**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

| x | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|---|--------------------------------------------------------------------------------------------------------------------------------------|

**For      the quarterly period ended June 30, 2005**

| o | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

**0-14289**

**GREENE      COUNTY BANCSHARES, INC.**

| **Tennessee**                                                          |   | **62-1222567**                                      |
|------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of                         |   | (I.R.S.                Employer Identification No.) |
| incorporation                or organization)                          |   |                                                |
|                                                                   |   |                                                |
| **100                North Main Street, Greeneville, Tennessee**  |   | **37743-4992**                                      |
| (Address                of principal executive offices)                |   | (Zip                Code)                           |
|                                                                   |   |                                                |

**(423)      639-5111**

----

| **ITEM              1.** | **FINANCIAL                STATEMENTS** |
|--------------------------|-----------------------------------------|

----

**GREENE      COUNTY BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

**June      30, 2005 and December 31, 2004**

**(Amounts      in thousands, except share and per share data)**

----

|                                                                                                                             |   | **(Unaudited)****June                  30,****2005** |      |  **December                  31,****2004*** |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|-----------|--------------------------------------------------|--------|
|  **ASSETS**                                                                                                                 |   |                                                 |      |                                             |   |
|                                                                                                                             |   |                                                 |      |                                             |   |
| Cash                  and due from banks                                                                                         |   | $                                                    | 35,420    |                                             | $      | 30,727 |   |
| Federal                  funds sold                                                                                              |   |                                                 | 46,516    |                                             |   | 39,921 |   |
| Securities                  available for sale                                                                                   |   |                                                 | 51,216    |                                             |   | 35,318 |   |
| Securities                  held to maturity (with a market value of $3,503 and                  $4,506)                         |   |                                                 | 3,480     |                                             |   | 4,381 |   |
| FHLB,                  Bankers Bank and other stock, at cost                                                                     |   |                                                 | 6,339     |                                             |   | 6,211 |   |
| Loans                  held for sale                                                                                             |   |                                                 | 1,057     |                                             |   | 1,151 |   |
| Loans                                                                                                                            |   |                                                 | 1,158,644 |                                             |   | 1,046,867 |   |
| Less:                  Allowance for loan losses                                                                                 |   |                                                 | (16,880   | )                                                |   | (15,721 | ) |
| Net                  loans                                                                                                       |   |                                                 | 1,141,764 |                                             |   | 1,031,146 |   |
| Premises                  and equipment, net                                                                                     |   |                                                 | 35,373    |                                             |   | 35,591 |   |
| Goodwill                  and other intangible assets                                                                            |   |                                                 | 23,319    |                                             |   | 23,695 |   |
| Other                  assets                                                                                                    |   |                                                 | 29,710    |                                             |   | 25,262 |   |
| Total                  assets                                                                                                    |   | $                                                    | 1,374,194 |                                             | $      | 1,233,403 |   |
|                                                                                                                             |   |                                                 |      |                                             |   |   |   |
| **LIABILITIES                  AND SHAREHOLDERS’ EQUITY**                                                                  |   |                                                 |      |                                             |   |   |   |
|                                                                                                                             |   |                                                 |      |                                             |   |   |   |
| Liabilities                                                                                                                      |   |                                                 |      |                                             |   |   |   |
| Deposits                                                                                                                         |   | $                                                    | 1,148,434 |                                             | $      | 998,022 |   |
| Repurchase                  agreements                                                                                           |   |                                                 | 16,426    |                                             |   | 13,868 |   |
| FHLB                  advances and notes payable                                                                                 |   |                                                 | 70,509    |                                             |   | 85,222 |   |
| Subordinated                  debentures                                                                                         |   |                                                 | 13,403    |                                             |   | 10,310 |   |
| Accrued                  interest payable and other liabilities                                                                  |   |                                                 | 11,936    |                                             |   | 17,263 |   |
| Total                  liabilities                                                                                               |   |                                                 | 1,260,708 |                                             |   | 1,124,685 |   |
|                                                                                                                             |   |                                                 |      |                                             |   |   |   |
| Shareholders’                  equity                                                                                      |   |                                                 |      |                                             |   |   |   |
| Common                  stock: $2 par, 15,000,000 shares authorized, 7,651,016                  and 7,647,740 shares outstanding |   |                                                 | 15,303    |                                             |   | 15,296 |   |
| Additional                  paid-in capital                                                                                      |   |                                                 | 24,204    |                                             |   | 24,160 |   |
| Retained                  earnings                                                                                               |   |                                                 | 74,101    |                                             |   | 69,289 |   |
| Accumulated                  other comprehensive loss                                                                            |   |                                                 | (122      | )                                                |   | (27 | ) |
| Total                  shareholders’ equity                                                                                |   |                                                 | 113,486   |                                             |   | 108,718 |   |
| Total                  liabilities and shareholders’ equity                                                                |   | $                                                    | 1,374,194 |                                             | $      | 1,233,403 |   |
|                                                                                                                             |   |                                                 |      |                                             |   |   |   |

----

| *                     Condensed from audited consolidated financial statements. |   |   |   |   |   |   |   |
|------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                           |   |   |   |   |   |   |   |

----

**GREENE      COUNTY BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME**

**Three      and Six Months Ended June 30, 2005 and 2004**

**(Amounts      in thousands, except share and per share data)**

----

|                                                                                    |   | **Three                Months Ended****June                30,** |      | **Six                Months Ended****June                30,** |   |
|-----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|-----------|----------------------------------------------------------------|--------|
|                                                                                    |   | **2005**                                                         |      | **2004**                                                       |   | **2005** |   | **2004** |   |
|                                                                                    |   | **(Unaudited)**                                                  |      | **(Unaudited)**                                                |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |
| Interest                income                                                          |   |                                                             |      |                                                           |   |   |   |   |   |
| Interest                and fees on loans                                               |   | $                                                                | 19,851    |                                                           | $      | 15,522 |   | $ | 37,930 |   | $ | 31,047 |   |
| Investment                securities                                                    |   |                                                             | 592       |                                                           |   | 339 |   |   | 1,065 |   |   | 725 |   |
| Federal                funds sold and interest-earning deposits                         |   |                                                             | 260       |                                                           |   | 8 |   |   | 443 |   |   | 27 |   |
|                                                                                    |   |                                                             | 20,703    |                                                           |   | 15,869 |   |   | 39,438 |   |   | 31,799 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Interest                expense                                                         |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                |   |                                                             | 5,501     |                                                           |   | 3,006 |   |   | 9,763 |   |   | 6,192 |   |
| Borrowings                                                                              |   |                                                             | 1,130     |                                                           |   | 880 |   |   | 2,276 |   |   | 1,744 |   |
|                                                                                    |   |                                                             | 6,631     |                                                           |   | 3,886 |   |   | 12,039 |   |   | 7,936 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                      |   |                                                             | 14,072    |                                                           |   | 11,983 |   |   | 27,399 |   |   | 23,863 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Provision                for loan losses                                                |   |                                                             | 1,060     |                                                           |   | 1,162 |   |   | 2,682 |   |   | 2,685 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Net                interest income after provision for                loan losses  |   |                                                             | 13,012    |                                                           |   | 10,821 |   |   | 24,717 |   |   | 21,178 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Noninterest                income                                                       |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Service                charges and fees                                                 |   |                                                             | 2,836     |                                                           |   | 2,518 |   |   | 4,978 |   |   | 4,913 |   |
| Other                                                                                   |   |                                                             | 627       |                                                           |   | 552 |   |   | 1,661 |   |   | 1,251 |   |
|                                                                                    |   |                                                             | 3,463     |                                                           |   | 3,070 |   |   | 6,639 |   |   | 6,164 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Noninterest                expense                                                      |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Salaries                and employee benefits                                           |   |                                                             | 5,099     |                                                           |   | 4,464 |   |   | 10,344 |   |   | 9,171 |   |
| Occupancy                and furniture and equipment expense                            |   |                                                             | 1,774     |                                                           |   | 1,462 |   |   | 3,513 |   |   | 2,951 |   |
| Other                                                                                   |   |                                                             | 3,549     |                                                           |   | 2,648 |   |   | 6,840 |   |   | 5,403 |   |
|                                                                                    |   |                                                             | 10,422    |                                                           |   | 8,574 |   |   | 20,697 |   |   | 17,525 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Income                before income taxes                                               |   |                                                             | 6,053     |                                                           |   | 5,317 |   |   | 10,659 |   |   | 9,817 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Provision                for income taxes                                               |   |                                                             | 2,339     |                                                           |   | 2,042 |   |   | 4,010 |   |   | 3,690 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Net                income                                                               |   | $                                                                | 3,714     |                                                           | $      | 3,275 |   | $ | 6,649 |   | $ | 6,127 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                                     |   | $                                                                | 3,732     |                                                           | $      | 2,935 |   | $ | 6,554 |   | $ | 5,808 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Per                share of common stock:                                               |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Basic                earnings                                                           |   | $                                                                | 0.49      |                                                           | $      | 0.43 |   | $ | 0.87 |   | $ | 0.80 |   |
| Diluted                earnings                                                         |   | $                                                                | 0.48      |                                                           | $      | 0.42 |   | $ | 0.86 |   | $ | 0.79 |   |
| Dividends                                                                               |   | $                                                                | 0.12      |                                                           | $      | 0.12 |   | $ | 0.24 |   | $ | 0.24 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding:                                     |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |
| Basic                                                                                   |   |                                                             | 7,650,884 |                                                           |   | 7,656,832 |   |   | 7,649,982 |   |   | 7,661,593 |   |
| Diluted                                                                                 |   |                                                             | 7,745,985 |                                                           |   | 7,713,966 |   |   | 7,745,130 |   |   | 7,720,365 |   |
|                                                                                    |   |                                                             |      |                                                           |   |   |   |   |   |   |   |   |   |

----

**GREENE      COUNTY BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY**

**For      the Six Months Ended June 30, 2005**

**(Amounts      in thousands, except share and per share data)**

----

|                                                                           |   |            |   |           |   |         |   | **Accumulated**                  |   |               |   |
|--------------------------------------------------------------------------------|--------|-----------------|--------|----------------|--------|--------------|--------|----------------------------------|--------|--------------------|--------|
|                                                                           |   |            |   |           |   |         |   | **Other**                        |   | **Total**          |   |
|                                                                           |   |            |   | **Additional** |   |         |   | **Compre-**                      |   | **Share-**         |   |
|                                                                           |   | **Common**      |   | **Paid-in**    |   | **Retained** |   | **hensive**                      |   | **holders’** |   |
|                                                                           |   | **Stock**       |   | **Capital**    |   | **Earnings** |   | **Income                (Loss)** |   | **Equity**         |   |
|                                                                           |   | **(Unaudited)** |   |
|                                                                           |   |            |   |           |   |         |   |                             |   |               |   |
| **Balance,                January 1, 2005**                                    |   | $               | 15,296 |           | $      | 24,160       |   | $                                | 69,289 |               | $      | (27 | ) | $ | 108,718 |   |
|                                                                           |   |            |   |           |   |         |   |                             |   |               |   |   |   |   |   |   |
| Issuance                of 3,276 shares under stock option                plan |   |            | 7      |           |   | 44           |   |                             | --     |               |   | -- |   |   | 51 |   |
| Dividends                paid ($.24 per share)                                 |   |            | --     |           |   | --           |   |                             | (1,837 | )                  |   | -- |   |   | (1,837 | ) |
| Comprehensive                income:                                           |   |            |   |           |   |         |   |                             |   |               |   |   |   |   |   |   |
| Net                income                                                      |   |            | --     |           |   | --           |   |                             | 6,649  |               |   | -- |   |   | 6,649 |   |
| Change                in unrealized gains(losses),                net of taxes |   |            | --     |           |   | --           |   |                             | --     |               |   | (95 | ) |   | (95 | ) |
| Total                comprehensive income                                      |   |            |   |           |   |         |   |                             |   |               |   |   |   |   | 6,554 |   |
| **Balance,                June 30, 2005**                                      |   | $               | 15,303 |           | $      | 24,204       |   | $                                | 74,101 |               | $      | (122 | ) | $ | 113,486 |   |
|                                                                           |   |            |   |           |   |         |   |                             |   |               |   |   |   |   |   |   |

----

**GREENE      COUNTY BANCSHARES, INC.**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**For      the Six Months Ended June 30, 2005 and 2004**

