Countrywide Credit Industries reported that earnings dropped 22% to $33.7 million - or 37 cents a share - in its first fiscal quarter, mainly because of the costs of hedging its giant servicing portfolio.

A year earlier, the Pasadena, Calif.-based company had earnings of $43.3 million, or 49 cents a share.

David S. Loeb, chairman, said amortization of the cost of its servicing hedge amounted to $20 million in the quarter, which ended May 31. He said somewhat less than $20 million would also be amortized in the second quarter.

Thereafter, he said, hedging costs would drop because of the large number of loans that are at rates below the present market.

Mr. Loeb said Countrywide was still focused on "expanding our share of the home purchase mortgage market, reducing costs in line with production, and continuing to grow our servicing portfolio."

While loan production dropped by 19% in the quarter from the level a year earlier, the company's servicing portfolio reached $93.6 billion, up sharply from $64 billion.

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