens app and API integration with the myWalgreens loyalty program.
And while it's still early, the initial data we're seeing indicates that both the value prop and dynamic customer experience we have achieved with Walgreens are resonating very well with card holders in driving spend both inside and outside of Walgreens in categories such as grocery, health and wellness.
By empowering our partners and customers with best-in-class wallet optionality and compelling outcomes, Synchrony is increasingly well positioned as the partner of choice.
With more than 65 million active accounts, Synchrony has market-leading reach and deep diverse lending insights that enable us to better anticipate the needs of customers and therefore which financing options will optimize utilization and drive lifetime value.
So whether it comes in the form of our dual, co-branded and private label credit cards, our various SetPay installment products or our Synchrony Mastercard, we deeply understand when, why and how customers seek financing solutions for their day-to-day purchases.
We're particularly excited about the opportunity we see for our Synchrony Mastercard, which allows us to tap into the $500 billion general purpose credit card market.
We are taking a measured approach to growth.
However, by leveraging our scale and underwriting expertise, we've been able to identify better performing customer segments, acquire more customers at lower CPAs, and fine tune our channel strategy over the last two years.
Today, Synchrony Mastercard offers a variety of value propositions, which we use in combination with our pricing strategy to expand our customer reach and optimize conversion and we have great digital utility through dApply and integration in Apple Wallet as well as our mobile app.
This allows customers to access their various bank products, their money market and high-yield savings accounts as well as their credit card balances and transaction data.
This value proposition and seamless digital experience resonates very well with our customer, leading to purchase volume growth of 36% versus the same period in 2019.
We're also seeing higher levels of engagement around the product and brand as spend per active account is up 40% versus 2019.
So we're very excited about our Synchrony Mastercard.
It's an important offering within our product suite strategy that we believe will enable us to capture a larger portion of customers top of wallet spend and which should [Phonetic] drive highly scalable growth and above average returns to our business over the long-term.
Synchrony's third quarter financial results reflected broad-based strength across our business, highlighted by a double-digit purchase volume increase and continued loan growth, a significant improvement in our net interest margin, historically low losses and delinquencies, and continued cost discipline.
The combination of these results led to $1.1 billion in net earnings or $2 per diluted share, a return on average assets of 4.9% and a return on tangible common equity of 40.1%.
These results are a true testament to the power of Synchrony's unique business model, which builds on our deep domain expertise in consumer lending and leverages dynamic digital capabilities a little bit [Phonetic] through our comprehensive multi-product suite to reach and serve deep and diverse universe of partners and customers.
Looking at our third quarter performance in greater detail, beginning with purchase volume, which grew 16% compared to last year and 16% compared to 2019 excluding Walmart demonstrates clear broad-based strength in consumer demand.
This is also reflected in our purchase volume per account, which increased 11% compared to last year.
Dual card and co-branded cards accounted for 40% of the purchase volume in the third quarter and increased 29% from the prior year.
On a loan receivable basis, excluding the impact of the reclassification of the Gap portfolio to held for sale, dual and co-branded cards accounted for 24% of the portfolio and increased 4% from the prior year.
Average active accounts increased 5% compared to last year and new accounts increased 17% totaling more than 6 million new accounts in the third quarter and over 17.5 million new accounts.
In late August, we reached an agreement for the sale of the Gap portfolio, which led to the reclassification of $3.5 billion of loan receivables to held for sale and therefore reduced our ending loan receivables balance.
Excluding the impact of the reclassification, loan receivables would have increased by 2% versus the prior year as the period's strong purchase volume growth was largely offset by a persistently elevated payment rate.
Payment rate for the third quarter was approximately 200 basis points higher when compared to the last year.
Interest and fees on loans increased 2% compared to last year, reflecting similar growth in average loan receivables.
Net interest income was 6% higher than last year, primarily reflecting a decline in interest expense due to lower benchmark rates.
RSAs were $1.3 billion in the third quarter and 6.38% of average receivables.
The $367 million year-over-year increase primarily reflected the impact of the lower provision for credit losses and continued strong program performance including growth and improvement in net interest income.
To put this in context, remember that RSAs are designed to align interest between ourselves and each of our partners.
This means driving growth in attractive risk-adjusted returns enhancing program profitability.
This allows each partner to share the programs performance, so when profitability expands, our partners participate in that upside.
Now when you think about the combined $1.4 billion year-over-year improvement in net interest income, net losses and the reserve change, we shared $367 million of that through the RSA.
Focusing on our credit performance, provision for losses was $25 million.
Included in this quarter's provision was reserve release of $407 million which incorporated our continued strength in credit performance and we're optimistic macroeconomic environment and the impact of reclassifying our Gap portfolio loan receivables to held for sale.
This resulted in a reserve reduction of approximately $247 million.
Other income decreased $37 million, generally reflecting higher loyalty program costs from higher purchase volume during the quarter.
Other expense decreased $106 million compared to the prior year.
As you recall, last year we recognized an $89 million restructuring charge and we continue to see favorability from lower operational losses.
Moving to Slide 8 and our platform results.
We saw a broad-based purchase volume growth across all five platforms, reflecting strong consumer demand.
Our Home & Auto, Diversified & Value, Digital, and Health & Wellness platforms each experienced double-digit year-over-year growth in purchase volume.
The 10% year-over-year increase in Home & Auto was generally driven by strong retailer performance across almost all verticals while purchase volume in Diversified & Value increased 25% reflecting the continued return to in-person retail experiences.
In Digital, the 21% increase was due to broad-based growth across our partners coupled with growth in our new programs with Verizon and Venmo.
In Health & Wellness, the 10% growth in purchase volume primarily reflected consumers being more comfortable with the environment and undergoing planned procedures.
Meanwhile, purchase volume grew a more modest 2% in lifestyle reflecting broad-based growth across the platform, but having a tough comparable to last year's strong growth in power sports.
Loan receivable growth trends by platform generally reflected modest growth rates versus the prior year as higher purchase volume was largely offset by elevated payment rates.