**(Amounts      in thousands)**

----

|                                                                                                             |   | **June                30,** |     | **June                30,** |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|----------|-----------------------------|--------|
|                                                                                                             |   | **2005**                    |     | **2004**                    |   |
|                                                                                                             |   | **(Unaudited)**             |     |
|                                                                                                             |   |                        |     |                        |   |
| **Cash                flows from operating activities**                                                          |   |                        |     |                        |   |
| Net                income                                                                                        |   | $                           | 6,649    |                        | $      | 6,127 |   |
| Adjustments                to reconcile net income to net cash provided from                operating activities |   |                        |     |                        |   |   |   |
| Provision                for loan losses                                                                         |   |                        | 2,682    |                        |   | 2,685 |   |
| Depreciation                and amortization                                                                     |   |                        | 1,763    |                        |   | 1,499 |   |
| Security                amortization and accretion, net                                                |   |                        | 9        |                        |   | 47 |   |
| FHLB                stock dividends                                                                              |   |                        | (128     | )                           |   | (105 | ) |
| Net                gain on sale of mortgage loans                                                                |   |                        | (207     | )                           |   | (243 | ) |
| Originations                of mortgage loans held for sale                                                      |   |                        | (16,755  | )                           |   | (25,516 | ) |
| Proceeds                from sales of mortgage loans                                                             |   |                        | 17,056   |                        |   | 26,326 |   |
| Increase                in cash surrender value of life insurance                                                |   |                        | (289     | )                           |   | (243 | ) |
| Net                losses from sales of fixed assets                                                             |   |                        | 19       |                        |   | 46 |   |
| Net                loss on OREO and repossessed assets                                                           |   |                        | 26       |                        |   | 132 |   |
| Deferred                tax (benefit) expense                                                                    |   |                        | (797     | )                           |   | 1,788 |   |
| Net                changes:                                                                                      |   |                        |     |                        |   |   |   |
| Other                assets                                                                                      |   |                        | (1,076   | )                           |   | 366 |   |
| Accrued                interest payable and other liabilities                                                    |   |                        | (5,327   | )                           |   | 743 |   |
| Net                cash provided from operating activities                                                  |   |                        | 3,625    |                        |   | 13,652 |   |
|                                                                                                             |   |                        |     |                        |   |   |   |
| **Cash                flows from investing activities**                                                          |   |                        |     |                        |   |   |   |
| Purchase                of securities available for sale                                                         |   |                        | (16,860  | )                           |   | (4,000 | ) |
| Proceeds                from maturities of securities held for sale                                              |   |                        | 800      |                        |   | 9,425 |   |
| Proceeds                from maturities of securities held to maturity                                           |   |                        | 902      |                        |   | 801 |   |
| Purchase                of life insurance                                                                        |   |                        | (1,450   | )                           |   | -- |   |
| Net                change in loans                                                                               |   |                        | (115,364 | )                           |   | (36,213 | ) |
| Proceeds                from sale of other real estate                                                           |   |                        | 1,259    |                        |   | 1,746 |   |
| Proceeds                from sale of fixed assets                                                                |   |                        | 8        |                        |   | 20 |   |
| Premises                and equipment expenditures                                                               |   |                        | (1,196   | )                           |   | (2,255 | ) |
| Net                cash used in investing activities                                                             |   |                        | (131,901 | )                           |   | (30,476 | ) |
|                                                                                                             |   |                        |     |                        |   |   |   |
| **Cash                flows from financing activities**                                                          |   |                        |     |                        |   |   |   |
| Net                change in deposits                                                                            |   |                        | 150,413  |                        |   | (23,101 | ) |
| Net                change in repurchase agreements                                                               |   |                        | 2,558    |                        |   | 1,635 |   |
| Proceeds                from notes payable                                                                       |   |                        | 161,255  |                        |   | 62,950 |   |
| Proceeds                from subordinated debentures                                                             |   |                        | 3,093    |                        |   | -- |   |
| Repayments                of notes payable                                                                       |   |                        | (175,969 | )                           |   | (29,318 | ) |
| Dividends                paid                                                                                    |   |                        | (1,837   | )                           |   | (1,837 | ) |
| Proceeds                from issuance of common stock                                                            |   |                        | 51       |                        |   | 137 |   |
| Repurchase                of common stock                                                                        |   |                        | --       |                        |   | (538 | ) |
| Net                cash provided from financing activities                                                       |   |                        | 139,564  |                        |   | 9,928 |   |
|                                                                                                             |   |                        |     |                        |   |   |   |
| **Net                change in cash and cash equivalents**                                                       |   |                        | 11,288   |                        |   | (6,896 | ) |
|                                                                                                             |   |                        |     |                        |   |   |   |
| Cash                and cash equivalents, beginning of year                                                      |   |                        | 70,648   |                        |   | 41,341 |   |
|                                                                                                             |   |                        |     |                        |   |   |   |
| **Cash                and cash equivalents, end of period**                                                      |   | $                           | 81,936   |                        | $      | 34,445 |   |
|                                                                                                             |   |                        |     |                        |   |   |   |
| **Supplemental                disclosures - cash and noncash**                                                   |   |                        |     |                        |   |   |   |
| Interest                paid                                                                                     |   | $                           | 11,842   |                        | $      | 7,715 |   |
| Income                taxes paid                                                                                 |   |                        | 3,275    |                        |   | 2,570 |   |
| Loans                converted to other real estate                                                              |   |                        | 2,570    |                        |   | 1,516 |   |
| Unrealized                (loss) gain on available for sale securities, net of tax                               |   |                        | (95      | )                           |   | (319 | ) |

----

**GREENE          COUNTY BANCSHARES, INC.**

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June          30, 2005**

**Unaudited**

**(Amounts          in thousands, except share and per share data) **

----

**NOTE      1 - PRINCIPLES OF CONSOLIDATION**

**NOTE      2 - STOCK COMPENSATION**

|                                                                                                                                                            |   | **Three                Months Ended****June                30,** |   | **Six                Months Ended****June                30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                                                                                                            |   | **2005**                                                         |   | **2004**                                                       |   | **2005** |   | **2004** |   |
|                                                                                                                                                            |   |                                                             |   |                                                           |   |   |   |   |   |
| Net                income:                                                                                                                                      |   |                                                             |   |                                                           |   |   |   |   |   |
| As                reported                                                                                                                                      |   | $                                                                | 3,714  |                                                           | $      | 3,275 |   | $ | 6,649 |   | $ | 6,127 |   |
| Add:                Stock-based employee compensation expense                included in reported net income, net                of related tax effects         |   |                                                             | 4      |                                                           |   | 10 |   |   | 7 |   |   | 19 |   |
| Deduct:                Total stock-based compensation expense determined                under fair value-based method for all awards,                net of tax |   |                                                             | (40    | )                                                              |   | (47 | ) |   | (130 | ) |   | (94 | ) |
| Pro                forma                                                                                                                                        |   | $                                                                | 3,678  |                                                           | $      | 3,238 |   | $ | 6,526 |   | $ | 6,052 |   |
|                                                                                                                                                            |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |
| Earnings                per common share:                                                                                                                       |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |
| As                reported                                                                                                                                      |   | $                                                                | 0.49   |                                                           | $      | 0.43 |   | $ | 0.87 |   | $ | 0.80 |   |
| Pro                forma                                                                                                                                        |   | $                                                                | 0.48   |                                                           | $      | 0.42 |   | $ | 0.85 |   | $ | 0.78 |   |
|                                                                                                                                                            |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |
| Diluted                earnings per common share:                                                                                                               |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |
| As                reported                                                                                                                                      |   | $                                                                | 0.48   |                                                           | $      | 0.42 |   | $ | 0.86 |   | $ | 0.79 |   |
| Pro                forma                                                                                                                                        |   | $                                                                | 0.47   |                                                           | $      | 0.42 |   | $ | 0.84 |   | $ | 0.78 |   |
|                                                                                                                                                            |   |                                                             |   |                                                           |   |   |   |   |   |   |   |   |   |

----

**GREENE        COUNTY BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June        30, 2005**

**Unaudited**

**(Amounts        in thousands, except share and per share data)**

----

**NOTE      3 - LOANS (NET)**

|                                            |   | June                  30, |      | December                  31, |   |
|-------------------------------------------------|--------|---------------------------|-----------|-------------------------------|--------|
|                                            |   | 2005                      |      | 2004                          |   |
|                                            |   |                      |      |                          |   |
| Commercial                                      |   | $                         | 203,469   |                          | $      | 165,975 |   |
| Commercial                  real estate         |   |                      | 567,211   |                          |   | 484,088 |   |
| Residential                  real estate        |   |                      | 312,462   |                          |   | 319,713 |   |
| Consumer                                        |   |                      | 83,287    |                          |   | 82,532 |   |
| Other                                           |   |                      | 2,895     |                          |   | 4,989 |   |
|                                            |   |                      | 1,169,324 |                          |   | 1,057,297 |   |
|                                            |   |                      |      |                          |   |   |   |
| Less:                  Unearned interest income |   |                      | (10,680   | )                             |   | (10,430 | ) |
| Allowance                  for loan losses      |   |                      | (16,880   | )                             |   | (15,721 | ) |
|                                            |   |                      |      |                          |   |   |   |
| Net                  Loans                      |   | $                         | 1,141,764 |                          | $      | 1,031,146 |   |
|                                            |   |                      |      |                          |   |   |   |

|                                             |   | **June                  30,****2005** |   | **December                  31,****2004** |   |
|--------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------------|--------|
|                                             |   |                                  |   |                                      |   |
| Balance                  at beginning of year    |   | $                                     | 15,721 |                                      | $      | 14,564 |   |
| Add                  (deduct):                   |   |                                  |   |                                      |   |   |   |
| Reserve                  acquired in acquisition |   |                                  | -      |                                      |   | 363 |   |
| Provision                                        |   |                                  | 2,682  |                                      |   | 5,836 |   |
| Loans                  charged off               |   |                                  | (2,481 | )                                         |   | (6,980 | ) |
| Recoveries                  of loans charged off |   |                                  | 958    |                                      |   | 1,938 |   |
| Ending                  balance                  |   | $                                     | 16,880 |                                      | $      | 15,721 |   |
|                                             |   |                                  |   |                                      |   |   |   |

|                                                     |   | **June                  30,****2005** |   | **December                  31,****2004** |   |
|----------------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------------|--------|
|                                                     |   |                                  |   |                                      |   |
| Loans                  past due 90 days still on accrual |   | $                                     | 384    |                                      | $      | 664 |   |
| Nonaccrual                  loans                        |   |                                  | 6,770  |                                      |   | 6,242 |   |
| Total                                                    |   | $                                     | 7,154  |                                      | $      | 6,906 |   |
|                                                     |   |                                  |   |                                      |   |   |   |

