Mid Penn Bank in Millersburg, Pa., warned Monday that it expects to record two hefty fourth-quarter expenses: a $700,000 provision for loan losses and a $478,000 severance payment for its former chief executive officer.

The expenses seem likely to wipe out much of the bank's profits for the quarter. It had earned $1.1 million in the third quarter, when it took a $275,000 provision.

The $552 million-asset unit of Mid Penn Bancorp Inc. said the higher provision is based on a recent loan portfolio review that took into account the impact of the deteriorating economy on particular borrowers, a decrease in collateral values, and loan growth.

The $700,000 provision would exceed the $530,000 it set aside during the first nine months of the year.

The severance payment is for Alan W. Dakey, who had been the president and CEO of both the bank and its parent before resigning Oct. 29. According to a Securities and Exchange Commission filing Oct. 30, the resignation did not result from any disagreement. Under his employment agreement, Mr. Dakey is entitled to receive all payments and benefits in the event of termination without cause.

Edwin D. Schlegel, the chairman of Mid Penn Bancorp, has assumed Mr. Dakey's titles until a successor is found.

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