Afternoon, and welcome to the PRA Group conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the call over to Ms. Lauren Partin, Vice President of Global Financial Planning and Analysis for PRA Group. Please go ahead.
Thank you. Good afternoon, everyone, and thank you for joining us. With me today are Kevin Stevenson, President and Chief Executive Officer, and Pete Graham, Executive Vice President and Chief Financial Officer. We will make forward-looking statements during the call, which are based on management's current beliefs, projections, assumptions, and expectations. We assume no obligation to revise or update these statements. We caution listeners that these forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could cause our actual results to differ materially from our expectations. Please refer to the earnings press release and our SEC filings for a detailed discussion of these factors. The earnings release, the slide presentation that we will use during today's call, and our SEC filings can be found on the investor section of our website at www.pragroup.com.
Additionally, a replay of this call will be available shortly after its conclusion, and the information needed to listen is in the earnings press release. All comparisons mentioned today will be between Q3 2020 and Q3 2021, unless otherwise noted, and our Americas results include Australia. During our call, we will discuss adjusted EBITDA and debt to adjusted EBITDA for the twelve months ended September 30, 2021 and December 31, 2020. Please refer to the appendix of the slide presentation on our website used during this call for a reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures. I'd now like to turn the call over to Kevin Stevenson, our President and Chief Executive Officer.
All right. Well, thank you, Lauren. I'd like to begin the call this evening once again sending our thoughts out to those who have been impacted by COVID. After almost two years of the pandemic, we are still faced with challenges that impact our daily lives. It's my hope that we can all move together and help each other during these very difficult times. Now moving on to the third quarter review. In Q3, we collected $488 million globally. This was driven by strong European cash collections, which increased almost $30 million compared to the third quarter of 2020. This brings year-to-date global cash collections to almost $1.6 billion, which is 4% ahead of our record 2020 year. Net income attributable to PRA Group for the quarter was $34 million.
Quarterly portfolio purchases were almost $400 million, one of our largest Q3s on record. Our investments in the quarter reflect the power of our geographic diversification as we invested broadly across our platform in Europe and the Americas. Importantly, looking beyond our funded purchases, we also have built a significant pipeline for the future. At quarter end, looking out generally 12 months or less, our future forward flow commitments total $874 million. Finally, during the quarter, we repurchased $74 million of our common stock. This was part of the $150 million plan that was approved in Q3. The $74 million deployment equated to 1.8 billion shares at an average price of around $41 a share.
As you may have seen in our press release dated November 1, our board has approved the topping off of our share repurchase program by adding an additional $80 million. In summary, over the past 2 quarters, we approved $230 million of buybacks. Of course, $74 million of that was deployed in Q3. This quarter's strong performance from both an operational and investment perspective is directly related to the strategic objectives that I highlighted at the end of last quarter's call. Operationally, our focus on modernizing collections has contributed significantly to our ability to service our NPL portfolios. Our U.S. digital platform continues to drive collections that exceed the combination of our 2 largest call centers. In Europe, digital collections, although smaller in scale, have grown almost 40% from the third quarter of 2020.
We're of course very excited about this growth and continue to make enhancements to ensure that our customers are being served via the channel that they prefer. Domestic productivity is still very high, with dollars collected per hour paid performing consistent with historically high levels attained in the third quarter of 2020. Many of the metrics we track continue to either maintain their strong performance or improve. Focusing on modernized collections has driven improvements in our cash efficiency ratio, and we continue to push in order to drive that metric even higher. We hired additional talent in our U.S. operations workforce focused on workforce planning and analytics. We've been working towards shifting a higher percentage of our U.S. legal placements from external law firms to internal staff, which should increase this channel's margin over time. We continue to invest in data and analytics in support of our strategic objectives.
Our focus on utilizing advanced analytics and AI enables us to leverage our robust internal data assets, which are then further augmented with external predictive data. The team is building, deploying, and improving our suite of predictive scores that we apply throughout the business to benefit our underwriting, our offers, and our custom-customer contact strategies. This is a continuous improvement cycle for PRA, as the team is constantly monitoring and improving upon the data and analytical methods we use in our business strategies. In Europe, we're also benefiting from technology investments that have been driving our cash efficiency ratios higher. These projects include standing up digital platforms in nearly all of our markets, implementing standardized cloud-based dialers and general cloud-based infrastructure, and beginning robotic process automation and integration into supporting systems.
Our efficiency efforts, coupled with robust cash collections, has driven our cash efficiency ratio to 65.8% year-to-date. We continue to make strides aimed at fostering a high-performing workforce. Specifically, we've been deploying initiatives focusing in on diversity and inclusion, and we are very proud of our recognition as a three-plus corporation by 50/50 Women on Boards for having three or more women on our board of directors. We also have a dedicated leader of diversity and inclusion, and the importance of diversity and inclusion filters down throughout the entire organization. This was demonstrated during Q3 when we launched our first global inclusion week across Europe and the U.S., and we saw meaningful employee engagement in the program. For more information on our ESG efforts, please visit our website and view our ESG tear sheet.