----

**GREENE        COUNTY BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June        30, 2005**

**Unaudited**

**(Amounts        in thousands, except share and per share data)**

----

**NOTE        4 - EARNINGS PER SHARE OF COMMON STOCK**

|                                                                                                   |   | **Three                  Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                   |   | **2005**                                         |   | **2004** |   |
|                                                                                                   |   | **Income**                                       |   | **Shares** |   | **Income** |   | **Shares** |   |
|                                                                                                   |   | **(Numerator)**                                  |   | **(Denominator)** |   | **(Numerator)** |   | **(Denominator)** |   |
| **Basic                  EPS**                                                                         |   |                                             |   |   |   |   |   |   |   |
| Income                  available to common shareholders                                               |   | $                                                | 3,714  |   |   | 7,650,884 |   | $ | 3,275 |   |   | 7,656,832 |   |
|                                                                                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Effect                  of dilutive securities**                                                     |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Stock                  options outstanding                                                             |   |                                             | --     |   |   | 95,101 |   |   | -- |   |   | 57,134 |   |
|                                                                                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  EPS**                                                                       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                    available to common shareholders plus assumed                    conversions |   | $                                                | 3,714  |   |   | 7,745,985 |   | $ | 3,275 |   |   | 7,713,966 |   |
|                                                                                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                                       |   | **Six                    Months Ended June 30,** |   |
|------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                                                                       |   | **2005**                                         |   | **2004** |   |
|                                                                                                       |   | **Income**                                       |   | **Shares** |   | **Income** |   | **Shares** |   |
|                                                                                                       |   | **(Numerator)**                                  |   | **(Denominator)** |   | **(Numerator)** |   | **(Denominator)** |   |
|                                                                                                       |   |                                             |   |   |   |   |   |   |   |
| **Basic                    EPS**                                                                           |   |                                             |   |   |   |   |   |   |   |
| Income                    available to common shareholders                                                 |   | $                                                | 6,649  |   |   | 7,649,982 |   | $ | 6,127 |   |   | 7,661,593 |   |
|                                                                                                       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Effect                    of dilutive securities**                                                       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options outstanding                                                               |   |                                             | --     |   |   | 95,148 |   |   | -- |   |   | 58,772 |   |
|                                                                                                       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                    EPS**                                                                         |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Income                      available to common shareholders plus assumed                      conversions |   | $                                                | 6,649  |   |   | 7,745,130 |   | $ | 6,127 |   |   | 7,720,365 |   |
|                                                                                                       |   |                                             |   |   |   |   |   |   |   |   |   |   |   |

----

**GREENE        COUNTY BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June        30, 2005**

**Unaudited**

**(Amounts        in thousands, except share and per share data)**

----

**NOTE        5 - SEGMENT INFORMATION**

| **Three                  months ended June 30, 2005** |   | **Bank** |      | **Other                  Segments** |   | **Holding                  Company** |   | **Eliminations** |   | **Totals** |   |
|-------------------------------------------------------|--------|----------|-----------|-------------------------------------|--------|--------------------------------------|--------|------------------|--------|------------|--------|
|                                                  |   |     |      |                                |   |                                 |   |             |   |       |   |
| Net                  interest income (expense)        |   | $        | 12,698    |                                | $      | 1,547                                |   | $                | (173   | )          | $      | -- |   | $ | 14,072 |   |
| Provision                  for loan losses            |   |     | 738       |                                |   | 322                                  |   |             | --     |       |   | -- |   |   | 1,060 |   |
| Noninterest                  income                   |   |     | 3,163     |                                |   | 516                                  |   |             | 6      |       |   | (222 | ) |   | 3,463 |   |
| Noninterest                  expense                  |   |     | 9,389     |                                |   | 1,086                                |   |             | 169    |       |   | (222 | ) |   | 10,422 |   |
| Income                  tax expense (benefit)         |   |     | 2,212     |                                |   | 257                                  |   |             | (130   | )          |   | -- |   |   | 2,339 |   |
|  **Segment                  profit**             |   | $        | 3,522     |                                | $      | 398                                  |   | $                | (206   | )          | $      | -- |   | $ | 3,714 |   |
| **Segment                  assets at June 30, 2005**  |   | $        | 1,340,531 |                                | $      | 31,272                               |   | $                | 2,391  |       | $      | -- |   | $ | 1,374,194 |   |
|                                                  |   |     |      |                                |   |                                 |   |             |   |       |   |   |   |   |   |   |

| **Three                    months ended June 30, 2004** |   | **Bank** |      | **Other                    Segments** |   | **Holding                    Company** |   | **Eliminations** |   | **Totals** |   |
|---------------------------------------------------------|--------|----------|-----------|---------------------------------------|--------|----------------------------------------|--------|------------------|--------|------------|--------|
|                                                    |   |     |      |                                  |   |                                   |   |             |   |       |   |
| Net                    interest income (expense)        |   | $        | 10,504    |                                  | $      | 1,600                                  |   | $                | (121   | )          | $      | -- |   | $ | 11,983 |   |
| Provision                    for loan losses            |   |     | 783       |                                  |   | 379                                    |   |             | --     |       |   | -- |   |   | 1,162 |   |
| Noninterest                    income                   |   |     | 2,867     |                                  |   | 391                                    |   |             | 7      |       |   | (195 | ) |   | 3,070 |   |
| Noninterest                    expense                  |   |     | 7,431     |                                  |   | 1,140                                  |   |             | 198    |       |   | (195 | ) |   | 8,574 |   |
| Income                    tax expense (benefit)         |   |     | 1,974     |                                  |   | 185                                    |   |             | (117   | )          |   | -- |   |   | 2,042 |   |
|  **Segment                    profit**             |   | $        | 3,183     |                                  | $      | 287                                    |   | $                | (195   | )          | $      | -- |   | $ | 3,275 |   |
| **Segment                    assets at June 30, 2004**  |   | $        | 1,091,319 |                                  | $      | 31,803                                 |   | $                | 1,880  |       | $      | -- |   | $ | 1,125,002 |   |
|                                                    |   |     |      |                                  |   |                                   |   |             |   |       |   |   |   |   |   |   |

