Updated from 10:31 a.m. EST

The specter of subprime and other poor credit-related bets have spooked yet another financial institution.

Regional lender M&T Bank ( MTB) saw its fourth-quarter crushed 70% resulting from a combination of sour investments in mortgage-tainted collateralized debt obligations, or CDOs, and provisions for future losses and litigation.

Shares of the Buffalo, N.Y.-based regional bank, which kicks off an intense run over the coming weeks in which a number of regional and national banks report earnings, had dropped by as much as 3.7% Monday, but more recently were down 1.7% to $72.52 in morning trading.

Fourth-quarter net income for M&T fell to $64.9 million, or 60 cents a share, from $213.3 million, or $1.88 per share, during the same period last year. Analysts had forecast fourth-quarter earnings for the bank to come in around $1.63 a share, according to Thomson Financial polls.

For the year, M&T reported earnings of $654.3 million, or $5.95 a share, vs. $839.2 million, or $737 a share, in the year-ago period. Analysts had expected $6.95 a share.

Already depressed in value since the summer, CDO prices have further plummeted in recent weeks, forcing M&T to take a $127 million charge in the fourth quarter as it had to revalue its CDO holdings to $4.4 million, according to the bank's filing with the Securities and Exchange Commission.

The bank also beefed up its loss reserves in anticipation of an increase in mortgage defaults, setting aside approximately $100 million for losses and saw charge-offs for loans written off as a loss hit $53 million.

M&T CFO Rene Jones said that the additional provisions and loss reserves should be able to buffet the bank as it faces a tumultuous mortgage market. "While it is likely that weakness in this sector will continue for some time, we believe that our exposure to residential real estate has been appropriately provided for," he said in a statement.

The bank also saw a $23 million charge related to Visa's settlement of litigation with American Express ( AXP), which filed an antitrust suit alleging Visa blocked it from entering the bank-issued credit card business in the U.S.

Bright spots in M&T's business included its integration of acquisitions of Partners Trust and the First Horizon.

The regional also saw a boost in loan growth as the market tightened. Total loans increased $2.8 billion, or 6% from June 30 to the end of the year, including growth in business loans and commercial real estate loans of $2.2 billion. The increase was $1.8 billion, or 4% for the fourth quarter. Jones explained that the bank was seeing whole loan growth in commercial loans as the commercial mortgage-backed securities market experiences some tightening resulting from angst in the securitization market.

"I'm not saying we won't have problems but from what we see today we think we've identified most of the areas that seem apparent," Jones said during an analyst call discussing the bank's earnings.