Further to benefit our employees, we've taken several steps to promote and educate on the COVID-19 vaccine. We've held several on-site vaccination clinics for both our employees and their friends and family. To make it easier, we provided unvaccinated employees with paid time off to go get the vaccine, and then as an incentive, provided two additional PTO days or paid time off days after they were vaccinated. Finally, we created a lottery for the vaccinated employees. It includes three awards of significant cash prizes, 10 awards of one week of PTO, again, paid time off. Lastly, for the site with the highest vaccination rate, they will have a CEO-hosted lunch for the entire site. We're having a good time with the lottery and getting a lot of people vaccinated.
From the investment perspective, our strong volume for the third quarter was the result of our efforts to accomplish another of our strategic objectives, expand products and market share. We leveraged our ability to invest broadly across our platform, allowing us to deploy nearly $400 million in portfolio purchases, an increase of over $200 million from the third quarter of 2020. This achievement clearly demonstrates the power of operating a geographically diverse enterprise. Combine that with our strong balance sheet and access to funding, and we believe we're in a good position from both a capital and operational perspective to shift capital widely across markets where it can be best deployed. In the Americas, we invested $172 million.
We continue to see similar marketed volumes to the first half of the year domestically as well as the same trends last quarter. Consumer spending in the U.S., is increasing and consumer credit outstanding is now growing. We saw short-term delinquency rates tick up for some of the large consumer lending clients. Our view from last quarter remains the same. We are moving through what we expect to be a trough in supply in the U.S., and we believe that volumes will build in 2022. Importantly, because of our expansion into South America in 2015, we augmented our purchasing volumes in the Americas with some larger portfolio purchases there. As we indicated earlier in the year, the pipeline in Europe has been very healthy. Combine that with our diversified footprint and strong balance sheet, we invested $220 million for the quarter.
In fact, volumes in Europe have been so good that the first nine months of 2021 has exceeded the first nine months of any other year since we expanded into Europe. You may also notice that we had a sizable increase in our maximum committed forward flow volumes, which now sits at $874 million. This amount generally represents 12 months or less in terms of maximum commitment amount. This includes $323 million in the Americas and Australia, and $551 million in Europe. Part of the increase is due to a large forward flow that we secured in Europe. This flow spans multiple years. You're just seeing the next 11 months of the maximum contractual commitment given certain provisions in that forward flow.
The full contract amount will be higher than what's reported since it extends well beyond 11 months. Now I can turn things over to Pete to go through our financial results. Pete?
Thanks, Kevin.
We had continued strong performance with total revenues of $264 million for the third quarter and $839 million year to date, which represents 6% growth from the prior year. Total portfolio revenue was $257 million, with portfolio income of $213 million and changes in expected recoveries of $44 million. During the quarter, we collected $46 million in excess of our expected recoveries, bringing the total for the nine months year to date to $224 million. The reduced level of cash overperformance in the third quarter was a result of forecast adjustments made in the first and second quarters in some geographies to increase near-term expected collections, bringing them in line with recent performance and collection trends.
We've applied a consistent approach in our ERC forecast for this quarter as well. Operating expenses were $186 million, a $7 million increase from the third quarter of 2020. This was driven primarily by increases in compensation and employee services, outside fees and services, and other operating expenses. The effective tax rate for the nine months ended September 30th was 21%, and we still expect to be in the low 20% range for the full year. Net income attributable to PRA Group was $34 million, which generated $0.76 in diluted earnings per share for the third quarter. The corresponding nine months year to date was $149 million, generating $3.24 in diluted earnings per share, an increase of 25%. For the quarter, cash collections were $488 million.
For the first nine months of the year, Americas collections were $1.1 billion and are ahead of our expectations for the year. We continue to see good operating metrics in our U.S., call centers and digital platforms, and collections in those channels were slightly higher than in 2020. This was offset by decreases in U.S., legal collections, reflecting the lower inventory of accounts placed into that channel over the last year. Europe cash collections grew $29 million or 20% in the quarter. For the first nine months of the year, Europe cash collections grew $109 million or 26%. The strength of our pan-European operations allowed us to invest at favorable levels over the last three years, and this is driving the growth in our European business.
For reference, our investment levels in 2017 were split about 75% in Americas and 25% in Europe. In 2019 and 2020, the split was closer to 55%, 45%. So far this year, investments split roughly 50/50. As a result, we're seeing very strong growth in the business in Europe. We've continued to see favorable cash efficiency trends. Our cash efficiency ratio was 62.4% for the third quarter and 65.8% for the first nine months of the year. We're holding our expectation for the full year cash efficiency ratio at 64%. Although we're experiencing some normalization of the efficiency ratio, we're still operating at some of the highest efficiency levels we've had in the history of the company.
