Don't get out the hats and horns on Bank of America's results just yet.

Though it looks like BofA's reported earnings of 72 cents a share on revenue of $20.6 bn beat analysts estimates of 53 cents a share on sales of $18.4 bn, the results do not include the colossal losses at Countrywide.

BofA (BAC) won shareholder approval to acquire Countrywide for $2.5 bn on July 1, so the losses from that acquisition will start bleeding through in BofA's third quarter. Wall Street, so desperate to find a bottom to this mortgage and housing mess, so excited to see BofA beating estimates, has sent the stock chart on this one moving up and down today like an EKG heart monitor read of a 90-year-old on a Bowflex machine. Analysts' chronic short-sightedness has drained them of all common sense.

Bank of America today reported second-quarter 2008 net income of $3.41 bn, down from a record $5.76 bn a year earlier.

Factor in Countrywide's $2.3 bn in losses, and BofA's profit plunges to $1.1 bn, just a little over a fifth of its income result in the year earlier period. Factor those losses in and BofA misses analysts estimates by a country mile.

Also, BofA has one of the biggest book of debt securitizations in the banking business at $227.4 bn, up 25% from a year earlier and swamping its net worth of $162 bn. That's about twice the amount of debt securitizations at Wachovia (WB), and we know that slug of portfolios at too many banks hold massive stinkbombs as home loans continue to bellyflop.

Countrywide's balance sheet is ugly, its book of loans held for investments alone is at $95 bn, more than a third of that is in home equity lines of credit and second lien mortgages which don't have first dibs on a house if a mortgage goes under. Countrywide has $199 bn in assets and $185.9 bn in liabilities, against stockholders equity of a teensy $13 bn. Countrywide also has $15.6 bn in mortgage-backed and other securities it wants to unload, with $10.4 bn in level 2 or hard to pricetag assets because the markets for them are still in blackout mode, and $5.2 bn in assets, valuations based on the bank's own models, not market prices because the markets for them are frozen solid.

That's why the amount BofA is setting aside in cookie jar reserves soared higher to $5.8 bn, more than triple the sums a year earlier, reflecting net charge offs of $3.6 bn.

Driving BofA's results was its acquisition of LaSalle Bank and US trust, with net interest income rising a sweet 25% v the same period a year ago.

Turning to Countrywide, through June, Countrywide is achingly, slowly going through its loan workouts at what seems to be a snail's pace. It worked out 119,000 loans, nearly twice the number of its completed foreclosures. And it's not half way done here. Bank of America estimates Countrywide will have to restructure about 265,000 home loans worth $40 bn during the next two years.

In sum, watch the net charge-offs figures for BofA, more than doubling to 1.67% from 0.81% of total average loans and leases a year earlier. This figure represents the loans it doesn't think are collectable. Nonperforming assets nearly quadrupled to 1.13% presently from a year ago.

All of this, and also largely due to the Countrywide acquisition, are the reasons why Morgan Stanley (MS) slashed its investment rating on BofA shares last week, saying it expects the bank will have to raise $12 bn in capital and cut its dividend by a fifth.