The one exception being in our Diversified & Value platform which was impacted by store closures in 2020.
Average active account trends ranged on a platform basis up by as much as 10% in Diversified & Value and 7% in Digital while Home & Auto and Health & Wellness average active accounts were generally flat.
The active account growth in Diversified & Value largely reflected the return to in-store retail experiences.
Digital active accounts were up versus prior year due to greater engagement across our existing customer base as well as the impact of recent program launches.
Interest and fee trends were generally improved across the platform with the exception of Diversified & Value, which was down due to lower receivables.
I'll move to Slide 9 to discuss net interest income and margin trends.
The accumulated savings by consumers resulting from stimulus, forbearance and lower discretionary spending continue to impact the payment rates during the third quarter.
Payment rates were approximately 260 basis points higher than our five-year historical average.
That said, we've begun to see some signs of moderation in certain cohorts as payment rate was about 200 basis points higher year-over-year compared to almost 300 basis points higher year-over-year comparison in the second quarter.
We expect the payment rate to gradually normalize as consumer spending remains robust, excess savings have peaked and widespread forbearance dissipates.
Interest and fees were up approximately 2% in the third quarter reflecting [Phonetic] average loan receivable growth.
Net interest income increased 6% from last year reflecting the year-over-year improvement in interest and fees as well as lower interest expense for the period.
The net interest margin was 15.45% compared to last year's margin of 13.8%, a 165 basis point improvement year-over-year driven by the mix of interest earning assets and favorable interest bearing liabilities costs.
More specifically, the mix of loan receivables as a percent of total earning assets increased by 550 basis points from 78.3% to 83.8% driven by lower liquidity held during the quarter.
This accounted for 106 basis point increase in our net interest margin.
Interest bearing liabilities costs were 1.31%, a year-over-year improvement of 59 basis points primarily due to lower benchmark rates and funding mix.
This provided a 51 basis point increase in our net interest margin.
The loan receivables yield was 19.59%, a year-over-year improvement of 10 basis points.
This resulted in an 8 basis point improvement in our net interest margin.
Next, I'll cover our key credit trends on Slide 10.
First, let's discuss our delinquency trends where higher payment trends have continued to drive year-over-year improvements.
Our 30-plus delinquency rate was 2.42% compared to 2.67% last year.
Our 90 plus delinquency rate was 1.05% compared to 1.24% last year.
It should be noted that removing the impact of the Gap program from the third quarters of this year and last year, the 30-plus delinquency metric would have been down about 40 basis points versus 25 basis points and the 90 plus metric would be down about 25 basis points instead of 19 basis points.
And in terms of our portfolio's loss performance, our net charge-off rate was 2.18% compared to 4.42% last year.
This year-over-year improvement was primarily driven by strong delinquency trends we've experienced.
Our allowance for credit losses as a percent of loan receivables was 11.28%.
Let's move to Slide 11 and discuss expenses.
Overall expenses were down $106 million or 10% from last year to $961 million primarily reflecting the impact of the prior year's restructuring charge of $89 million and lower operational losses.
The efficiency ratio for the third quarter was 38.7% compared to 39.7% last year.
This metric remains elevated relative to our historical average due to lower revenue resulting from the impact of higher payment rate and lower average receivables.
We continue to maintain a disciplined focus on cost containment while we make strategic investments in our business to deepen our competitive advantage and drive long-term value for shareholders.
Moving to Slide 12, given the reduction in loan receivables in 2020 and early 2021 coupled with the strength of our deposit platform, we continue to carry a higher level of liquidity.
While we believe it's prudent to maintain a higher liquidity level during uncertain and volatile periods, we continue to actively manage our funding profile to mitigate excess liquidity and optimize our funding profile.
As a result of this strategy, there was a shift in our funding mix during the third quarter.
Our deposits declined by $3.2 billion from last year and our securitized and unsecured funding sources declined by $3 billion.
This resulted in deposits being 82% of our funding, compared to 80% last year with securitized and unsecured funding each comprising 9% of our funding sources at quarter-end.
Total liquidity including undrawn credit facilities was $18.4 billion which equated to 20% of our total assets, down from 28% last year.
Before I provide detail on our capital position, it should be noted that we elected to take the benefit of the transition rules issued by the joint federal banking agencies, which has two primary benefits.
First, it delays the effect of the CECL transition adjustment for an incremental two years.
And second, it allows for a portion of the current period provisioning to be deferred and amortized with the transition adjustment.
With this framework, we ended the quarter at 17.1% CET1 under the CECL transition rules, 130 basis points above last year's level of 15.8%.
The Tier 1 capital ratio was 18% in the CECL transition rules compared to 16.7% last year.
The total capital ratio increased 120 basis points to 19.3% and the Tier 1 capital plus reserves ratio on a fully phased in basis decreased to 26.6% compared to 27.3% last year.
During the quarter, we returned $1.4 billion to shareholders, which included $1.3 billion in share repurchases and $124 million in common stock dividends.
Our business generates strong returns and considerable capital resulting from our commitment to drive growth at appropriate risk-adjusted returns, the scalability of our technology platform and our ongoing cost discipline.
We will continue to take the opportunistic approach to returning our excess capital to shareholders as our business performance and market conditions allow, subject to our capital plan and any regulatory restrictions.
While there are a number of external variables that are difficult to predict with precision, we generally expect the third quarter's key operating trends to be stable in the fourth quarter.
Underpinning our forecast is a stable and improving macroeconomic environment and the pandemic continues to be largely in control.
We expect strong consumer demand through the holiday season to support continued strength in purchase volume.
This strength, partially offset by continued elevation in payment rates should lead to a modest growth in receivables.
Our net interest margin will likely be consistent with 3Q '21.
Our provision for credit losses will continue to reflect the impact of asset growth, credit performance and macroeconomic factors as well as continued reserve reductions related to the Gap portfolio.
As credit losses begin to normalize, we expect the RSA as a percent of average loan receivables to begin to moderate.