ERC at the end of the quarter was $6.1 billion, with 41% in the U.S.,` and 52% in Europe. This was an increase of $91 million from the prior quarter, due primarily to strong purchasing in Europe and South America. Our diversification within Europe has also improved, with the proportion of ERC coming from Northern Europe increasing due to our ability to deploy capital in the Nordics. We expect to collect $1.6 billion of our ERC balance during the next twelve months, and we would need to invest approximately $900 million globally over the same timeframe to replace this runoff and maintain current ERC levels. We anticipate that even in the current market conditions, we could meet or exceed that level of investment.
For the 12 months ended September 30, we generated $1.4 billion of adjusted EBITDA, an increase of nearly $60 million when compared to the full year of 2020. Through this continued strong cash and financial performance, we have considerable flexibility for capital deployment. During the third quarter, we repurchased $74 million or 1.8 million shares of our common stock at an average price around $41 per share. Despite an almost $400 million investment quarter and utilizing half of our authorized share repurchase program, we ended the quarter with a debt-to-adjusted EBITDA ratio of 1.8 times. In the fourth quarter, we added $80 million to our existing share repurchase authorization in order to more closely align with credit facility amendments made during the third quarter.
These amendments provide for a calendar year limit for share repurchases equal to $150 million plus 50% of the prior year net income. We intend to continue to manage this program, balancing our portfolio investment pipeline and business plans while maintaining our leverage and growth targets. Also, during the quarter, we continued the process of diversifying our funding sources and managing our maturity profile, issuing a $350 million bond with an 8-year maturity. Our capital position remains strong, with $1.4 billion available for portfolio investment at the end of the quarter, in addition to the adjusted EBITDA generated by the business. With our leverage ratios remaining below our long-term target of 2-3 times debt to adjusted EBITDA, we continue to evaluate additional opportunities for capital deployment. Now I'd like to turn things back to Kevin.
Right. Well, thank you, Pete. We're committed to delivering long-term results. Our focus on our strategic objectives continue to contribute to our success. Maintaining a conservative balance sheet has always played an important factor in our performance. This quarter and the past few years have demonstrated the benefit of this approach. We had record purchasing in 2019, followed by very strong 2020. These trends have continued in 2021 due to the effective and diverse platforms, coupled with our seasoned teams in a broad range of markets. Creating an enterprise that is not dependent on any one country's economy and has enough capital and the flexibility to shift that capital globally has been the journey PRA has traveled since 2012, when we first entered Europe. Our expansion has been well planned, well executed, and accomplished at a sustainable rate.
Today, we believe we are well positioned not only to deliver results, but also to deliver additional shareholder value through repurchases. All of this is accomplished without stress on our balance sheet or operations. We have an amazing team to help us accomplish all that we've set out to do. Thank you again to all of our employees who've contributed to these results. You are what makes us successful. With that, operator, we are now ready for questions.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question will be from Bob Napoli from William Blair. Please go ahead.
Thank you. Good afternoon, Pete, Kevin.
Hi, Bob.
Nice to see the big jump in purchases. Maybe a little color on what you saw in the market that led to that level of purchase and maybe a little more color around the forward flow. Were there any changes in IRRs or the competitive environment that allowed you to have that much success on the purchase front?
Yeah, you know, that's a great question, Bob, and it's a big one all wrapped into one. I'll just start. You know, I said the word diverse platform, I don't know how many times in my prepared remarks, but that's. At the end of the day, that's the key to the whole thing. We have been purposefully focused on our strategic objective of expanding products and market share. That's been something we've been working on. We've been working on operational excellence. We've been working on collecting data and all that. This quarter has been really interesting. Pete talked about the concept that, you know, in 2017, 25% of our buying came from Europe, and this quarter was 50/50. Even in Europe then, we diversified, you know, more broadly across Europe.
We've talked about the deal in Norway. Axactor actually put a press release out on that. It was over $100 million. That's really it. It's been a concerted effort to continue to build expertise around the globe. You know, another one was South America. You know, we had a pretty sizable purchase down in South America as well. The flow itself, you know, we don't wanna disclose too much about it, but in short, again, what you saw in the numbers is just the first 11 months of it. There are provisions in it that really at our option, several situations exist where we could exit that flow. It's three years.
I guess I'll say that the maximum contractual amount of that's over $1 billion for that three years.
Great. Thank you. South America. What are the IRRs in South America versus other markets? It seems like that would be, you know, a market where you would want to have somewhat higher IRRs, you know, given, you know, maybe a less stable environment for that purchase. Not sure if there's any-
Yeah, that's completely.
Yeah.
