Profits plunge by 58% at Ky.'s Pikeville National.

Pikeville National Corp's earnings for the second quarter tumbled 58% from a year ago to $1.6 million. The decline followed a 17%. drop in first-quarter earnings.

"This is a temporary blip," said James L. Springer, the $1.4 billion-asset banking company's chief financial officer. "It is an abnormal situation for us."

The company blamed the second-quarter drop on two loans that had to be charged off. One loan totaling $1.25 million was made to a company in its home state of Kentucky that develops industrial computer software. The other loan was coal industry related.

Pikeville's first quarter decline was due to a decrease in its net interest margin, a decrease in fees from mortgage originations and a 5% increase in noninterest expense.

Alan Morel, a banking analyst with J.J.B. Hilliard, W.L. Lyons, was surprised by the software loan.

"It doesn't strike me as a typical Pikeville loan," he said.

Mr. Morel said Pikeville traditionally has been a strong performer with plenty of capital and few loan problems.

"It's a very well-operated bank," he said.

Mr. Springer said earnings have been dragged down by a companywide effort, begun last year, to restructure operations. Pikeville's noninterest expense jumped 9% to $11.2 million, compared with a year ago.

Mr. Springer said the bank is trying to find a more efficient way to run its business. It's looking at everything from backroom operations to how it makes loans.

"Our operating efficiencies haven't been that good," he said. "We are looking at how we do everything."

Mr. Springer said the company plans to reduce its staff 10% to 15%, through cuts and attrition. He expects earnings to improve in the third and fourth quarters, but that the entire year will be off compared to 1993.

"We expect to see a substantial benefit from the reorganization in 1995 and going forward," he said.

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