"At this point, everything is a go to complete this transaction," Bank of America Corp. Chief Executive Ken Lewis said at an investor conference in New York.

Countrywide's earnings fell far short of Wall Street estimates. Still, investors sent its shares on an upswing, with the stock rising 37 cents, or 6.2 percent, to $6.32 in afternoon trading.

Bank of America shares rose 66 cents, or 1.6 percent, to $41.86 in afternoon trading.

Calabasas, Calif.-based Countrywide posted its second consecutive quarterly loss as rising home loan delinquencies forced the nation's largest mortgage lender to boost loss provisions and take impairment charges.

It reported a huge third-quarter loss of $1.2 billion.

The company lost $422 million, or 79 cents per share, during the fourth quarter, compared with earnings of $622 million, or $1.01 per share, during the same period the previous year.

Analysts polled by Thomson Financial, on average, forecast a loss of 30 cents per share for the quarter.

Revenue for the quarter totaled $1.2 billion, down 58 percent from $2.8 billion in the prior-year quarter.

The quarterly performance didn't live up to a previous outlook by Chairman and Chief Executive Angelo Mozilo, who predicted in October that the company would return to profitability in the fourth quarter.

"While considerably improved from the previous quarter, Countrywide's results for the fourth quarter of 2007 were adversely impacted by further credit deterioration across the industry and continued illiquidity in the secondary mortgage markets," Mozilo said in a statement Tuesday.

The lender said the ongoing housing downturn and tightening in the mortgage credit market led to fewer new loan originations last year, conditions that the company expects will hamper loan origination volumes throughout 2008.

Lewis noted that the factors behind Countrywide's fourth-quarter loss were consistent with the bank's analysis of the lender's business and the agreed-upon buyout price.

"Much more important to us is the dramatic improvement in the underlying fundamentals of the mortgage business," Lewis said, noting both Countrywide and Bank of America have seen a significant increase in loan volume due to the Federal Reserve's recent interest rate cut.

The spread between Countrywide's stock price and the value of Bank of America's offer has remained unusually large — around 20 percent below what each would be worth at the current price of Bank of America stock.

That has sparked concerns by some investors that Bank of America may turn its back on the deal or press for a lower price.

Nick Perry, an equities options analyst at Schaffer's Investment Research, suggested that general investor uncertainty and a sense that Countrywide's performance can't get much worse might have contributed to the modest surge in Countrywide shares Tuesday.

"There's been so much negativity in the market that I think it's going to be really tough to surpass expectations on the down side," Perry said. "People are expecting the worst, even when you get numbers that are bad."

Countrywide set aside $924 million for credit losses during the fourth quarter, compared with reserves of $73 million during the final quarter in 2006.

The mortgage lender also recorded an impairment charge of $831 million during the quarter tied to securities backed by prime home equity lines of credit typically reserved for borrowers with excellent credit histories.

Because of continued deterioration in the credit markets, Countrywide also took a loss of $394 million as it transferred about $7 billion in jumbo mortgages that exceed $417,000 to a held-for-investment portfolio.

Countrywide also cited lingering disruption in capital markets and "severe" lack of demand for jumbo loans.

Countrywide's total loan funding volume in the quarter totaled $69 billion, down 44 percent from $124 billion in the prior-year period.

The decrease in loan production was due to declining demand for new home loans, tightened underwriting standards and less demand for mortgages on the secondary market for jumbo loans, the company said.

The company's loan production unit posted a $448 million loss during the quarter, versus earnings of $421 million in the prior-year, due to write-downs on loans.

The loss offset a $332 million gain on sales of loans, but the gain on sales marked an improvement from the third quarter, reflecting Countrywide's decision to shift much of its loan production to loans it could sell to government-sponsored mortgage finance companies Fannie Mae and Freddie Mac.

The company's loan servicing portfolio was valued at $1.47 trillion as of Dec. 31, up from $1.29 trillion in the same quarter in 2006.

The unit posted a $198 million loss due to the $831 million in impairment charges. Rising mortgage delinquencies and revised estimates of home price declines forced the lender to account for the prospect of more defaults and credit-related losses.

The company's banking arm, Countrywide Bank FSB, held $113 billion in assets, up from $83 billion in the prior-year quarter.