Bloomberg News reports that Bank of America (NYSE: BAC) missed earnings expectations by 44%. Specifically, its first-quarter net income declined to $1.21 billion, or 23 cents a share, from $5.26 billion, or $1.16 a share in 2007. The 21 analysts surveyed by Bloomberg expected the bank to make 41 cents a share. The bank experienced a huge rate of late credit card payments in its $81 billion credit-card portfolio -- 5.8% compared with an industry average of 4.1%.

Bank of America's problem is its exposure to the housing market. Assuming 2% of its home-equity loans are uncollectible this year, the cost may be $2.3 billion according to a Fitch Ratings analyst. If the bad loans reach 5%, the damage could total $5.9 billion. Meanwhile, Bank of America is still on track to buy Countrywide Financial Corp (NYSE: CFC) which had $34 billion in home-equity loans at the end of 2007.

Both Bank of America and Countrywide have home-equity loans concentrated in the regions with the most foreclosure filings. California, Nevada, Arizona and Florida are the four states where housing prices are sliding faster than the national average -- ranking among the top 10 states with the most foreclosure filings in March.

Bank of America (NYSE: BAC) is indicated slightly higher in pre-market trading after beating earnings estimates. The largest U.S. bank posted $1.28 EPS and revenues came in at $19.96 billion. That is higher from First Call estimates of $1.20 EPS and $18.6 billion revenues, and up from $1.19 EPS and $18.5 billion revenues in Q2 2006.

Consumer and small business banking, corporate and investment banking and wealth and investment management were listed as the reasons for the boost in earnings. Perhaps the company should focus more on its brokerage operations now that it is as close to the U.S. deposit limit of 10%. Investment banking revenue rose 26% from a year ago period, retail product sales added 8% and non-interest income rose 17% to $11.18 billion.

The banking giant didn't claim to be immune to credit losses at all, as it boosted provisions for loan losses. It has set aside $1.81 billion overall for credit losses, up from $1.24 billion in the first quarter and $1.01 billion in the second quarter of 2006, and its net charge-offs rose to $1.5 billion. Those are some pretty large increases if you do the math on total earnings and revenues.

Bank of America has fallen behind in the market cap race with Citigroup (NYSE:C): B of A has a $219 billion market cap and Citigroup has a $255 billion market cap.

Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.

Since August, the stock price of Countrywide (NYSE: CFC) has had a decent rally. And, it looks like part of it has been from rumors of a takeover.

Well, according to a report from the Financial Times, there may actually be some credence to this scenario. The suitor? Bank of America (NYSE: BAC).

However, the first step may be an alliance. But, why not just ultimately make it a merger?

Actually, investors are taking things seriously. On the news, Countrywide's stock price increased 4.24% to $42.

Already, Bank of America is #1 in deposits and #1 in credit cards. Hey, why not #1 in mortgages?

Besides, after last year's deal for MBNA, Bank of America is probably ready for another mega deal.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

I worked at Wachovia Corporation (NYSE:WB)'s predecessor, First Union, in the heady early years of banking consolidation. My boyfriend at the time worked for the cross-town rival, NationsBank, now Bank of America Corporation (NYSE:BAC). Our bosses were married, coincidentally, so we got lots of peaks into the personalities behind some of the biggest banks in the country. At the time, I was in Loan Syndications, meaning that each month brought a new opportunity to meet & greet the local frontliners in all the world's banks -- and every time a new bank acquisition came across the pike, we had both one fewer contact and instant access into merger scuttlebutt.

Let's just say that, when I read in the Chicago Tribune about the Morgan Stanley report claiming that both Bank of America and Citigroup Inc. (NYSE:C) were leading takeover targets, I said (much like blogger Ticker Sense), what the flip? Hardly. Not only, as Ticker Sense points out, are Bank of America and Citigroup the fourth- and fifth-largest companies in the country, and as a result: entirely too big to be bought out. But, also, it's just not in their corporate personalities. Hugh McColl, longtime CEO of Bank of America and, though he's retired, a manager whose spirit will always be redolent in the corporate decision-making, is a buyer, not a seller. He and his counterparts at Citigroup have been locked in a battle of one-ups-manship to secure the title of biggest bank in the nation for years, and neither would be likely to give up said title for a little (questionable, in the huge conglomerate that would result from any acquisition) value for shareholders.

There's going to be no takeover here, not with Bank of America or Citigroup at the short end of the stick. Maybe the two company's stocks are cheap (Bank of America closed today at $54.56, a decline of 7 cents and only a dollar away from its 52-week high; while Citigroup closed at $50.31, a $0.46 decline, and also about a dollar away from 52-week high), but that says "buying opportunity" to me, not "takeover target."

Want to buy a buyout possibility? Now Wachovia ... that's a possibility.

If it's November, it must be time for some mergers. Sometime back in late July, a bored investment banking VP, mad at being stuck in the office shepherding the summer associates while all the managing directors were at their houses in the Hamptons, came up with a plan. A pitch. A huge acquisition. A strategic merger! The summer associate, blinded by the glamor of writing something that would one day soon be on the desk of the CEO of Bank of America Corporation (NYSE:BAC), or Nasdaq Stock Market Inc. (NASDAQ:NDAQ), or Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), made it look fabulous. The synergies would be mind-blowing, the financial impact, in the billions.

When the managing director was wooed back from the Hamptons with the promise of a meeting with Ken Lewis at Bank of America, or the Blackstone Group's patrician Jonathan D. Gray, she realized this was a brilliant idea. And immediately saw the M&A fee, like hundreds of gallons of revenue pushing the millwheel of the group's bonus pool. The summer associate carried the dozen color copies of the pitchbook to some vastly inferior city and the CEO was convinced.

Come November, the summer associate is pouring back Yuenglings at business school, basking in the full-time job offer he received to return to the investment bank, and in the nick of time, right before the managing director checks out for the holiday season, the mergers have been launched. They're not all successful, but that's part of the fun: that bored vice president will be ever more busy and will naturally have to cancel his trip home to Maine for Thanksgiving launching a counter-offer. Here's a rundown of the successful and not-so-successful deals of the day: