##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 14289
 
 GREEN BANKSHARES, INC.
  Tennessee
    
    62-1222567(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)100 North Main Street, Greeneville, Tennessee
    
    37743-4992(Address of principal executive offices)
    
    (Zip Code)
 (423) 639-5111
 N/A  (Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer: o
    
    Accelerated filer: þ
    
    Non-accelerated filer: o
    
    Smaller reporting company: o(Do not check if a smaller reporting company)
 o þ




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##### 



PART I  FINANCIAL INFORMATION
 ITEM 1.FINANCIAL STATEMENTSThe unaudited condensed consolidated financial statements of Green Bankshares, Inc. and its wholly
owned subsidiaries are as follows:Condensed Consolidated Balance Sheets  March 31, 2008 and December 31, 2007.
    
    
    2Condensed Consolidated Statements of Income and Comprehensive Income  For the three months
ended March 31, 2008 and 2007.
    
    
    3Condensed Consolidated Statement of Changes in Shareholders Equity  For the three months
ended March 31, 2008.
    
    
    4Condensed Consolidated Statements of Cash Flows  For the three months ended March 31, 2008
and 2007.
    
    
    5Notes to Condensed Consolidated Financial Statements.
    
    
    6Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2008 and December 31, 2007
(Amounts in thousands, except share and per share data)
 (Unaudited)March 31,
    
    
    December 31,2008
    
    
    2007*ASSETSCash and due from banks
    
    $
    57,517
    
    
    $
    65,717Securities available for sale
    
    
    231,349
    
    
    
    235,273Securities held to maturity (with a market value of $1,084 and $1,280)
    
    
    1,118
    
    
    
    1,303FHLB and other stock, at cost
    
    
    12,887
    
    
    
    12,322Loans held for sale
    
    
    2,350
    
    
    
    2,331Loans, net of unearned income
    
    
    2,335,979
    
    
    
    2,356,376Allowance for loan losses
    
    
    (33,927
    )
    
    
    (34,111
    )Premises and equipment, net
    
    
    82,685
    
    
    
    82,697Goodwill and other intangible assets
    
    
    157,172
    
    
    
    157,827Other assets
    
    
    65,485
    
    
    
    68,006Total assets
    
    $
    2,912,615
    
    
    $
    2,947,741LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDeposits
    
    $
    2,059,382
    
    
    $
    1,986,793Federal funds purchased
    
    
    39,839
    
    
    
    87,787Repurchase agreements
    
    
    92,957
    
    
    
    106,738FHLB advances and notes payable
    
    
    272,342
    
    
    
    318,690Subordinated debentures
    
    
    88,662
    
    
    
    88,662Accrued interest payable and other liabilities
    
    
    29,268
    
    
    
    36,594Total liabilities
    
    
    2,582,450
    
    
    
    2,625,264Shareholders equityCommon stock: $2 par, 20,000,000 shares authorized, 13,000,987 and
12,931,015 shares outstanding
    
    
    26,002
    
    
    
    25,862Additional paid-in capital
    
    
    185,222
    
    
    
    185,170Retained earnings
    
    
    115,426
    
    
    
    109,938Accumulated other comprehensive income
    
    
    3,515
    
    
    
    1,507Total shareholders equity
    
    
    330,165
    
    
    
    322,477Total liabilities and shareholders equity
    
    $
    2,912,615
    
    
    $
    2,947,741
 *
    
    This condensed consolidated balance sheet has been derived from the audited consolidated balance sheet, as filed in
the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007.   2




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GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 Three Months Ended March 31, 2008 and 2007
 (Amounts in thousands, except share and per share data)
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Interest incomeInterest and fees on loans
    
    $
    42,749
    
    
    $
    31,915Investment securities
    
    
    3,357
    
    
    
    708Federal funds sold and other
    
    
    3
    
    
    
    1546,109
    
    
    
    32,638Interest expenseDeposits
    
    
    15,935
    
    
    
    11,153Borrowings
    
    
    5,702
    
    
    
    2,66421,637
    
    
    
    13,817Net interest income
    
    
    24,472
    
    
    
    18,821Provision for loan losses
    
    
    888
    
    
    
    974Net interest income after provision for loan
losses
    
    
    23,584
    
    
    
    17,847Noninterest incomeService charges and fees
    
    
    6,227
    
    
    
    4,289Other
    
    
    1,079
    
    
    
    1,1107,306
    
    
    
