Northern Rock is giving disgraced former chief executive Adam Applegarth a £760,000 pay-off, a £346,000 pension top-up and continuing to honour his cut-price staff mortgage.

The pay-off is much larger than the sum foreshadowed in December, when sources close to the bank insisted Mr Applegarth would get less than six months' pay.

Rock revealed today that it had plunged to a £167.6 million loss last year, compared with a profit of £627 million in 2006, because of the exceptional costs of the strategic review and write-offs on mortgages and unsecured loans.

New chairman Ron Sandler also warned that he expected the bank to continue to make losses for the next three years before breaking even in 2011.

The Rock report also details that:

The extent of the flight by depositors during and after the run last September was revealed for the first time: net outflow of funds was £12.2 billion.

Bryan Sanderson, who was appointed chairman on 19 October and stood down to make way for Mr Sandler last month, will be allowed to keep his £315,000 fee and up to £85,000 for office costs.

And Paul Thompson, who was heading a company-preferred buy-out vehicle for Rock, was paid £100,000 for his services as a non-executive director from 17 January to 22 February - for five weeks' work.

Mr Applegarth, who was responsible for devising and implementing the bank's disastrously flawed strategy, is being paid the golden goodbye in 12 monthly instalments of £63,000, according to the annual report published today.

The value of his pension pot increased by £346,000 last year, the annual report also reveals, and now stands at £2.6 million. The accrued pension entitlement is £305,000 a year.

Mr Applegarth, 45, will also continue to enjoy a concessionary staff interest rate on £75,000 of his mortgage from the bank, Rock said, without disclosing the precise terms.

The pay-off is equivalent to a year's base pay for Mr Applegarth, who finally left in December after announcing plans to step down in November. He had run the bank for the previous six years.

Mr Applegarth has in the past refused to shoulder the blame for Rock's flawed over-dependence on wholesale funding and its over-aggressive expansion of its mortgage book. Last October he told MPs the collapse was the fault of the Bank of England, which failed to approve a potential rescue bid from Lloyds TSB.

Today, the bank admitted to deteriorating quality of its loanbook, with mortgage arrears growing, though still low by industry standards, and bad debts on the £8 billion unsecured loanbook worsening more sharply.

However, there was one glimmer of good news for taxpayers, who are in effect underwriting the £100 billion of Rock liabilities. Bank of England loans to Rock, which stood at £26.9 billion on 31 December, have since been reduced to £24 billion. Rock said it expected to completely repay Bank of England debt by 2010 and to no longer need the Treasury guarantee by 2011.

Mr Sandler said, "Looking ahead we have developed a business plan that we believe will help drive the bank back towards profitability and ensure it has a sustainable future and remains an important employer in the North East."

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