Lastly, turning to our operating expense, we expect the acceleration in purchase volume to contribute to a slight sequential increase in absolute dollars for the fourth quarter.
That said, we continue to expect the full-year operating expenses to be down compared to 2020.
As we close out the year and look forward to the future, we're excited about the opportunities we see to continue to drive strong financial results and shareholder value.
We are well positioned to execute on the strategy we laid out during our Investor Day and drive sustainable growth and attractive risk-adjusted returns simply by continuing to leverage our inherent core strengths, the breadth and depth of our business model, the scalability of our innovative digital capabilities and customer lifetime value expansion we drive through our diversified product suite and powerful value propositions.
I'm really proud of the results that we as a team continued to deliver for Synchrony's partners, customers and stakeholders.
We have a truly unique understanding of the wide range of needs that our partners and customers seek to address at any given time and our differentiated approach to addressing those needs enables us to deliver solutions and experiences that deeply resonate whether it's through the optionality embedded within our diverse product suite and customized value propositions or the many ways in which we power the connection between our partners and customers, Synchrony continues to reach, engage and serve more customers and drive greater, more sustainable outcomes for our stakeholders.
We will now begin the Q&A session.
So that we can accommodate as many of you as possible, I'd like to ask the participants to please limit yourselves to one primary and one follow-up question.
If you have additional questions, the Investor Relations team will be available after the call.
Operator, please start the Q&A session.
 Assistant:

Chosen response:
third quarter 2021 net earnings of $1.1 billion, or $2.00 per diluted share.
q3 net earnings included a $187 million post-tax benefit, or $0.33 per diluted share.
q3 net interest income increased $201 million, or 6%, to $3.7 billion.
q3 provision for credit losses decreased $1.2 billion, or 98%, to $25 million.


Prompt:
Human: This information can be accessed by going to the Investor Relations section of the website.
During the call, we will refer to non-GAAP financial measures in discussing the company's performance.
You can find a reconciliation of these measures to GAAP financial measures in our materials for today's call.
Finally, Synchrony Financial is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcripts provided by third parties.
2020 was a challenging year, marked by a global pandemic, economic disruption and unrest due to racial injustice.
It was a true test to our resilience, our agility and our strength as a business.
We're proud of the way Synchrony managed through these challenges.
Though there have been significant developments that provide hope that the pandemic will begin to moderate, the virus resurgence and resulting regional shutdown and continued impact on unemployment is something we are still managing through.
And though the pandemic continues to impact results, we are encouraged by some of those trends that have developed.
Later in the call, Brian Wenzel will detail these impacts on the quarter's results and provide a view on how we think this year might develop.
I will provide a high-level overview here.
Let's first focus on our quarterly results, including some of our recent successes, which are outlined on slides three and four.
Earnings were $738 million or $1.24 per diluted share, an increase of $0.09 over last year.
Loan receivables were down 6% to $81.9 billion, and average active accounts decreased 10% from last year, with new accounts down 19%.
Purchase volume per account increased 10% over last year to $602.
And average active balance per account increased 4% to just under $1,200.
Net interest margin was down 37 basis points to 14.64% and the efficiency ratio was 37.1% for the quarter.
Net charge-offs hit a new low at 3.16%.
As a result of our liquidity and funding strategy, in response to COVID-19 impact on our balance sheet, deposits were down $2.3 billion or 4% versus last year.
This includes a strategic decision to slow overall deposit growth, given the excess liquidity we have.
Total deposits comprise 80% of our funding and our direct deposit platform remains an important funding source.
Our ability to service and provide digital tools to customers, makes our bank attractive to depositors, and we will continue to build out additional capabilities.
During the quarter -- we returned $128 million in the quarter through a common stock dividend.
We also announced that the Board authorized $1.6 billion in share repurchases for 2021, beginning in the first quarter.
We have a solid pipeline across our platforms, a mix of start-up and existing programs.
But we are being very disciplined around risk and returns, given the uncertainty in the current environment.
And while this retail landscape is shifting, we believe similar opportunities will continue, as evidenced by recent wins.
I will touch upon a few highlights.
We announced that we will become the issuer of Walgreens co-branded credit card program in the U.S., the first such credit program in the retail health sector.
The card will allow customers to earn rewards for purchases anywhere Mastercard is accepted.
We expect to launch the new program in the second half of 2021.
This new agreement is built upon the company's existing strategic partnership.
CareCredit is already accepted at more than 9,000 Walgreens and Duane Reade stores.
We are committed to providing Walgreens customers and patients with unparalleled experiences, a best-in-class loyalty program and the ability to manage their health and wellness spending.
In addition, we renewed our strategic partnership with Mattress Firm.
We provide flexible financing solutions and innovative business tools that empowered Mattress Firm to meet their customers at critical moments in the purchasing journey, which is increasingly online.
Our digital tools and industry-leading credit program team, including marketing, and analytic retail experts have optimized every step of the omnichannel customer journey to deliver a competitive user experience.
We look forward to many more years as a strategic partner of Mattress Firm.
We also reached a definitive agreement to acquire Allegro Credit, a leading provider of point-of-sale consumer financing for audiology products and dental services.
Allegro offers numerous customers loan options through its merchant partners with flexible payment terms at the point of sale.
These products are designed to offer customers choice to purchase the products and services they need or want.
The addition of Allegro Credit's merchant network and customers complements our strategy of growing CareCredit, our leading health and wellness financing platform.
The transaction is expected to close in the first quarter of 2021.
Altogether this quarter, we signed nine renewals and won seven new deals, along with the acquisition.
I cannot overstate the importance of digital innovation to the success of our programs.
Consumers are rapidly adopting technologies that enable contactless commerce and expect engagement along their digital purchase journeys.
We are leveraging our digital assets and continuously investing to ensure our partners are well positioned in this rapidly evolving dynamic.
These investments include the capabilities to empower SaaS and seamless integration with our partners' digital assets, enable customer choice at the point of sale, enhance contactless experiences, facilitate a seamless and easy application process, bring the in-store experience to a customer's digital devices for applications and payment, and integrate our financing office throughout the entire digital shopping experience.