| **Six                      months ended June 30, 2005** |   | **Bank** |   | **Other                      Segments** |   | **Holding                      Company** |   | **Eliminations** |   | **Totals** |   |
|---------------------------------------------------------|--------|----------|--------|-----------------------------------------|--------|------------------------------------------|--------|------------------|--------|------------|--------|
|                                                    |   |     |   |                                    |   |                                     |   |             |   |       |   |
| Net                      interest income (expense)      |   | $        | 24,687 |                                    | $      | 3,024                                    |   | $                | (312   | )          | $      | -- |   | $ | 27,399 |   |
| Provision                      for loan losses          |   |     | 2,027  |                                    |   | 655                                      |   |             | --     |       |   | -- |   |   | 2,682 |   |
| Noninterest                      income                 |   |     | 5,943  |                                    |   | 918                                      |   |             | 189    |       |   | (411 | ) |   | 6,639 |   |
| Noninterest                      expense                |   |     | 18,627 |                                    |   | 2,184                                    |   |             | 297    |       |   | (411 | ) |   | 20,697 |   |
| Income                      tax expense (benefit)       |   |     | 3,789  |                                    |   | 433                                      |   |             | (212   | )          |   | -- |   |   | 4,010 |   |
|  **Segment                      profit**           |   | $        | 6,187  |                                    | $      | 670                                      |   | $                | (208   | )          | $      | -- |   | $ | 6,649 |   |
|                                                    |   |     |   |                                    |   |                                     |   |             |   |       |   |   |   |   |   |   |

| **Six                      months ended June 30, 2004** |   | **Bank** |   | **Other                      Segments** |   | **Holding                      Company** |   | **Eliminations** |   | **Totals** |   |
|---------------------------------------------------------|--------|----------|--------|-----------------------------------------|--------|------------------------------------------|--------|------------------|--------|------------|--------|
|                                                    |   |     |   |                                    |   |                                     |   |             |   |       |   |
| Net                      interest income (expense)      |   | $        | 20,898 |                                    | $      | 3,191                                    |   | $                | (226   | )          | $      | -- |   | $ | 23,863 |   |
| Provision                      for loan losses          |   |     | 1,836  |                                    |   | 849                                      |   |             | --     |       |   | -- |   |   | 2,685 |   |
| Noninterest                      income                 |   |     | 5,579  |                                    |   | 791                                      |   |             | 174    |       |   | (380 | ) |   | 6,164 |   |
| Noninterest                      expense                |   |     | 15,207 |                                    |   | 2,280                                    |   |             | 418    |       |   | (380 | ) |   | 17,525 |   |
| Income                      tax expense (benefit)       |   |     | 3,577  |                                    |   | 333                                      |   |             | (220   | )          |   | -- |   |   | 3,690 |   |
|  **Segment                      profit**           |   | $        | 5,857  |                                    | $      | 520                                      |   | $                | (250   | )          | $      | -- |   | $ | 6,127 |   |
|                                                    |   |     |   |                                    |   |                                     |   |             |   |       |   |   |   |   |   |   |

----

**GREENE        COUNTY BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June        30, 2005**

**Unaudited**

**(Amounts        in thousands, except share and per share data)**

----

**NOTE        5 - SEGMENT INFORMATION**

**Asset      Quality Ratios**

| **As                  of and for the period ended June 30, 2005**                                                 |   | **Bank** |   | **Other** |   | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|----------|--------|-----------|--------|-----------|--------|
|                                                                                                              |   |     |   |      |   |      |   |
| Nonperforming                  loans as a percentage of total loans net of unearned                  income       |   |     | 0.59   | %         |   | 1.29      | %      |   | 0.62 | % |
| Nonperforming                  assets as a percentage of total assets                                             |   |     | 0.64   | %         |   | 1.97      | %      |   | 0.69 | % |
| Allowance                  for loan losses as a percentage of total loans net of unearned                  income |   |     | 1.25   | %         |   | 7.71      | %      |   | 1.46 | % |
| Allowance                  for loan losses as a percentage of nonperforming assets                                |   |     | 163.27 | %         |   | 369.92    | %      |   | 177.74 | % |
| Annualized                  net charge-offs to average total loans, net of unearned                  income       |   |     | 0.16   | %         |   | 4.19      | %      |   | 0.27 | % |
|                                                                                                              |   |     |   |      |   |      |   |   |   |   |

| **As                    of and for the period ended June 30, 2004**                                                |   | **Bank** |   | **Other** |   | **Total** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|----------|--------|-----------|--------|-----------|--------|
|                                                                                                               |   |     |   |      |   |      |   |
| Nonperforming                    loans as a percentage of total loans net of unearned                    income    |   |     | 0.52   | %         |   | 2.23      | %      |   | 0.59 | % |
| Nonperforming                    assets as a percentage of total assets                                            |   |     | 0.74   | %         |   | 3.24      | %      |   | 0.84 | % |
| Allowance                    for loan losses as a percentage of total loans net unearned                    income |   |     | 1.24   | %         |   | 8.55      | %      |   | 1.51 | % |
| Allowance                    for loan losses as a percentage of nonperforming assets                               |   |     | 145.67 | %         |   | 254.22    | %      |   | 158.23 | % |
| Annualized                    net charge-offs to average total loans, net of unearned                    income    |   |     | 0.29   | %         |   | 5.62      | %      |   | 0.48 | % |
|                                                                                                               |   |     |   |      |   |      |   |   |   |   |

| **As                    of and for the year ended December 31, 2004**                                              |   | **Bank** |   | **Other** |   | **Total** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|----------|--------|-----------|--------|-----------|--------|
|                                                                                                               |   |     |   |      |   |      |   |
| Nonperforming                    loans as a percentage of total loans net of unearned                    income    |   |     | 0.60   | %         |   | 2.22      | %      |   | 0.66 | % |
| Nonperforming                    assets as a percentage of total assets                                            |   |     | 0.61   | %         |   | 2.90      | %      |   | 0.69 | % |
| Allowance                    for loan losses as a percentage of total loans net unearned                    income |   |     | 1.27   | %         |   | 7.77      | %      |   | 1.50 | % |
| Allowance                    for loan losses as a percentage of nonperforming assets                               |   |     | 176.54 | %         |   | 255.69    | %      |   | 185.56 | % |
| Net                    charge-offs to average total loans, net of unearned income                                  |   |     | 0.35   | %         |   | 5.04      | %      |   | 0.51 | % |
|                                                                                                               |   |     |   |      |   |      |   |   |   |   |

----

**GREENE        COUNTY BANCSHARES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June        30, 2005**

**Unaudited**

**(Amounts        in thousands, except share and per share data)**

----

**NOTE        6 - GOODWILL AND OTHER INTANGIBLE ASSETS**

**Goodwill**

**Core      deposit and other intangibles**

| 2005  |   | $      | 752   |   |
|-------|--------|--------|-------|--------|
| 2006  |   |   | 642   |   |
| 2007  |   |   | 642   |   |
| 2008  |   |   | 642   |   |
| 2009  |   |   | 642   |   |
| Total |   | $      | 3,320 |   |

**NOTE      7 - SUBORDINATED DEBENTURES**

**NOTE        8 - PENDING ACQUISITION**

----

| **ITEM                2.** | **MANAGEMENT’S                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                OPERATIONS** |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------|

