By Cindy Schroeder
The Cincinnati Enquirer

COLD SPRING - The First Baptist Church of Cold Spring must pay its mortgage in full by Monday, or it will be in default of its $4 million loan, a lawyer for Fifth Third Bank said in a letter to the church's lawyer.

The March 10 letter from attorney Alan J. Stratman said Fifth Third Bank is concerned the church might not have spent its loan money according to the terms of its contract. He also cited "a material adverse change'' in the church's financial condition.

"The borrower has engaged in false, misleading and materially inaccurate representations when it certified that the proceeds of the loan were to be used solely for construction of improvements on the real estate securing this note," the letter said.

Kentucky State Police detectives are investigating possible criminal misuse of money at the 1,800-member church. But church leaders say all of the money borrowed from Fifth Third Bank was spent on its intended purpose - construction of a new sanctuary.

"Based on these events ... (Fifth Third) Bank has accelerated the entire amount owed on the note,'' the bank's letter said. "If payment arrangements are not made within five business days of the date of this letter, we will recommend to the bank that it exercise all legal rights to collect the entire balance owed.''

Church leaders questioned why the bank is calling in the loan, taken out in September 2003. They say their lawyers have asked representatives of Fifth Third Bank to attend the church's monthly business meeting Wednesday night to explain its actions.

Tracy Hughes, a spokeswoman for Fifth Third Bank, would not comment on the letter.

Church members have been divided since mid-January when some accused the Rev. Larry Davis, the church's pastor, of mishandling church money. Fifth Third Bank identified $500,000 in questionable transfers - some made at horse tracks, online gambling sites and at an MGM casino.

Davis, who has not been charged with any crime, has denied any wrongdoing.

"I'm a little aggravated that we've received a letter saying they intend to call us in default of our loan when our payments are current and we haven't been late,'' said John Roseberry, chairman of the church trustees. "As far as the church is concerned, we're going to continue making payments. ... But if this is how the bank acts toward a church that's been a pillar of the community, I personally will not put a dime in that bank.''

After word of Fifth Third's letter began circulating among church members, Roseberry said he received calls asking how the notice of default would affect church operations. The chairman of trustees said he tried to reassure worried callers that it was business as usual.

"I've had a few calls asking if we're still having church (services) on Sunday," Roseberry said. "I told them, 'Yes, church will be held as normal.' "

Phil Taliaferro, the church's lawyer, said his review of First Baptist's financial records indicate the church is current on all loan payments. He said he's written Fifth Third Bank and asked bank officials to explain why they believe the church is in default.

"I was really surprised that the bank would send a default letter because we are current on the payments and the church is in the process of healing," Taliaferro said. "Everybody has been trying to get together as one, and this certainly is a detriment to the healing process.''

E-mail cschroeder@enquirer.com