We also continue to expand our digital penetration of all aspects of our customer journey: apply, buy and service.
Approximately, 60% of our applications were done digitally during the fourth quarter and grew 18% in mobile channel applications.
In Retail Card, 51% of our sales occurred online.
Finally, approximately 65% of our payments were made digitally.
In short, we are rising to the challenges presented by this difficult time.
We have strengthened the strategic position of our business and expanded the opportunity set that lies before us.
And we're investing in the right strategy that will enable near-term successes while also driving considerable shareholder value over the long term.
With our future in mind, as you know, a few weeks ago, we announced some important changes to the leadership of this company.
Effective April 1, I will transition to the role of Executive Chair of our Board of Directors, and Brian Doubles will become Synchrony's President and CEO.
Synchrony means so much to me, and one of my goals as CEO was to set up a thoughtful leadership transition with a successor who will advance what we have built.
Both the Board and I believe there is no one in the world better equipped to do that than Brian.
Brian has helped to build Synchrony every step of the way.
He has been my trusted partner for more than a decade, including through our IPO.
When we started Synchrony back in 2014, we set out to build a great business with a great culture that delivers for our partners and customers every day.
Together, with our 16,500 employees, we are doing just that.
With Synchrony in a position of strength, now is the time to implement this transition, allowing Brian to continue the incredible progress that has been made and to drive the next stage of Synchrony's exciting growth journey.
I look forward to working with Brian through this transition and continuing to support Synchrony's growth and future success as Executive Chair.
We truly would not be where we are or who we are today without her leadership, and it's an absolute honor to succeed her and lead Synchrony into the future.
I am also grateful that we will continue to benefit from Margaret's expertise and leadership in her role as Executive Chair.
And I am excited to partner with her and the Board, our leadership team, and especially our employees as we continue to capitalize on our momentum.
There is a lot to be excited about as we continue Synchrony's journey.
We have a strong business, a winning culture, and a tremendous opportunity to build on this strong foundation.
As incoming CEO, I will continue to implement the strategy that we've developed over the last few years, and which has enabled the momentum that our business has today.
We will continue to leverage our competitive strength, deepen our market leadership and invest in digital, data analytics and new product offerings to create a seamless customer experience.
We will continue to grow our business and drive value for all of our stakeholders, our investors, our employees, our partners and our customers.
Fundamental to our business is our objective to provide a full suite of products that can be tailored to serve the evolving needs of our customers and partners, while earning appropriate economic returns.
Our partners' most critical needs are centered on their ability to offer a product that can seamlessly integrate with our digital assets and systems, deliver higher average order volumes and sales, increase conversion rates and deepen customer loyalty.
By the same token, customers have their own unique set needs, including financing solutions that fit within their budget, are transparent and easy and convenient to use, and which offer them flexibility in their purchase and financing decisions.
We have extensive experience in installment lending, which has informed our approach to equal payment financing.
We think about these products in two categories.
We offer mid- and long-term equal payment plans with promotional periods anywhere from 12 to 162 months, depending on the product category.
We also offer short-term equal payment plans with promotional periods of three to 12 months.
We offer collateralized installment products with bigger ticket purchases with promotional periods from 12 to 180 months.
And we also offer short and long-term installment loans through our SetPay product.
These products run anywhere from three to 36 months.
All of these products are priced appropriately to meet our partner and customer objectives with APR starting at 0%, and each of these products, in turn, offer distinct benefits and address the unique objectives of our partners and customers.
Revolving equal pay products, for example, can be embedded inside of an existing revolving account, eliminating the need for a customer to open a new account.
And given the nature of their functionality, they also provide for repeat purchases as well as higher engagement and loyalty to the partners plan.
Meanwhile, closed-end products can be appealed to customers that prefer regular predictable payments.
To put our overall equal payment financing strategy in perspective, we currently have $15 billion in equal payment balances, 56% of which have 0% APR financing.
We have about 74,000 partners or locations offering our payment plan products.
And we have an overall repeat purchase rate of approximately 30% within 24 months of the first purchase.
Synchrony's success in this and our other core strategies has been driven by our commitment to data-driven innovation, a deep understanding of our partners' objectives and customer needs, and our ability to adapt as the competitive landscape and market conditions have evolved over time.
Our organization is built around being nimble, responsive and results oriented.
We leverage our decades of underwriting experience, our proprietary data analytics and our industry expertise in order to design and implement customized solutions that address our partners' needs while also delivering appropriate economic outcomes.
This is what has driven Symphony's long-standing track record and deepened our market leadership over the years.
We are excited to drive this momentum forward in 2021 simply by continuing to enhance the value we offer to all those we serve.
I speak for everyone in the company when I say we look forward to working closely with them in the next chapter for Synchrony.
As we begin 2021, we're encouraged by the developments being made to fight the pandemic, and continue to be inspired by those in the front lines.
For our part, we remain dedicated to keeping our employees safe in helping our partners, customers and communities during this difficult period, guided by our values and principles.
And with the partner-centric focus, we are working to help our constituents navigate this environment with an eye toward the future and the opportunities ahead of us as we begin to overcome the pandemic.
However, our business mix, which includes a significant digital component and certain industries benefiting from staying at home, such as home-related products and services, veterinary services, and electronics and appliances have outbalanced against some of the effects of the economic downturn.
Purchase volume was essentially flat, down 1% versus last year and in line with our expectations for the quarter, despite some pressure from new shutdowns and restrictions as the pandemic progressed during the quarter.
The continued pressure caused our average active accounts to be down 10% and a decrease in loan receivables of 6%.
Payment rates continue to be elevated relative to normalized levels.
Interest and fees on loans were down 11% from last year, consistent with the core decrease we experienced last quarter.
Dual and co-branded cards account for 38% of our purchase line in the fourth quarter and declined 4% from the prior year.
On a loan receivable basis, they account for 24% of the portfolio and declined 10% from the prior year.