Yeah, no, I'll give you color on that. That's completely true. The IRRs are higher down there, but you know, they're risk adjusted, right? To your point. I didn't answer the other part of your question about IRRs. You know, the pricing has come in a little bit, obviously, from 2020. I guess I would couch them more in line of 2019. I think that just broadly, the markets in the U.S., while certainly competitive, have remained rational.
Thank you. Just last question from me. On the cash collection side, have you been able to track any changes in cash collections as government stimulus has you know, been winding down, I guess?
I don't know that we'd attribute it directly to that. We certainly expected that we would see some normal seasonality in the collections this year, and we have seen that. That's part of the reason why the year-over-year comparison to the third quarter of last year is really a tough comparison given all the stimulus that was in the environment last year. We feel like we've made adjustments to our ERC forecast the last couple of quarters to try and get kind of closer to the pin in terms of what the trends are. You know, we saw the results of that this quarter.
Great. Thank you. Appreciate it.
The next question will come from Mark Hughes with Truist Securities. Please go ahead.
Yeah. Thank you. Good afternoon.
Hey, Mark.
Hey, Mark.
How does the pipeline look now? I think in the release you described how you had a good pipeline in 3Q, and sounds like you did some very large, meaningful spot purchases. How should we think about the pipeline for 4Q and in the next year?
Well, yeah, I gave some color. I don't know if you joined late or not, but I gave some color on the large flow that we contracted with in Europe. You know, I will stand by the concept that European volumes remain strong. I talked about in my prepared comments that we think we're in a trough in the United States, but we're starting to now see purchasing balances and delinquency rates are to tick up. We would expect to see more volume in the U.S. coming into 2022, and then probably continue strong volumes in Europe.
How much visibility do you have on the South American, Brazilian portfolio? I know part of your investment process has been to collect data. Could you give us just some sense of, you know, how much confidence you've got in your outlook here on this, you know, meaningful portfolio?
Yeah. The meaningful one in South America?
Yes. Yeah.
Yeah. Yeah, you know, we've been there since 2015, so that I can dive into. The outlook is, you know, obviously, harder to look at. The outlook as far as the portfolio we bought, we're very confident in it. We've got some great operators down there. You know, we've been there for, you know, six full years. We've been working on South America for longer than that. We've actually functionally been in South America since 2015. No, we're very confident. Again, I wouldn't have bought it if I wasn't confident that we could perform on it.
That's helpful. Thank you. One other question, Pete, on the expenses. Is this the 64-dollar question? Do you think that's run rate efficiency? Is there still some tailwind that's in this year that may not recur next year? You know, specifically on the legal front, any plans or outlook for legal spending to re-accelerate?
Yep, sure. I think, you know, we peaked this earlier this year in the first quarter on the efficiency with two rounds of stimulus in that quarter. We had expected it to sort of soften as we came into the back half of this year. I think the level we're operating at now, kind of the quarterly level, is probably a good run rate going forward for the next couple of quarters anyway. Our expectation is that we'll continue to drive efficiency improvements over time. With regard to the legal investment, you know, our inventories still continue to be at relatively low levels, particularly in the U.S., just because we've been having such you know, favorable interaction in the call centers and digital.
I don't see anything that's gonna cause us to deviate from that trend, at least in the near term.
Thank you.
Once again, if you would like to ask a question, please press star then one. The next question will be from Robert Dodd from Raymond James. Please go ahead.
Hi guys. One housekeeping item first, if I can, for modeling. For the outside fees and services were up pretty substantially this quarter. Was there anything unusual in there, or is this, you know, a function of some of the other initiatives you've taken and you'd expect it to stay at this kinda level going forward?
I mean, it was a somewhat elevated level of legal expenses is driving that, particularly in the year-over-year comparison, but nothing really out of the ordinary. I'm not sure I would run rate that level, but, nothing really more to say than that.
Okay. I appreciate that. On the question on forward flows versus capital deployment, maybe not expectations. In a normal year, and I realize nothing about the last two years has been normal, what percentage of purchases come from forward flow agreements versus spot?
I don't know that number off the top of my head, but I would say generally, the U.S. market has historically been much more forward flow based. You know, upwards of 70% in any given year would be coming from forward flows. In the European market, not so much. The U.K. market has been developing more of a forward flow approach. Again, it's all around how the sellers view charge-off and how they're gonna manage charge-off. The countries like the U.S., and U.K., with a stricter regulatory regime around dealing with nonperforming loans will be the ones where the banks are more programmatic around debt sale, and therefore, you know, better able to forecast volumes that they might be bringing to market, which lends itself to forward flow agreements.
Outside of the U.S., and in the U.K., we're largely in, you know, spot deals driving the market.
Got it. I appreciate that. Thank you.
Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Kevin Stevenson for any closing remarks.
Well, thank you, operator. I just want to thank everyone for joining the call this evening, and we look forward to speaking with you next quarter.
Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.