**Forward-Looking      Statements**

**This      Quarterly Report on Form 10-Q contains forward-looking statements within the      meaning of Section 27A of the Securities Act of 1933 and Section 21E of the      Securities Exchange Act of 1934. Forward-looking statements, which are based      on      assumptions and estimates and describe our future plans, strategies and      expectations, are generally identifiable by the use of the words“anticipate,”“will,”“believe,”“may,”“could,”“would,”“should,”“estimate,”“expect,”“intend,”“seek,”      or similar expressions. These forward-looking statements may address, among      other things, the Company's business plans, objectives or goal for future      operations or expansion, the Company's forecasted revenues, earnings, assets      or      other measures of performance, or estimates of risks and future costs and      benefits. Although these statements reflect the Company's good faith belief      based on current expectations, estimates and projections, they are subject      to      risks, uncertainties and assumptions and are not guarantees of future      performance. Important factors that could cause actual results to differ      materially from the forward-looking statements we make in this Quarterly Report      on Form 10-Q include, but are not limited to, the      following:**

|   | **●** | **the                Company's potential growth, including its entrance or expansion into                new                markets, and the need for sufficient capital to support that                growth;** |
|--------|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **●** | **changes                in the quality or composition of the Company's loan or investment                portfolios, including adverse developments in borrower industries                or in                the repayment ability of individual borrowers or                issuers;** |
|--------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **●** | **an                insufficient allowance for loan losses as a result of inaccurate                assumptions;** |
|--------|-------------|--------------------------------------------------------------------------------------------------------------------|

|   | **●** | **changes                in interest rates, yield curves and interest rate spread                relationships;** |
|--------|-------------|-------------------------------------------------------------------------------------------------------------------|

|   | **●** | **the                  strength of the economies in the Company's target market areas,                  as well as                  general economic, market or business conditions;** |
|--------|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | **●** | **changes                in demand for loan products and financial                services;** |
|--------|-------------|-----------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | **●** | **increased                competition or market                concentration;** |
|--------|-------------|----------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | **●** | **concentration                of credit exposure;** |
|--------|-------------|------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | **●** | **new                state or federal legislation, regulations, or the initiation or outcome                of                litigation; and** |
|--------|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

|   | **●** | **other                circumstances, many of which may be beyond the Company's control.** |
|--------|-------------|--------------------------------------------------------------------------------------------|

|   |   |   |
|--------|--------|--------|

**If      one or more of these risks or uncertainties materialize, or if any of the      Company's underlying assumptions prove incorrect, the Company's actual results,      performance or achievements may vary materially from future results, performance      or achievements expressed or implied by these forward-looking statements. All      forward-looking statements included in this Quarterly Report on Form 10-Q are      expressly qualified in their entirety by the cautionary statements in this      section. The Company does not intend to and assumes no responsibility for      updating or revising any forward-looking statements contained in or incorporated      by reference into this Quarterly Report on Form 10-Q, whether as a result of      new      information, future events or otherwise.**

----

**Presentation      of Amounts**

**All      dollar amounts set forth below, other than per-share amounts, are in thousands      unless otherwise noted. **

**General**

**Growth      Strategy **

**Overview**

----

**Critical      Accounting Policies and Estimates**

----

**Changes      in Results of Operations**

**Net      income. **

**Net      Interest Income**

----

|                                                                                                |   | **Three                Months Ended** |      |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|
|                                                                                                |   | **June                30,**           |      |
|                                                                                                |   | **2005**                              |      | **2004** |   |
|                                                                                                |   | Average                               |      |   |   | Average |   | Average |   |   |   | Average |   |
|                                                                                                |   | Balance                               |      | Interest |   | Rate |   | Balance |   | Interest |   | Rate |   |
| **Interest-earning                assets:**                                                         |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                               |   | $                                     | 1,140,537 |   | $ | 19,851 |   |   | 6.98 | % | $ | 984,417 |   | $ | 15,522 |   |   | 6.34 | % |
| Investment                securities                                                                |   |                                  | 60,691    |   |   | 592 |   |   | 3.91 | % |   | 39,203 |   |   | 339 |   |   | 3.48 | % |
| Other                short-term investments                                                         |   |                                  | 33,265    |   |   | 260 |   |   | 3.13 | % |   | 3,560 |   |   | 8 |   |   | 0.90 | % |
| Total                interest-earning assets                                                        |   |                                  | 1,234,493 |   | $ | 20,703 |   |   | 6.73 | % |   | 1,027,180 |   | $ | 15,869 |   |   | 6.21 | % |
| Noninterest                earning assets                                                           |   |                                  | 104,107   |   |   |   |   |   |   |   |   | 96,182 |   |   |   |   |   |   |   |
| Total                assets                                                                         |   | $                                     | 1,338,600 |   |   |   |   |   |   |   | $ | 1,123,362 |   |   |   |   |   |   |   |
|                                                                                                |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing                liabilities:**                                                    |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                           |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Now                accounts, money market and savings                                               |   | $                                     | 401,441   |   | $ | 1,161 |   |   | 1.16 | % | $ | 345,250 |   | $ | 403 |   |   | 0.47 | % |
| Time                Deposits                                                                        |   |                                  | 598,470   |   |   | 4,340 |   |   | 2.91 | % |   | 465,914 |   |   | 2,603 |   |   | 2.25 | % |
| Total                interest-bearing deposits                                                      |   | $                                     | 999,911   |   | $  | 5,501 |   |   | 2.21 | % | $  | 811,164 |   | $  | 3,006 |   |   | 1.49 | % |
| Securities                sold under repurchase agreements and                short-term borrowings |   |                                  | 15,014    |   |   | 95 |   |   | 2.54 | % |   | 16,026 |   |   | 34 |   |   | 0.85 | % |
| Notes                payable                                                                        |   |                                  | 81,000    |   |   | 1,035 |   |   | 5.13 | % |   | 72,621 |   |   | 846 |   |   | 4.69 | % |
| Total                interest-bearing liabilities                                                   |   | $                                | 1,095,925 |   | $ | 6,631 |   |   | 2.43 | % | $  | 899,811 |   | $ | 3,886 |   |   | 1.74 | % |
| **Noninterest                bearing liabilities:**                                                 |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                      |   |                                  | 116,436   |   |   |   |   |   |   |   |   | 104,966 |   |   |   |   |   |   |   |
| Other                liabilities                                                                    |   |                                  | 12,942    |   |   |   |   |   |   |   |   | 12,819 |   |   |   |   |   |   |   |
| Total                noninterest bearing liabilities                                                |   |                                  | 129,378   |   |   |   |   |   |   |   |   | 117,785 |   |   |   |   |   |   |   |
| Total                liabilities                                                                    |   |                                  | 1,225,303 |   |   |   |   |   |   |   |   | 1,017,596 |   |   |   |   |   |   |   |
| Shareholders’                equity                                                           |   |                                  | 113,297   |   |   |   |   |   |   |   |   | 105,766 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’ equity                                     |   | $                                     | 1,338,600 |   |   |   |   |   |   |   | $ | 1,123,362 |   |   |   |   |   |   |   |
|                                                                                                |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                             |   |                                  |      |   | $ | 14,072 |   |   |   |   |   |   |   | $ | 11,983 |   |   |   |   |
|                                                                                                |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                rate spread                                                                 |   |                                  |      |   |   |   |   |   | 4.30 | % |   |   |   |   |   |   |   | 4.48 | % |
|                                                                                                |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                yield on interest-earning assets                                                 |   |                                  |      |   |   |   |   |   | 4.57 | % |   |   |   |   |   |   |   | 4.69 | % |