While we're seeing positive trending in our growth metric as we enter the quarter, the acceleration of the pandemic result in regional shutdowns and diminished effects of the CARES Act stimulus slowed that early momentum.
While our sales are stable, we are encouraged by recent developments, including the recently enacted stimulus, the proposed stimulus, a new administration and national rollout of a vaccine.
We believe these factors will have a positive impact.
It should provide momentum as we progress through 2021.
I'll provide a more comprehensive view on 2021 shortly.
RSAs increased $18 million or 2% from last year.
RSAs as a percentage of average receivables was 5.2% for the quarter.
This was elevated from the historical average, primarily due to the significant improvement in net charge-offs and the elimination of Walmart, which operated at a lower than company average RSA percentage.
The improvement in net charge-offs resulted in a decrease in the provision for credit losses of $354 million or 32% from last year.
This was partially offset by a reserve build in the fourth quarter of $119 million.
Other income decreased $22 million, mainly due to higher loyalty costs.
Other expense decreased $79 million or 7% from last year due to lower purchase volume and average active accounts, coupled with lower employee costs as we have begun to implement our strategic plan to reduce operating expenses.
Moving to our platform results on slide eight sales platforms continue to be impacted in varying degrees due to COVID-19, and their trajectories through this period have been different based on factors such as business and partner mix, digital concentration, provider access and availability of hardline goods.
In Retail Card, loan receivables were down 8%, with the COVID-19 impact being partially offset by strong growth in digital programs.
That resiliency is evident in the growth in purchase line, which was up 1% over last year.
Other performance metrics were down due to the impact from COVID-19.
We're excited about the launch of our new value prop with Sam's Club.
They are an important and valued partner, and we're excited about the changes in this program for Sam's Club members.
The continued strength of powersports and home specialty and payment solutions helped offset some of the impact from COVID-19.
Loan receivables declined 2%.
Average active account and interest and fees on loans were down 9%, which was driven primarily by lower yield on loan receivables.
Purchase line decreased 7% this quarter.
We signed several new programs and renewed several key partnerships this quarter.
We continue to drive growth organically through our partnerships and networks and added over 2,800 new merchants during the quarter.
We also continue to drive higher card reuse, which now stands at approximately 34% of purchase volume, excluding oil and gas.
Our efforts and successes are expanding an already solid base for growth as we exit the pandemic.
Although CareCredit was impacted the most by COVID-19 earlier this year, we began to see some improvement as the year progressed as providers continue to increase elective and planned services from the trough in the second quarter.
That said, rising infection rates and increasing stay-at-home restrictions did slow some of this progress.
Loan receivables declined 7% with interest and fees on loans decreasing 4%, primarily driven by lower merchant discount revenue as a result of the decline in purchase volume, which was down 6%.
Average active accounts decreased 10%.
As Margaret noted earlier, we're excited about our partner activity within this platform including the acquisition of Allegro Credit, our Aspen Dental renewal and expansion and our new partnership with Community Veterinary Partners.
During the quarter, we also continued to grow our CareCredit network and enhance utility of our card.
The expansions of our network and acceptance strategy has helped to drive reuse rate to 59% of purchase line in the fourth quarter.
We are proud of these achievements, I'm particularly excited about the opportunities we see to drive future growth in this platform as the impact of the pandemic subsides.
I'll move to slide nine and cover our net interest income and margin trends.
Net interest income decreased 9% from last year primarily driven by an 11% decrease in interest and fees on loan receivables due to the impact of COVID-19.
Net interest margin was 14.64% compared to last year's margin of 15.01%, largely driven by the impact of COVID-19 on loan receivables, an increase in liquidity and lower benchmark rates.
Specifically, the mix of loan receivables as a percent of total earning assets declined approximately 30 basis points from 80.2% to 79.9%, driven by higher liquidity held during the quarter.
This accounted for five basis points of the net interest margin decline.
The loan receivables yield of 19.93% was down 94 basis points versus last year and was a driver of a 75 basis point reduction in our net interest margin.
The liquidity yield declined as a result of lower benchmark rates and accounted for a 30 basis point reduction in our net interest margin.
These impacts were partially offset by an 89 basis point decrease in the total interest-bearing liabilities cost to 1.69%, primarily due to lower benchmark rates and a higher proportion of deposit funding.
This provides a 73 basis point increase in our net interest margin.
Next, I'll cover our key credit trends on Slide 10.
In terms of specific dynamics in the quarter, I'll start with the delinquency trends.
The 30-plus delinquency rate was 3.07% compared to 4.44% last year.
The 90-plus delinquency rate was 1.40% compared to 2.15% last year.
Higher payment trends have helped drive the improvement in delinquency rates.
Focusing on net charge-off trends.
The net charge-off rate was 3.16% compared to 5.15% last year.
The reduction in the net charge-off rate was primarily driven by improving delinquency trend as customer payment behavior improved throughout 2020.
The allowance for credit losses as a percent of loan receivables was 12.54% with the increase to last year being primarily driven by the adoption of CECL in 2020 and the impact from COVID-19.
Moving to slide 11.
I will cover expenses for the quarter.
Overall expenses were $1 billion for the quarter, down $79 million or 7% from last year.
The decrease was driven by lower purchase volume and average active accounts as well as reduction in employee costs and operational losses.
The efficiency ratio for the fourth quarter was 37.1% compared to 34.8% last year.
The ratio was negatively impacted by lower revenue that resulted from lower receivables and lower interest and fee yield, which was partially offset by the reduction in employee costs and operational losses.
Moving to slide 12.
Given the reduction in our loan receivables and strength in our deposit platform, we continue to carry a higher level of liquidity.
While we believe it's prudent to maintain a higher liquidity level during this uncertain and volatile period, we are actively managing our funding profile to mitigate excess liquidity where appropriate.
As a result of this strategy, there is a shift in the mix of our funding during the quarter.
Deposits declined $2.3 billion from last year.
Our securitized and unsecured funding sources were down $2.6 billion and $1.5 billion, respectively.