    5,399Noninterest expenseSalaries and employee benefits
    
    
    9,848
    
    
    
    7,458Occupancy and furniture and equipment expense
    
    
    3,449
    
    
    
    2,096Other
    
    
    6,264
    
    
    
    4,48819,561
    
    
    
    14,042Income before income taxes
    
    
    11,329
    
    
    
    9,204Provision for income taxes
    
    
    4,151
    
    
    
    3,588Net income
    
    $
    7,178
    
    
    $
    5,616Comprehensive Income
    
    $
    9,186
    
    
    $
    5,657Per share of common stock:Basic earnings
    
    $
    0.56
    
    
    $
    0.57Diluted earnings
    
    
    0.56
    
    
    
    0.57Dividends
    
    
    0.13
    
    
    
    0.13Weighted average shares outstanding:Basic
    
    
    12,931,169
    
    
    
    9,815,452Diluted
    
    
    12,931,169
    
    
    
    9,910,315
   3




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GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 For the Three Months Ended March 31, 2008
(Amounts in thousands, except share and per share data)
 AccumulatedOther
    
    
    TotalAdditional
    
    
    
    
    
    
    Compre-
    
    
    Share-Common Stock
    
    
    Paid-in
    
    
    Retained
    
    
    hensive
    
    
    holdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Equity(Unaudited)Balance, December 31, 2007
    
    
    12,931,015
    
    
    $
    25,862
    
    
    $
    185,170
    
    
    $
    109,938
    
    
    $
    1,507
    
    
    $
    322,477Common stock transactions:Exercise of shares under
stock option plan
    
    
    439
    
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    7Issuance of restricted common
shares
    
    
    69,533
    
    
    
    139
    
    
    
    (139
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense:Stock options
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    114Restricted stock
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    71Dividends paid ($.13 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ( 1,690
    )
    
    
    
    
    
    
    (1,690
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,178
    
    
    
    
    
    
    
    7,178Change in unrealized gains ,
net of reclassification and
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,008
    
    
    
    2,008Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,186Balance, March 31, 2008
    
    
    13,000,987
    
    
    $
    26,002
    
    
    $
    185,222
    
    
    $
    115,426
    
    
    $
    3,515
    
    
    $
    330,165
   4




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GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended March 31, 2008 and 2007
(Amounts in thousands, except share and per share data)
 March 31,
    
    
    March 31,2008
    
    
    2007(Unaudited)Cash flows from operating activitiesNet income
    
    $
    7,178
    
    
    $
    5,616Adjustments to reconcile net income to net cash provided by
operating activitiesProvision for loan losses
    
    
    888
    
    
    
    974Depreciation and amortization
    
    
    1,742
    
    
    
    1,056Security amortization and accretion, net
    
    
    (304
    )
    
    
    (3
    )Loss on sale of securities
    
    
    
    
    
    
    23FHLB stock dividends
    
    
    (148
    )
    
    
    Net gain on sale of mortgage loans
    
    
    (178
    )
    
    
    (271
    )Originations of mortgage loans held for sale
    
    
    (15,351
    )
    
    
    (17,196
    )Proceeds from sales of mortgage loans
    
    
    15,510
    
    
    
    16,833Increase in cash surrender value of life insurance
    
    
    (263
    )
    
    
    (190
    )Net losses (gains) from sales of fixed assets
    
    
    383
    
    
    
    (1
    )Stock-based compensation expense
    
    
    185
    
    
    
    112Net (gain) loss on other real estate and repossessed assets
    
    
    14
    
    
    
    (111
    )Deferred tax expense
    
    
    (1,085
    )
    
    
    (251
    )Net changes:Other assets
    
    
    6,838
    
    
    
    1,535Accrued interest payable and other liabilities
    
    
    (7,326
    )
    
    
    (1,396
    )Net cash provided by operating activities
    
    
    8,083
    
    
    
    6,730Cash flows from investing activitiesPurchase of securities available for sale
    
    
    (18,853
    )
    
    
    (16,695
    )Proceeds from sale of securities available for sale
    
    
    
    
    
    
    1,262Proceeds from maturities of securities available for sale
    
    
    26,515
    
    
    
    7,631Proceeds from sale of securities held to maturity
    
    
    
    
    
    
    496Proceeds from maturities of securities held to maturity
    
    
    185
    
    
    
    405Purchase of FHLB stock
    
    
    (417
    )
    
    
    Net change in loans
    
    
    13,963
    
    
    
