Countrywide Credit Industries' earnings were $19.1 million for the second fiscal quarter, which ended Aug. 31.

The company said the results were not comparable with those a year earlier, because of a change in accounting rules this year that it was not permitted to apply retroactively.

However, Jonathan Gray, an analyst at Sanford C. Bernstein & Co., said that the company's earnings were higher than he had expected and stronger than the consensus estimate.

Production for the quarter was $8.9 billion, a 31% increase from the preceding quarter. However, prepayments increased to $3.7 billion from $1.6 billion in the previous quarter.

Countrywide started putting its originated servicing rights on the books in the quarter ended May 31, in accordance with a new accounting rule, FAS 122, that recognizes originated servicing rights as an asset, just as purchased servicing rights have been all along.

Mr. Gray was expecting Countrywide to report earnings of 41 cents a share. He said this would have been equivalent to double what it was a year ago. The company actually reported earnings of 49 cents a share.

The higher-than-expected earnings were a result of a number of factors. One reason for the increase was a sharp decline in overhead related to loan production, Mr. Gray said.

"When loan production volume rises sharply, the number of loans closed by each employee increases," Mr. Gray said, resulting in a lower cost per loan. Mr. Gray said he had expected Countrywide's production cost for the quarter to be higher than it turned out - 77 basis points per loan. That is down from 120 basis points a year ago.

Mr. Gray recently downgraded Countrywide's stock because, he said, its current price fairly reflected its value. He sees no problems with the mortgage industry these days, he said.

"Business is booming. Production is very strong," Mr. Gray said of Countrywide.

Countrywide's prepayment rate in the second quarter was just under 13%, which Mr. Gray said he had expected. That is up from 7% in the first quarter but consistent with the rate for all of last year, he added.

Mr. Gray said the lender was able to increase retail lending volume, its most profitable, in the second quarter.

Countrywide's servicing portfolio grew 31% from the level a year ago to reach $126 billion in the second quarter.

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