This resulted in deposits being 80% of our funding compared to 77% last year with securitized and unsecured funding, each comprising 10% of our funding sources at quarter end.
Total liquidity, including undrawn credit facilities, was $23.7 billion, which equated to 24.7% of our total assets, up from 22% last year.
Before I provide details on our capital position, it should be noted that we elected to take the benefit of the transition rules issued by the joint federal banking agencies in March, which had two primary benefits.
First, it delays the effects of the CECL transition adjustment for an incremental two years; and second, it allows for a portion of the current period provisioning to be deferred and amortized with the transition adjustment.
With this framework, we ended the quarter at 15.9% CET1 under the CECL transition rules, 180 basis points above last year's level of 14.1%.
The Tier one capital ratio was 16.8% under CECL transition rules compared to 15% last year.
The total capital ratio increased 180 basis points as well to 18.1%.
And the Tier one capital plus reserves ratio on a fully phased-in basis increased to 27% compared to 21.4% last year, reflecting the increase in reserves as a result of implementing CECL.
During the quarter, we paid a common stock dividend of $0.22 per share.
For the full year, we returned approximately $1.5 billion to shareholders in the form of share repurchases and common stock dividends.
As we finish 2020 and enter 2021, we have continued to assess the capital and liquidity strength of the company and the stability of our business at this point in the pandemic.
With this backdrop, the Board has authorized $1.6 billion in share repurchases for 2021, beginning in the first quarter.
Repurchases are subject to our capital plan, and regulatory restrictions as well as overall market conditions, including any potential deterioration from the ongoing pandemic.
Next, on slide 13, we are providing a framework on key drivers for 2021.
It goes without saying that the current environment will have periods of uncertainty and volatility until the pandemic is under control and the resulting impact to the economic environment is more fully known.
While our visibility is limited, we're providing this framework about how we are thinking about the year might unfold based on our best assessment as of today.
These views assume that in the first half of the year, there is continuing pressure from the pandemic and a slow economic recovery.
In the second half, we assume that pandemic is largely under control and economic recovery accelerates.
First quarter purchase items is expected to be consistent with the trends that developed at the end of 2020.
Second quarter comparisons will obviously reflect the economic trough experienced in second quarter '20.
The second half of the year, we anticipate improving growth trends as the pandemic impact moderate and macroeconomic growth accelerates.
Regarding loan receivable growth.
In the first half, we expect continued higher payment rates from the stimulus actions to impact loan growth.
In the second half of the year, we believe payment rates will slow as stimulus abate, and we return to more normalized payment behavior patterns, combined with the expected increase in purchase volume from an improving macroeconomic environment.
These drivers will contribute to accelerating asset growth.
For net interest margin, overall, we expect continued improvement as we enter 2021.
Regarding the improvement, in the first half, we anticipate that higher payment rates will contribute to continued excess liquidity impacting asset mix.
In the second half, excess liquidity is reduced through asset growth and slowing payment rates, which drive normalized interest and fee yields leading to increasing NIM.
With respect to our view on credit for the year, delinquencies are expected to increase with peak delinquencies occurring in third quarter 2021 and result in sequential quarter increases in net charge-offs.
We would expect reserves to be largely driven by asset growth and the impacts from any changes in the credit macroeconomic scenario.
We anticipate a reserve release during 2021 as the credit macroeconomic environment develops.
RSAs will remain elevated in the first half, primarily reflecting the strong program performance, including revenue and net charge-offs.
In the second half, we expect lower RSAs, generally reflecting the higher net charge-offs, partially offset by higher revenue.
As we outlined previously, we've implemented cost reductions across the organization.
We believe this will result in expense reductions of approximately $210 million during the year.
Partially offsetting these cost reductions will be expense increases related to growth in addition to the anticipated increase in delinquent accounts.
We will continue to closely monitor how the pandemic develops and its impact to the macroeconomic environment and adjust as the landscape unfolds.
As we enter 2021, we remain optimistic in the strength and the strategic position of our business to meet the challenges and exit the pandemic period in a stronger position than when we entered.
We will continue to make investments in our people, products, technology and platforms to drive long-term value and continue to ensure safety of our employees, while meeting the needs of our partners, merchants, providers and cardholders.
 Assistant:

Chosen response:
compname reports q4 net earnings of $738 mln or $1.24 per diluted share.
q4 earnings per share $1.24.
qtrly net interest income decreased $370 million, or 9%, to $3.7 billion.


Prompt:
Human: I'm joined by our Chief Executive Officer, Patrick Beharelle.
We use non-GAAP measures when presenting our financial results.
Any comparisons made today are based on a comparison to the same period in the prior year, unless otherwise stated.
Total revenue for the third quarter was down 25% and we posted positive net income of $9 million or $0.25 per share.
We are very pleased that the company has returned to profitability.
We've taken the right actions to restore profitability and position the company for long-term growth as the economy recovers.
During the third quarter, we saw steady improvements in our revenue trends across most of the industries and geographies we serve.
Our cost management actions continue to show meaningful results which helps position us for stronger incremental profit margins when revenue growth returns.
Now, let's turn to our results by segment, starting with PeopleReady.
PeopleReady is our largest segment representing 61% of trailing 12-month revenue and 76% of segment profit.
PeopleReady is the leading provider of on-demand labor and skilled trades in the North American industrial staffing market.
We service our clients via a national footprint of physical branch locations as well as our JobStack mobile app.
PeopleReady's revenue was down 29% during the quarter and we saw intra-quarter improvement with revenue down 27% in September versus down 32% in July.
PeopleManagement is our second largest segment representing 30% of trailing 12-month revenue and 15% of segment profit.
PeopleManagement provides onsite industrial staffing and commercial driving services in the North American industrial staffing market.
The essence of a typical PeopleManagement engagement is supplying an outsourced workforce that involves multi-year, multi-million-dollar onsite or driver relationships.
These types of client engagements tend to be more resilient in a downturn.
Revenue for PeopleManagement was down 8% during the quarter with the top line down just 2% in September versus down 12% in July.