    (64,807
    )Proceeds from sale of other real estate
    
    
    1,037
    
    
    
    776Improvements to other real estate
    
    
    (82
    )
    
    
    Proceeds from sale of fixed assets
    
    
    50
    
    
    
    1Premises and equipment expenditures
    
    
    (1,510
    )
    
    
    (2,250
    )Net cash provided (used) by investing activities
    
    
    20,888
    
    
    
    (73,181
    )Cash flows from financing activitiesNet change in deposits
    
    
    72,589
    
    
    
    57,937Net change in federal funds purchased and repurchase agreements
    
    
    (61,729
    )
    
    
    (593
    )Tax benefit resulting from stock options
    
    
    
    
    
    
    9Proceeds from FHLB advances and notes payable
    
    
    20,000
    
    
    
    30,000Repayments of FHLB advances and notes payable
    
    
    (66,348
    )
    
    
    (35,692
    )Dividends paid
    
    
    (1,690
    )
    
    
    (1,275
    )Proceeds from issuance of common stock
    
    
    7
    
    
    
    223Net cash (used) provided by financing activities
    
    
    (37,171
    )
    
    
    50,609Net change in cash and cash equivalents
    
    
    (8,200
    )
    
    
    (15,842
    )Cash and cash equivalents, beginning of year
    
    
    65,717
    
    
    
    70,640Cash and cash equivalents, end of period
    
    $
    57,517
    
    
    $
    54,798Supplemental disclosures  cash and noncashInterest paid
    
    $
    22,314
    
    
    $
    13,635Income taxes paid
    
    
    683
    
    
    
    560Loans converted to other real estate
    
    
    5,483
    
    
    
    988Unrealized gain on available for sale securities, net of tax
    
    
    2,008
    
    
    
    41
   5




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GREEN BANKSHARES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 1  PRINCIPLES OF CONSOLIDATION
  NOTE 2  LOANS
  March 31,
    
    
    December 31,2008
    
    
    2007Commercial real estate
    
    $
    1,539,821
    
    
    $
    1,549,457Residential real estate
    
    
    392,171
    
    
    
    398,779Commercial
    
    
    320,134
    
    
    
    320,264Consumer
    
    
    94,751
    
    
    
    97,635Other
    
    
    3,445
    
    
    
    3,871Unearned income
    
    
    (14,343
    )
    
    
    (13,630
    )Loans, net of unearned income
    
    $
    2,335,979
    
    
    $
    2,356,376Allowance for loan losses
    
    $
    (33,927
    )
    
    $
    (34,111
    )
  (Continued)6




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  LOANS
  March 31,
    
    
    December 31,2008
    
    
    2007Balance at beginning of year
    
    $
    34,111
    
    
    $
    22,302Add (deduct):Reserve of acquired bank
    
    
    
    
    
    
    9,022Provision for loan losses
    
    
    888
    
    
    
    14,483Loans charged off
    
    
    (1,590
    )
    
    
    (13,471
    )Recoveries of loans charged off
    
    
    518
    
    
    
    1,775Ending balance
    
    $
    33,927
    
    
    $
    34,111
 March 31,
    
    
    December 31,2008
    
    
    2007Loans past due 90 days still on accrual
    
    $
    201
    
    
    $
    18Nonaccrual loans
    
    
    29,901
    
    
    
    32,060Total
    
    $
    30,102
    
    
    $
    32,078
  (Continued)7




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GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  EARNINGS PER SHARE OF COMMON STOCK
   Three Months Ended March 31,2008
    
    
    2007Income
    
    
    Shares
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    (Numerator)
    
    
    (Denominator)Basic EPSIncome available to common shareholders
    
    $
    7,178
    
    
    
    12,931,169
    
    
    $
    5,616
    
    
    
    9,815,452Effect of dilutive shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,863Diluted EPSIncome available to common
shareholders plus
assumed conversions (1)
    
    $
    7,178
    
    
    
    12,931,169
    
    
    $
    5,616
    
    
    
    9,910,315
 (1)
    
    During the three month period ending March 31, 2008 the treasury stock method used to calculate
earnings per share produced a result which was anti-dilutive. Therefore the basic shares outstanding were used
as the denominator.  (Continued)8




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  SEGMENT INFORMATION
   Other
    
    
    HoldingThree months ended March 31, 2008
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    24,070
    
    
    $
    1,834
    
    
    $
    (1,432
    )
    
    $
    
    
    
    $
    24,472Provision for loan losses
    
    
    414
    
    
    
