Bad consumer loans dragged Bank of America $1bn (£613m) into the red for the three months between July and September.
Outgoing chief executive Ken Lewis blamed continuing stress on the cash-strapped consumer and continued high credit costs for the worse-than-expected figure, which compares to a $1.2bn profit last year.
It is the last set of results to be overseen by Lewis who will step down at the end of the year.
It will be an ignominious exit for Lewis who has been heavily criticised by regulators and shareholders for buying credit crunch victim Merrill Lynch and putting the previously well-capitalised bank at risk of collapse.
Bank of America is the fourth Wall Street giant to report its third-quarter figures and of those, the only one to report a loss.
High credit costs
JP Morgan and Goldman Sachs both reported bumper profits earlier this week, boosted by strong performances in their investment banking divisions.
Meanwhile, Citigroup, which is a third-owned by the US taxpayer, also reported a profit, albeit more modest, reflecting the impact of its troubled High Street banking operations.
Bank of America says it put $11.7bn aside to cover credit losses, $1.7bn lower than the previous quarter, but $5.3bn higher than the same period last year.
The firm's credit card business made a $1bn loss, while $1.6bn was wiped off home loans and insurance and deposits halved compared to the same period in 2008.
It also set aside $402m to close a US Government guarantee on its assets.
Bank of America has been forced to go cap in hand to the US Government twice to help it absorb the losses it incurred when it bought Merrill.
Despite high credit costs, which Lewis called the firm's biggest financial challenge, he remains optimistic.
"We are heartened by early positive signs, such as the leveling of delinquencies among our credit card customers," he concludes.
‘Gareth Southgate Wealth Management’
Questions raised over govt role in dashboard
PA Awards deadline is 28 September