Turning to our third segment, PeopleScout, represents 9% of trailing 12-month revenue and 9% of segment profit.
PeopleScout is a global leader in filling permanent positions through our recruitment process outsourcing and managed service provider offerings.
Revenue was down 48% during the quarter versus down 53% in Q2.
PeopleScout results were particularly impacted by exposure to large travel and leisure clients.
Now I'd like to shift gears and update you on our key strategies by segment, starting with PeopleReady.
Our long-term strategy at PeopleReady is to digitize our business model to gain market share.
Most of our competitors in this segment are smaller mom and pops that don't have the scale or capital to deploy something like our JobStack mobile app.
So this, along with our nationwide footprint, is what makes us unique.
We began rolling out JobStack in 2017 to our associates and in 2018 we launched the client side of the app.
We now have digital fill rates north of 50% and more than 26,000 clients using the app.
In Q3 2020, we filled 726,000 shifts via JobStack representing a digital fill rate of 51%.
Our client user count ended the quarter at 26,100, up 37% versus Q3 2019.
In mid-2020, we introduced new digital onboarding features that cut application time in half.
This has led to some great operational results as we increase the ratio of associates put to work versus all applicants.
Early results indicate a 20% increase in worker throughput.
This is exciting because as we move back to a supply constrained environment, an increase in worker throughput will translate directly to revenue.
We believe we can further improve applicant throughput as we fine tune our processes.
Right now, we're also very focused on driving heavy client user growth.
A heavy user is a client who has 50 or more touches on JobStack per month whether it's entering an order, rating a worker or approving time.
JobStack heavy users have consistently posted better year-over-year growth rates compared to the rest of PeopleReady.
The growth differential is north of 20 percentage points and has held true even in this market downturn.
This makes sense, since we have many clients who use multiple vendors and we can grow our business simply by growing our wallet share even if our client's total volume is flat to down.
Our focus on heavy user growth is starting to pay-off.
We doubled our heavy user mix since 2019, up from 11% of our business in fiscal 2019 to 22% for 2020 year-to-date.
Our positive strategic progress is obviously overshadowed by the macro environment at the moment, but we continue to invest in our digital strategy and believe this approach will help PeopleReady emerge stronger than ever.
As our digital strategy continues to mature, we're taking a look at areas within PeopleReady where we can reduce our service delivery costs.
In 2020, we began testing a few different strategies.
It's too early to quantify potential savings, but we're developing a plan where cost savings will come from a mixture of both technology utilization and changing our go-to-market approach.
As we move down this path, I want to emphasize that the value and importance of our branch network should not be underestimated.
We need to maintain a local presence in the communities where we do business.
At the same time, we do see an opportunity to centralize more services and reorient job roles to improve our client-focused delivery.
We'll continue to update you on this front as plans evolve.
Turning to PeopleManagement, our strategy is to focus on execution and grow our client base.
Initiatives we've already implemented include sharpening our vertical market focus to target essential manufacturers and leverage our strength in e-commerce.
These are verticals that have held up well relative to the decline in non-essential goods at traditional bricks and mortar retailers.
We've also completed the integration of our Staff Management and SIMOS brand sales teams allowing the integrated team to offer a full portfolio of hourly and cost-per-unit solutions to clients.
These strategic initiatives are already paying off.
Even in the middle of this downturn, year-to-date new business wins at PeopleManagement are up 13% versus the prior year as we've secured $70 million of annualized new business wins versus $62 million the prior year.
Approximately half of new wins are in our Q3 run rate.
As the demand environment recovers, we'll be increasing sales resources and investing in client care programs to maintain our momentum.
Turning to PeopleScout, our strategy is to capture opportunities in an industry poised for growth.
Before COVID struck, we noticed a trend toward in-sourcing, with a handful of clients bringing more recruitment functions in-house.
Many of those in-house teams have been reduced or eliminated during the pandemic and we expect a trend reversal back toward outsourcing as the economy recovers.
Our strategy leverages our strong brand reputation as we are consistently ranked as a market leader by independent industry analysts and PeopleScout is traditionally the highest margin business within our portfolio.
Finally, I'd like to take a moment to touch on our balance sheet and capital allocation priorities.
We do have a solid balance sheet.
Our credit facility provides ample liquidity and we ended Q3 with more cash than debt.
Before the pandemic hit, we were generating substantial free cash flow and were focused on returning capital to shareholders.
Over the last five years, we've returned $169 million of capital to shareholders via share repurchases.
As we return to a more normalized environment, investing in our organic business opportunities will remain our top priority, but we'll also expect to renew our focus on returning excess capital to shareholders.
I'll now pass the call over to Derrek who will share greater detail around our financial results.
Total revenue for Q3 2020 was $475 million representing a decline of 25%.
We posted net income of $9 million or $0.25 per share and adjusted net income of $8 million or $0.24 per share.
While this quarter's bottom line results are lower than the prior year period, they are sizably better than the losses incurred in Q2 this year due to further improvement in our revenue and SG&A expense trends.
The Q3 year-over-year revenue decline was 14 percentage points better than the Q2 year-over-year revenue decline and the Q3 year-over-year SG&A decline was 8 points better than the Q2 year-over-year SG&A decline.
Adjusted EBITDA was $18 million, down from $39 million in Q3 2019, but up from a loss of $5 million in Q2 2020.
Gross margin of 23.3% was down 300 basis points.
Our staffing businesses contributed 230 basis points of compression with 180 basis points of pressure from negative bill and pay rate spreads and 50 basis points from mix and other items.
PeopleScout contributed another 70 basis points of compression primarily due to client mix and lower volume.
I'm going to spend a few moments stepping back from this quarter's gross margin results and share our perspective on the ebb and flow of gross margin across an economic cycle.
During a recession, the bill rates in our staffing businesses come under pressure as customers look to cut costs and as staffing companies compete in a lower demand environment.
However, pay rates do not come under the same amount of pressure which creates gross margin contraction.