    474
    
    
    
    
    
    
    
    
    
    
    
    888Noninterest income
    
    
    6,874
    
    
    
    498
    
    
    
    147
    
    
    
    (213
    )
    
    
    7,306Noninterest expense
    
    
    18,006
    
    
    
    1,293
    
    
    
    475
    
    
    
    (213
    )
    
    
    19,561Income tax expense (benefit)
    
    
    4,631
    
    
    
    221
    
    
    
    (701
    )
    
    
    
    
    
    
    4,151Segment profit (loss)
    
    $
    7,893
    
    
    $
    344
    
    
    $
    (1,059
    )
    
    $
    
    
    
    $
    7,178Segment assets at March 31, 2008
    
    $
    2,860,701
    
    
    $
    39,165
    
    
    $
    12,749
    
    
    $
    
    
    
    $
    2,912,615
 Other
    
    
    HoldingThree months ended March 31, 2007
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    17,532
    
    
    $
    1,557
    
    
    $
    (268
    )
    
    $
    
    
    
    $
    18,821Provision for loan losses
    
    
    614
    
    
    
    360
    
    
    
    
    
    
    
    
    
    
    
    974Noninterest income
    
    
    5,099
    
    
    
    588
    
    
    
    11
    
    
    
    (299
    )
    
    
    5,399Noninterest expense
    
    
    12,866
    
    
    
    1,230
    
    
    
    245
    
    
    
    (299
    )
    
    
    14,042Income tax expense (benefit)
    
    
    3,563
    
    
    
    217
    
    
    
    (192
    )
    
    
    
    
    
    
    3,588Segment profit (loss)
    
    $
    5,588
    
    
    $
    338
    
    
    $
    (310
    )
    
    $
    
    
    
    $
    5,616Segment assets at March 31, 2007
    
    $
    1,790,899
    
    
    $
    34,610
    
    
    $
    2,125
    
    
    $
    
    
    
    $
    1,827,634
  (Continued)9




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  SEGMENT INFORMATION
 Asset Quality Ratios
 As of and for the period ended March 31, 2008
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.27
    %
    
    
    1.37
    %
    
    
    1.29
    %Nonperforming assets as a percentage of total assets
    
    
    1.32
    %
    
    
    1.83
    %
    
    
    1.35
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.32
    %
    
    
    8.00
    %
    
    
    1.45
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    104.16
    %
    
    
    582.16
    %
    
    
    112.71
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.03
    %
    
    
    1.01
    %
    
    
    0.05
    %
 As of and for the period ended March 31, 2007
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    0.18
    %
    
    
    1.43
    %
    
    
    0.21
    %Nonperforming assets as a percentage of total assets
    
    
    0.24
    %
    
    
    2.04
    %
    
    
    0.28
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.26
    %
    
    
    8.01
    %
    
    
    1.43
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    713.22
    %
    
    
    560.16
    %
    
    
    690.10
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.01
    %
    
    
    0.73
    %
    
    
    0.02
    %
 As of and for the year ended December 31, 2007
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.35
    %
    
    
    1.30
    %
    
    
    1.36
    %Nonperforming assets as a percentage of total assets
    
    
    1.22
    %
    
    
    2.11
    %
    
    
    1.25
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.32
    %
    
    
    7.96
    %
    
    
    1.45
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    98.37
    %
    
    
    609.80
    %
    
    
    106.34
    %Net charge-offs to average total loans, net of unearned income
    
    
    0.50
    %
    
    
    4.14
    %
    
    
    0.57
    %
 Net charge-offs
    
    Bank
    
    
    Other
    
    
    TotalActual for the three month period ending March 31, 2008
    
    $
    682
    
    
    $
    390
    
    
    $
    1,072Actual for the three month period ending March 31, 2007
    
    $
    92
    
    
    $
    252
    
    
    $
    344Actual for the year ended December 31, 2007
    
    $
    10,193
    
    
    $
    1,503
    
    
    $
    11,696
 NOTE 5  REVOLVING CREDIT AGREEMENT
   (Continued)10




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  BUSINESS COMBINATION
    Cash and due from banks
    
