Bank of America Corp. (BAC), the largest U.S. bank by assets, reported a fourth-quarter net loss of $1.79 billion, or 48 cents a share, Friday morning --  compared with net income of $268 million, or 5 cents a share, in the fourth-quarter last year. Results included Countrywide Financial, which Bank of America purchased on July 1, but not Merrill Lynch & Co., which was acquired on Jan. 1, 2009. "Fourth quarter results were driven by escalating credit costs, including additions to reserves, and significant write-downs and trading losses in the capital markets businesses," said BofA in a press release Friday. "These actions reflect the deepening economic recession and extremely challenging financial environment, both of which significantly intensified in the last three months of 2008." The Charlotte, North Carolina-based bank still managed to pull a full-year profit of $4.01 billion -- although vastly lower than its $14.98 billion profit in 2007. BofA's Mortgage, Home Equity and Insurance Services reported a net loss of $2.5 billion as home equity credit costs soared. Higher non-interest expense was offset by increases in mortgage banking income, net interest income and insurance premiums, the bank said. Expense and revenue increases were due to the addition of Countrywide. Bank of America said it extended more than $115 billion in new credit in the fourth quarter, and is in the process of increasing staff in its mortgage unit to meet a surge in demand that began late in December, due to plunging mortgage rates. BofA's Global Consumer and Small Business Banking and Global Wealth and Investment Management were profitable in the fourth-quarter, paced by Bank of America's deposit business, according to the statement. But results in Capital Markets and Advisory Services reported negative revenue. Merrill Lynch preliminary results, as they are not included in the BofA fourth-quarter earnings, indicate a fourth-quarter net loss of $15.31 billion, or $9.62 per share, attributed to severe capital markets dislocations. BofA's CEO Kenneth Lewis has faced criticism from analysts in recent months after taking over Merrill Lynch and Countrywide, both of which are in the financial doldrums, to say the least. But Lewis said in a conference call today that it's in the best interest of the BofA, its stockholders and the country to move forward with the original terms and timing for buying Merrill Lynch. Renegotiating the deal could have cost more than it would have saved, and the government -- which, BTW, insisted that the deal go forward -- promised financial help in "recognition of the position Bank of America was in,'' Lewis said, according to a Bloomberg report. The "promised financial help" was granted to BofA late Thursday evening in the form of a second-round infusion of TARP funds. Under the agreement, the government will invest an additional $20 billion in the banking giant, and share losses on $118 billion of the company's assets -- the large majority of the assets were assumed by BofA as a result of its acquisition with Merrill Lynch.  See Full Story. Write to Kelly Curran at kelly.curran@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.