----

|                                                                                               |   | **Six                Months Ended** |      |
|----------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                                                               |   | **June                30,**         |      |
|                                                                                               |   | **2005**                            |      | **2004** |   |
|                                                                                               |   | Average                             |      |   |   | Average |   | Average |   |   |   | Average |   |
|                                                                                               |   | Balance                             |      | Interest |   | Rate |   | Balance |   | Interest |   | Rate |   |
| **Interest-earning                assets:**                                                        |   |                                |      |   |   |   |   |   |   |   |   |   |   |
| Loans                                                                                              |   | $                                   | 1,110,231 |   | $ | 37,930 |   |   | 6.89 | % | $ | 976,613 |   | $ | 31,047 |   |   | 6.39 | % |
| Investment                securities                                                               |   |                                | 55,874    |   |   | 1,065 |   |   | 3.84 | % |   | 41,145 |   |   | 725 |   |   | 3.54 | % |
| Other                short-term investments                                                        |   |                                | 33,694    |   |   | 443 |   |   | 2.65 | % |   | 5,830 |   |   | 27 |   |   | 0.93 | % |
| Total                interest-earning assets                                                       |   |                                | 1,199,799 |   | $ | 39,438 |   |   | 6.63 | % |   | 1,023,588 |   | $ | 31,799 |   |   | 6.25 | % |
| Noninterest                earning assets                                                          |   |                                | 103,339   |   |   |   |   |   |   |   |   | 99,989 |   |   |   |   |   |   |   |
| Total                assets                                                                        |   | $                                   | 1,303,138 |   |   |   |   |   |   |   | $ | 1,123,577 |   |   |   |   |   |   |   |
|                                                                                               |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing                liabilities:**                                                   |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                                                          |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Now                accounts, money market and savings                                              |   | $                                   | 395,246   |   | $ | 2,027 |   |   | 1.03 | % | $ | 340,165 |   | $ | 805 |   |   | 0.48 | % |
| Time                Deposits                                                                       |   |                                | 561,428   |   |   | 7,736 |   |   | 2.78 | % |   | 474,379 |   |   | 5,387 |   |   | 2.28 | % |
| Total                interest-bearing deposits                                                     |   | $                              | 956,674   |   | $  | 9,763 |   |   | 2.06 | % | $ | 814,544 |   | $ | 6,192 |   |   | 1.53 | % |
| Securities                sold under repurchase agreement and                short-term borrowings |   |                                | 16,712    |   |   | 184 |   |   | 2.22 | % |   | 16,826 |   |   | 67 |   |   | 0.80 | % |
| Notes                payable                                                                       |   |                                | 86,740    |   |   | 2,092 |   |   | 4.86 | % |   | 71,852 |   |   | 1,677 |   |   | 4.69 | % |
| Total                interest-bearing liabilities                                                  |   | $                              | 1,060,126 |   | $ | 12,039 |   |   | 2.29 | % | $  | 903,222 |   | $ | 7,936 |   |   | 1.77 | % |
| **Noninterest                bearing liabilities:**                                                |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                deposits                                                                     |   |                                | 116,644   |   |   |   |   |   |   |   |   | 102,755 |   |   |   |   |   |   |   |
| Other                liabilities                                                                   |   |                                | 14,235    |   |   |   |   |   |   |   |   | 12,794 |   |   |   |   |   |   |   |
| Total                noninterest bearing liabilities                                               |   |                                | 130,879   |   |   |   |   |   |   |   |   | 115,549 |   |   |   |   |   |   |   |
| Total                liabilities                                                                   |   |                                | 1,191,005 |   |   |   |   |   |   |   |   | 1,018,771 |   |   |   |   |   |   |   |
| Shareholders’                equity                                                          |   |                                | 112,133   |   |   |   |   |   |   |   |   | 104,806 |   |   |   |   |   |   |   |
| Total                liabilities and shareholders’ equity                                    |   | $                                   | 1,303,138 |   |   |   |   |   |   |   | $ | 1,123,577 |   |   |   |   |   |   |   |
|                                                                                               |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                                                 |   |                                |      |   | $ | 27,399 |   |   |   |   |   |   |   | $ | 23,863 |   |   |   |   |
|                                                                                               |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                rate spread                                                                |   |                                |      |   |   |   |   |   | 4.34 | % |   |   |   |   |   |   |   | 4.48 | % |
|                                                                                               |   |                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                yield on interest-earning assets                                                |   |                                |      |   |   |   |   |   | 4.61 | % |   |   |   |   |   |   |   | 4.69 | % |

----

**Provision      for Loan Losses. **

** **

**Noninterest      Income. **

----

**Noninterest      Expense.**

**Income      Taxes. **

**Changes      in Financial Condition**

----

**Liquidity      and Capital Resources**

**Liquidity.      **

**Capital      Resources. **

----

|                                     |   | RequiredMinimumRatio |   | Requiredto                beWell                Capitalized |   | Bank   |   | Company |   |
|------------------------------------------|--------|----------------------|--------|-------------------------------------------------------------|--------|--------|--------|---------|--------|
| Tier                1 risk-based capital |   |                 | 4.00   | %                                                           |   | 6.00   | %      |    | 9.02   | % |   | 8.94 | % |
| Total                risk-based capital  |   |                 | 8.00   | %                                                           |   | 10.00  | %      |    | 10.27  | % |   | 10.19 | % |
| Leverage                Ratio            |   |                 | 4.00   | %                                                           |   | 5.00   | %      |    | 7.93   | % |   | 7.85 | % |
|                                     |   |                 |   |                                                        |   |   |   |    |   |   |   |   |   |

----

**Off-Balance      Sheet Arrangements**

|                                                       |   | Less                than 1                Year |    | 1-3                Years |   | 3-5                Years |   | More                than 5                Years |   | Total  |   |
|------------------------------------------------------------|--------|------------------------------------------------|---------|--------------------------|--------|--------------------------|--------|-------------------------------------------------|--------|--------|--------|
| Commitments                to make loans - fixed      |   | $                                              | 10,904  |                     | $      | --                       |   | $                                               | --     |   | $      | -- |   | $ | 10,904 |   |
| Commitments                to make loans - variable.  |   |                                           | 65,144  |                     |   | --                       |   |                                            | --     |   |   | -- |   |   | 65,144 |   |
| Unused                lines of credit                 |   |                                           | 191,573 |                     |   | 38,078                   |   |                                            | 4,689  |   |   | 39,085 |   |   | 273,425 |   |
| Letters                of credit                      |   |                                           | 13,320  |                     |   | 14,167                   |   |                                            | 1,003  |   |   | 165 |   |   | 28,655 |   |
| Total                                                 |   | $                                              | 280,941 |                     | $      | 52,245                   |   | $                                               | 5,692  |   | $      | 39,250 |   | $ | 378,128 |   |
|                                                       |   |                                           |    |                     |   |                     |   |                                            |   |   |   |   |   |   |   |   |

**Disclosure      of Contractual Obligations**

|                                                    |   | Less                than 1                Year |    | 1-3                Years |   | 3-5                Years |   | More                than 5                Years |    | Total  |   |
|---------------------------------------------------------|--------|------------------------------------------------|---------|--------------------------|--------|--------------------------|--------|-------------------------------------------------|---------|--------|--------|
| Deposits                without a stated maturity  |   | $                                              | 520,480 |                     | $      | --                       |   | $                                               | --      |   | $      | -- |   | $ | 520,480 |   |
| Certificate                of deposits             |   |                                           | 438,441 |                     |   | 139,343                  |   |                                            | 49,589  |   |   | 581 |   |   | 627,954 |   |
| Repurchase                agreements               |   |                                           | 16,426  |                     |   | --                       |   |                                            | --      |   |   | -- |   |   | 16,426 |   |
| FHLB                advances and notes payable     |   |                                           | 369     |                     |   | 2,624                    |   |                                            | 60,362  |   |   | 7,154 |   |   | 70,509 |   |
| Subordinated                debentures             |   |                                           | --      |                     |   | --                       |   |                                            | --      |   |   | 13,403 |   |   | 13,403 |   |
| Operating                lease obligations         |   |                                           | 568     |                     |   | 858                      |   |                                            | 250     |   |   | 136 |   |   | 1,812 |   |
| Deferred                compensation               |   |                                           | 412     |                     |   | 1,170                    |   |                                            | --      |   |   | 710 |   |   | 2,292 |   |
| Purchase                obligations                |   |                                           | 43      |                     |   | --                       |   |                                            | --      |   |   | -- |   |   | 43 |   |
| Total                                              |   | $                                              | 976,739 |                     | $      | 143,995                  |   | $                                               | 110,201 |   | $      | 21,984 |   | $ | 1,252,919 |   |
|                                                    |   |                                           |    |                     |   |                     |   |                                            |    |   |   |   |   |   |   |   |

