CULLMAN — A hearing is set for next week to reconsider a motion to dismiss a lawsuit between Cullman-based Peoples Bank and a handful of shareholders alleging financial misrepresentations in bank documents.

Cullman County Circuit Court Judge Don Hardeman will reconsider a motion to dismiss the case at an August 4 hearing, though he may not rule on the motion that day. Once the judge does rule, bank attorneys will have five days to issue a response.

Hardeman previously denied the motion to dismiss the case in April, though bank attorney’s requested and were granted the upcoming hearing.

Shareholders Stanley Dye, James Adams and Ed Holcombe are suing the bank, as well as its holding company Altrust Financial Services. At least three more shareholders have joined the suit since it was first filed in December 2009, and the plaintiffs are demanding a jury trial.

The shareholders are alleging general mismanagement by bank officials, as well as financial misrepresentations in information presented to shareholders. Those misrepresentations, the shareholders claim, led them to keep stock in the company they would have otherwise sold.

Bank officials, the bank’s owners and an accounting firm used to prepare financial statements are all targets in the civil complaint.

In a press release issued at the same time as the suit, Peoples Bank general counsel Michael Babb said bank leaders “deny the allegations in the complaint and remain confident in our position.”

Andrew Campbell, counsel for the plaintiffs, did not return a message left seeking comment for this story.

Specifically, the suit alleges financial statements issued by the bank for 2005 and 2006 were missing some information — despite the fact they were verified by auditor Dixon Hughes, a defendant in the case.

The shareholders also say bank officials did not fully disclose their involvement in the Midnight Properties incident that came to a head in 2008. Peoples Bank was owed more than $5.8 million from three loans taken out by developers Josh and Eddie Canaday involving the Bon Secour Village coastal development, according to court filings.

“Defendants did not disclose that, in 2006, the first signs of distress of Midnight Properties had appeared [and] that its investors were scrambling for cash,” the suit claims.

The suit alleges bank officials then declared a per-share dividend more than four times higher than average in an effort to generate funds.

“The dividend was declared without regard to the liquidity needs of the Bank,” the suit states. “Defendants did not disclose that [bank president] Robin Cummings and the [bank owners Alan, Tim and Terry] Walker brothers have wielded control over the company and that the bank had disregarded banking regulations.”

Another aspect of the suit claims bank officials hid the fact that the higher-than-usual dividend in 2006 had left the bank with a “bare minimum” of capital.

“In 2008, the defendants knew that the extraordinary dividend in 2006, made as it was when the economy was turning sour, made it incumbent upon the Bank to increase its capital, not to decrease capital, but did not disclose that strategic mistake,” the defendants allege.

The lawsuit also claims the defendants did not alert shareholders to the fact that the bank gave Bank of Blountsville President Ken Patterson — who was in federal prison at the time — a $200,000 unsecured loan after Peoples Bank purchased the Bank of Blountsville.

Founded in 1977 in Holly Pond, Peoples Bank includes 29 branches across six counties. Altrust Financial Services, Inc. was created as a bank holding company in 1984.



* Trent Moore can be reached by e-mail at trentm@cullmantimes.com, or by telephone at 734-2131, ext. 225.