Diluted GAAP earnings per common share were $3.69 for the third quarter of 2021, improved from $3.41 in the second quarter of 2021 and $2.75 in the third quarter of 2020.
Net income for the quarter was $495 million, compared with $458 million in the linked quarter and $372 million in the year-ago quarter.
On a GAAP basis, M&T's third-quarter results produced an annualized rate of return on average assets of 1.28% and an annualized return on average common equity of 12.16%.
This compares with rates of 1.22% and 11.5%, respectively, in the previous quarter.
Included in GAAP results in the recent quarter were after-tax expenses from the amortization of intangible assets amounting to $2 million or $0.02 per common share, little change from the prior quarter.
Also included in the quarter's results were merger-related charges of $9 million related to M&T's proposed acquisition of People's United Financial.
This amounted to $7 million after tax or $0.05 per common share.
Results for this year's second quarter included $4 million of such charges amounting to $3 million after-tax effect or $0.02 per common share.
M&T's net operating income for the third quarter, which excludes intangible amortization and the merger-related expenses, was $504 million.
Compare that with $463 million in the linked quarter and $375 million in last year's third quarter.
Diluted net operating earnings per common share were $3.76 for the recent quarter, improved from $3.45 in 2021 second quarter and up from $2.77 in the third quarter of 2020.
Net operating income yielded annualized rates of return on average tangible assets and average tangible common shareholders' equity of 1.34% and 17.54% for the recent quarter.
The comparable returns were 1.27% and 16.68% in the second quarter of 2021.
Taxable equivalent net interest income was $971 million in the third quarter of 2021, compared with $946 million in the linked quarter.
Higher income from PPP loans accounted for the majority of the $25 million quarter-over-quarter increase in net interest income and the second round of PPP loans began to receive forgiveness from the Small Business Administration.
The net interest margin for the past quarter was $2 dollars -- excuse me, 2.74%, down just three basis points from 2.77% in the linked quarter.
We estimate that the higher balance of cash on deposit at Federal Reserve contributed about 13 basis points of pressure to the margin.
Largely offsetting that was the higher income from PPP loans both scheduled amortization and accelerated recognition of fees from forgiven loans, which added an estimated 10 basis points to the margin.
Compared with the second quarter of 2021, average interest earning assets increased by 3%, reflecting a 22% increase in money market placements, primarily cash on deposit with the Fed and a 3% decline in investment securities.
Average loans outstanding declined about 3% compared with the previous quarter.
Overall, commercial and industrial loans declined by $3.3 billion or 12%.
The primary driver was a $2.4 billion decline in PPP loans.
Dealer floor plan loans declined by $803 million, reflecting the ongoing impact from vehicle production and inventory issues seen across the industry.
Residential real estate loans declined by just under 4%.
Consumer loans were up 3%, consistent with the recent quarters and continuing to be led by growth in indirect auto and recreational finance loans.
On an end-of-period basis, total loans were down 4%, reflecting most of the same factors I just mentioned.
The 11% decline in C&I loans include a decline of PPP loans outstanding to $2.2 billion at September 30.
Average core customer deposits, which exclude CDs over $250,000, increased 2% or $2.8 billion compared with the second quarter.
That figure includes $3.8 billion of noninterest-bearing deposits partially offset by lower interest checking deposits.
Noninterest income totaled $569 million in the third quarter, compared with $514 million in the linked quarter.
The recent quarter included an insignificant valuation gain on equity securities, largely on our remaining holdings of GSE preferred stock, while the prior quarter included $11 million of valuation losses.
Mortgage banking revenues were $160 million in the recent quarter, compared with $133 million in the linked quarter.
Revenues for our residential mortgage business, including both origination and servicing activities, were $110 million in the third quarter, compared with $98 million in the prior quarter.
Residential mortgage loans originated for sale were down about 7% to $1.1 billion when compared with the second quarter.
Commercial mortgage banking revenues were $50 million in the third quarter, compared with $35 million in the linked quarter.
Trust income was $157 million in the recent quarter, compared with $163 million in the previous quarter.
Recall that the second quarter's results included $4 million of seasonal fees arising from tax preparation work we undertake for clients, which did not recur in the third quarter.
Also, in conjunction with the transfer of M&T's retail brokerage and advisory business to the platform of LPL Financial in mid-June of this year, about $10 million in revenues associated with managed investment accounts, previously classified as trust income, are now included in brokerage services income.
Service charges on deposit accounts were $105 million, compared with $99 million in the second quarter.
Operating expenses for the third quarter, which exclude the amortization of intangible assets and merger-related expenses previously mentioned, were $888 million.
The comparable figure was $859 million in the linked quarter.
Salaries and benefits were $510 million for the quarter, compared with $479 million in the prior quarter.
Other cost of operations in the recent quarter, including $5 million from the accelerated amortization of capitalized mortgage servicing rights as a result of the prepayments of previously securitized commercial mortgage loans that we referenced earlier.
Also recall that the other cost of operations for the second quarter included an $8 million addition to the valuation allowance for our capitalized residential mortgage servicing rights.
The efficiency ratio, which excludes intangible amortization and merger-related costs from the numerator and securities gains or losses from the denominator was 57.7% in the recent quarter, compared with 58.4% in 2021's second quarter.
The allowance for credit losses declined by $60 million to stand at $1.5 billion at the end of the third quarter.
This reflects a $20 million recapture of previous provisions for credit losses, combined with $40 million of net charge-offs in the quarter.
At September 30, the allowance for credit losses as a percentage of loans outstanding was unchanged from June 30 at 1.62%.
Annualized net charge-offs as a percentage of total loans were 17 basis points for the third quarter, 19 basis points in the second quarter.
Our forecast assumes the national unemployment rate continues to be elevated compared to prepandemic levels, averaging 5.5% over 2021, followed by a gradual improvement, reaching 3.5% by mid-2023.
The forecast also assumes that GDP grows at a 6.8% annual rate over 2021 and 2.7% annual rate during 2022.
Nonaccrual loans were essentially flat at $2.2 billion compared with June 30, but increased as a percentage of loans to 2.4%, compared with 2.31% of loans at the end of June.
Loans past due, on which we continue to accrue interest, were $1 billion at the end of the recent quarter.
M&T's Common Equity Tier 1 ratio was an estimated 11.1% at quarter end, compared with 10.7% at the end of the second quarter.
We noted on the July conference call that we expected net interest income in the third and fourth quarters to, on average, be in line with the $946 million in the second quarter.

Summary:
Diluted GAAP earnings per common share were $3.69 for the third quarter of 2021, improved from $3.41 in the second quarter of 2021 and $2.75 in the third quarter of 2020.
Diluted net operating earnings per common share were $3.76 for the recent quarter, improved from $3.45 in 2021 second quarter and up from $2.77 in the third quarter of 2020.
Taxable equivalent net interest income was $971 million in the third quarter of 2021, compared with $946 million in the linked quarter.
This reflects a $20 million recapture of previous provisions for credit losses, combined with $40 million of net charge-offs in the quarter.
At September 30, the allowance for credit losses as a percentage of loans outstanding was unchanged from June 30 at 1.62%.