----

**Effect      of New Accounting Standards**

*Accounting      for Stock-Based Compensation*

| **ITEM              3.** | **QUANTITATIVE                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**  |
|--------------------------|-------------------------------------------------------------------------------------|

| **ITEM              4.** | **CONTROLS                AND PROCEDURES** |
|--------------------------|--------------------------------------------|

**Evaluation      of Disclosure Controls and Procedures**

**Changes      in Internal Control Over Financial Reporting**

**PART      II - OTHER INFORMATION**

| **Item              1.** | **Legal                Proceedings** |
|--------------------------|--------------------------------------|

*Jimmy      Holland Boyd and Spring City & Co. v. Town of Jonesborough, Tennessee, et      al. *

----

| **Item                2.** | **Unregistered                Sales of Equity Securities and Use of Proceeds** |
|----------------------------|--------------------------------------------------------------------------------|

| **Item              3.** | **Defaults                upon Senior Securities** |
|--------------------------|----------------------------------------------------|

| **Item              4.** | **Submission                of Matters to a Vote of Security                Holders** |
|--------------------------|---------------------------------------------------------------------------------------|

|                            |   | **Votes** |      |
|---------------------------------|--------|-----------|-----------|
|                            |   |      |      |   |   | **Broker** |   |
|                            |   | **For**   |      | **Withheld** |   | **Non-Votes** |   |
| Bruce                Campbell   |   |      | 5,398,104 |   |   | 43,634 |   |   | -- |   |
| Robin                Haynes     |   |      | 5,437,029 |   |   | 4,709 |   |   | -- |   |
| Jerald                K. Jaynes |   |      | 5,390,023 |   |   | 51,715 |   |   | -- |   |
| R.                Stan Puckett  |   |      | 5,390,101 |   |   | 51,637 |   |   | -- |   |
| John                Tolsma      |   |      | 5,431,812 |   |   | 9,926 |   |   | -- |   |
|                            |   |      |      |   |   |   |   |   |   |   |

| Mr. Charles Brooks            | 2006   |
|-------------------------------|--------|
| Mr. W.T. Daniels              | 2006   |
| Mr. Charles H. Whitfield, Jr. | 2006   |
|                          |   |
| Mr. Phil M. Bachman      | 2007   |
| Mr. Terry Leonard             | 2007   |
| Mr. Ronald E. Mayberry        | 2007   |
| Mr. Kenneth R. Vaught         | 2007   |
|                          |   |

| **Item              5.** | **Other                Information** |
|--------------------------|--------------------------------------|

----

| **Item                6.** | **Exhibits** |
|----------------------------|--------------|

|   | Exhibit                No. 2.1  | Branch                Purchase and Assumption Agreement dated July 20, 2005 by and between                Greene County Bank and Old National Bank (Pursuant to Item 601(b)(2)                of                Regulation S-K the schedules and exhibits to this agreement have                been                omitted from this filing)* |
|--------|---------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                            |                                                                                                                                                                                                                                                                                                                                           |
|   | Exhibit                No. 31.1 | Chief                Executive Officer Certification Pursuant to Rule                13a-14(a)/15d-14(a)                                                                                                                                                                                                                                       |
|   |                            |                                                                                                                                                                                                                                                                                                                                           |
|   | Exhibit                No. 31.2 | Chief                Financial Officer Certification Pursuant to Rule                13a-14(a)/15d-14(a)                                                                                                                                                                                                                                       |
|   |                            |                                                                                                                                                                                                                                                                                                                                           |
|   | Exhibit                No. 32.1 | Chief                Executive Officer Certification Pursuant to 18 U.S.C. Section 1350,                as                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                                                                                                                     |
|   |                            |                                                                                                                                                                                                                                                                                                                                           |
|   | Exhibit                No. 32.2 | Chief                Financial Officer Certification Pursuant to 18 U.S.C. Section 1350,                as                Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002                                                                                                                                     |
|   |                            |                                                                                                                                                                                                                                                                                                                                           |

----

| * | Portions                    of this exhibit have been omitted and are subject to a request                    for                    confidential treatment pursuant to Rule 24b-2 under the Securities                    Exchange Act of 1934, as amended. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                     |                                                                                                                                                |                                    |
|------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
|                                     | **GREENE                  COUNTY BANCSHARES, INC.**(Registrant)                                                                                     |
|                                |                                                                                                                                           |                               |
| Date: August                1, 2005 | By:                                                                                                                                       | /s/ R.                Stan Puckett |
|                                     |                                                                                                                                                     |
|                                     | R.                  Stan PuckettChairman of the Board and Chief Executive                  Officer(Duly authorized                  representative) |

|                                     |                                                                                                                                                                                                                       |                                        |
|------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------|
| Date: August                1, 2005 | By:                                                                                                                                                                                                              | /s/ William                F. Richmond |
|                                     |                                                                                                                                                                                                                            |
|                                     | William                  F. RichmondSenior Vice President, Chief Financial                  Officer(Principal financial and accounting officer)                  and                  Assistant                  Secretary |

----

**EXHIBIT      INDEX**

|   | Exhibit                  No. 2.1  | Branch                  Purchase and Assumption Agreement dated July 20, 2005 by and between                  Greene County Bank and Old National Bank (Pursuant to Item 601(b)(2)                  of                  Regulation S-K the schedules and exhibits to this agreement have                  been                  omitted from this filing)* |
|--------|-----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                              |                                                                                                                                                                                                                                                                                                                                                       |
|   | Exhibit                  No. 31.1 | Chief                  Executive Officer Certification Pursuant to Rule                  13a-14(a)/15d-14(a)                                                                                                                                                                                                                                               |
|   |                              |                                                                                                                                                                                                                                                                                                                                                       |
|   | Exhibit                  No. 31.2 | Chief                  Financial Officer Certification Pursuant to Rule                  13a-14(a)/15d-14(a)                                                                                                                                                                                                                                               |
|   |                              |                                                                                                                                                                                                                                                                                                                                                       |
|   | Exhibit                  No. 32.1 | Chief                  Executive Officer Certification Pursuant to 18 U.S.C. Section 1350,                  as                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002                                                                                                                                         |
|   |                              |                                                                                                                                                                                                                                                                                                                                                       |
|   | Exhibit                  No. 32.2 | Chief                  Financial Officer Certification Pursuant to 18 U.S.C. Section 1350,                  as                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002                                                                                                                                         |
|   |                              |                                                                                                                                                                                                                                                                                                                                                       |

| * | Portions                      of this exhibit have been omitted and are subject to a request                      for                      confidential treatment pursuant to Rule 24b-2 under the Securities                      Exchange Act of 1934, as amended. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----