Investors in the failed Tennessee Commerce Bank have reached a tentative agreement to resolve a two-year-old class action involving the bank.

The $2.6 million deal would settle claims that the Franklin, Tenn., bank falsified its earnings reports to shareholders before it was seized by regulators in January 2012. The lawsuit was brought against the bank's holding company and four executives, including two former heads of the bank, Arthur F. Helf and Michael R. Sapp.

A hearing on the proposed settlement has been scheduled for March 20, according to online court records.

The November 2012 lawsuit charged the $1 billion-asset Tennessee Commerce with inflating its financial condition, causing its stock to trade at an artificially high level. When the bank revealed its financial troubles, the stock price "reacted negatively, damaging investors," according to the original lawsuit filed in the U.S. District Court for the Middle District of Tennessee.

News of the settlement was reported Thursday by the Nashville Business Journal.

The Federal Deposit Insurance Corp. in May assessed a $485,000 civil money penalty against Sapp because of his role in concealing the bank's losses. He was chief executive of the bank and the holding company starting in late 2009.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.