In this particular recession, pay rate inflation has accelerated to entice contingent employees given COVID health concerns and due to the amount of federal unemployment benefits available, which for jobs on the lower-end of the pay scale when combined with state unemployment benefits, can provide more take-home pay than a work assignment.
In the recruitment process outsourcing business, gross margin also comes under pressure, but this has more to do with volume than price as RPO cost of sales is mostly comprised of recruiting personnel costs.
While we are able to reduce recruiting costs by reducing headcount, there is a semi-fixed component that creates negative operating leverage in the cost of sales for the RPO business as revenue declines, similar to the dynamic with the rest of our enterprise personnel costs that are reported in SG&A expense.
As the economy recovers, pricing power has historically swung back to the industrial staffing industry as demand for talent surges due to economic growth as well as a preference for more contingent labor due to the hesitation of businesses to hire permanent staff associated with uncertainty about the sustainability of the recovery.
Likewise, additional revenue volume has assisted the recovery of RPO gross margin.
We have an experienced team that has operated through these economic cycles and we have tested processes in place to help ensure we seize the opportunity to improve our gross margin in the future.
Turning to SG&A expense, we turned in another quarter of very strong results.
Expense was down $40 million or 31% compared to Q3 2019.
We also continue to challenge prior assumptions about the costs needed to run the business and invest in technology.
We are optimistic that these actions will result in a more efficient service delivery model.
The opportunity for additional cost savings is greatest in our PeopleReady business.
We see opportunity to further reduce the costs of our branch network while maintaining the strength of our geographic footprint through a greater use of technology, centralizing work activities, and repurposing job roles.
We've made good progress in 2020 by centralizing certain recruiting activities and repurposing certain job functions.
A necessary precursor to further reducing the costs of the branch network is a broader repurposing of jobs to increase centralization which can be accomplished through the normal course of employee attrition.
Client-facing job functions must also be repurposed to ensure we continue to meet the service expectations of our clients.
We will be testing these plans throughout 2021 before we make large-scale changes which will also help us provide more clarity on the savings opportunity.
Turning to our tax rate, our effective tax rate was 30% in Q3, which is higher than what we had experienced in prior years as a result of this quarter's performance reducing the net operating loss for the year.
This results in a reduction to our CARES Act carry-back benefit expectation resulting in some catch up expense this quarter.
Additional information on the components of our effective tax rate is available in our 10-Q filed today.
Turning to our segments, PeopleReady, our largest segment, saw a 29% decline in revenue and segment profit was down 39%.
We saw nice intra-quarter revenue improvement with September down 27% compared to 32% in July with further improvement to a decline of 19% in October.
The improvement was broad-based across most geographies and industries with construction, manufacturing, services, and transportation industries leading the way.
PeopleManagement saw an 8% decline in revenue and segment profit was up 35%.
PeopleManagement experienced encouraging intra-quarter revenue improvement with September down 2% compared to 12% in July.
Month-to-date for October, PeopleManagement was up 1%.
About half of the segment profit growth is attributable to cost management actions and half from unique costs in Q3 last year creating a favorable comparison this year.
Turning to PeopleScout, we saw a 48% decline in revenue and segment profit was down 97%.
Intra-quarter revenue did show improvement with September down 40% compared to 52% in July.
As Patrick noted, PeopleScout results were adversely impacted by exposure to travel and leisure clients, which made up roughly 25% of the prior year mix and revenue for this vertical was down 74% year-over-year.
Now let's turn to the balance sheet and cash flows.
Our balance sheet continues to shine, providing financial flexibility and stability.
Our credit facility provides ample liquidity and our debt position is at its lowest level since 2012.
We also repurchased 9% of our common stock at favorable prices earlier this year to boost shareholder return.
Year-to-date cash flow from operations was $99 million as compared to $53 million for Q3 year-to-date last year with the increase coming from the deleveraging of accounts receivable.
We've been on a nice trajectory of reducing our total-debt-to capital.
In 2017, our total debt-to-capital was 18%; in 2018, 12%; in 2019, 6%; and as of Q3 this year, nearly zero.
For the fourth quarter of 2020, we expect gross margin contraction of 250 basis points to 190 basis points.
This is less contraction in comparison with Q3 due to favorable mix and less recruiting staff in our PeopleScout business given the current revenue volume.
Our cost management strategies are on track.
For the fourth quarter of 2020, we expect a year-over-year SG&A reduction of $23 million to $27 million, which would result in $102 million to $106 million of savings in 2020.
All-in, this would produce a decrease in SG&A expense of about 20% in 2020.
I'd also like to remind everyone that our business can generate an incremental operating margin of about 20% on incremental revenue which can of course run much higher with gross margin expansion or further SG&A declines.
For capital expenditures, we expect about $7 million for the fourth quarter of 2020, which is net of approximately $4 million of build out costs for our Chicago headquarters that are to be reimbursed by our landlord.
Our outlook for fully diluted weighted average shares outstanding for the fourth quarter of 2020 is 34.8 million.
With respect to our tax rate, we are not able to provide an effective income tax rate outlook due to the variability associated with the relatively lower pre-tax income base and the semi-fixed nature of the Work Opportunity Tax Credit.
It's also worth noting that the Work Opportunity Tax Credit expires at the end of this year.
While this program has been in existence for decades and has always been renewed due to its appeal to both political parties, the timing can be lumpy.
Total benefits derived from this program were $11 million for fiscal 2019 and $6 million year-to-date in Q3 of this year.
While we have a lot more work to do to get back to where we were before COVID hit, we like the progress we have made.
We've taken the right actions to restore profitability and have done so without losing our operational strengths or technology momentum.
It has challenged us to think of new ways of running our business more efficiently.
Our balance sheet is strong.
Of most importance, the spirit of our employees is high.
This experience has created an even deeper sense of teamwork and camaraderie among all of us and we are excited about the opportunities in front of us.
 Assistant:

Chosen response:
q3 adjusted earnings per share $0.24.
q3 earnings per share $0.25.
q3 revenue $475 million versus refinitiv ibes estimate of $454.4 million.