    $
    21,182Securities
    
    
    200,081FHLB stock
    
    
    2,863Bankers Bank stock
    
    
    100Loans held for sale
    
    
    8,642Loans, net of unearned income
    
    
    631,496Allowance for loan losses
    
    
    (9,022
    )Premises and equipment
    
    
    18,332Goodwill
    
    
    111,813Core deposit intangible
    
    
    8,740Mortgage servicing rights
    
    
    745Other assets
    
    
    16,618Total assets acquired
    
    
    1,011,590Deposits
    
    
    (699,089
    )Federal funds purchased
    
    
    (52,500
    )Repurchase agreements
    
    
    (42,790
    )FHLB advances
    
    
    (32,000
    )Subordinated debentures
    
    
    (17,527
    )Other liabilities
    
    
    (3,416
    )Total liabilities assumed
    
    
    (847,322
    )Net assets acquired
    
    $
    164,268
    (Continued)11




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  BUSINESS COMBINATION
 Three Months EndedMarch 31,2007Net interest income
    
    $
    25,469Net income
    
    $
    7,565Basic earnings per share
    
    $
    0.59Diluted earnings per share
    
    $
    0.58
 NOTE 7  BORROWINGS
      (Continued)12




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 8  FAIR VALUE DISCLOSURES
   Level 1
  Level 2
  Level 3
   Investment Securities Available-for-Sale
   (Continued)13




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 8  FAIR VALUE DISCLOSURES
 Loans Held for Sale
  Loans
 
 Loan Servicing Rights
  Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  March 31, 2008Total CarryingAmount in Statement
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    of Financial
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    ValueSecurities available for sale
    
    $
    
    
    
    $
    231,349
    
    
    $
    
    
    
    $
    231,349
    
    
    $
    231,349
  (Continued)14




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 8  FAIR VALUE DISCLOSURES
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
  March 31, 2008Total CarryingAmount in Statement
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    of Financial
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    ValueLoans
    
    $
    
    
    
    $
    
    
    
    $
    532
    
    
    $
    532
    
    
    $
    532
 
  (Continued)15




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  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 forward-looking terminology and words
such as trends, assumptions, target, guidance, outlook, opportunity, future, plans,
goals, objectives, expectations, near-term, long-term, projection, may, will,
would, could, expect, intend, estimate, anticipate, believe, potential, regular,
or continue (or the negative or other derivatives of each of these terms) or similar terminology
and expressions.
 Although the Company believes that the assumptions underlying any forward-looking statements
are reasonable, any of the assumptions could be inaccurate, and therefore, actual results may
differ materially from those projected in or implied by the forward-looking statements. Factors and
risks that may result in actual results differing from this forward-looking information include,
but are not limited to, those contained in the 2007 10-K in Part I, Item 1A thereof, which is
incorporated herein by this reference, as well as other factors discussed throughout this document,
including, without limitation the factors described under Critical Accounting Policies and
Estimates on page 18 of this Quarterly Report on Form 10-Q , or from time to time, in the Companys
filings with the SEC, press releases and other communications.
 Readers are cautioned not to place undue reliance on forward-looking statements made in this
document, since the statements speak only as of the documents date. 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 and to the more detailed risk factors included in the
Companys 2007 10-K. The Company has no obligation and does not intend to publicly update or
revise any forward-looking statements contained in or incorporated by reference into this Quarterly
Report on Form 10-Q , to reflect events or circumstances occurring after the date of this document
or to reflect the occurrence of unanticipated events. Readers are advised, however, to consult any
further disclosures the Company may make on related subjects in its documents filed with or
furnished to the SEC or in its other public disclosures.
  16




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##### Table of Contents



Growth and Business Strategy
      Overview
    17




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##### Table of Contents



Critical Accounting Policies and Estimates
     Changes in Results of Operations
 Net Income.
 Net Interest Income.
  18




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##### Table of Contents



Beginning
    
    
    Increase/
    
    
    EndingFOMC Meeting Date
    
    Rate
    
    
    Decrease
    
    
    RateMarch 21, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %May 9, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %June 28, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %August 7, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %September 18, 2007
    
    
    5.25
    %
    
    
    (0.50
    %)
    
    
    4.75
    %October 31, 2007
    
    
    4.75
    %
    
    
    (0.25
    %)
    
    
    4.50
    %December 11, 2007
    
    
    4.50
    %
    
    
    (0.25
    %)
    
    
    4.25
    %January 22, 2008
    
    
    4.25
    %
    
    
    (0.75
    %)
    
    
    3.50
    %January 30, 2008
    
    
    3.50
    %
    
    
    (0.50
    %)
    
    
    3.00
    %March 18, 2008
    
    
    3.00
    %
    
    
    (0.75
    %)
    
    
    2.25
    %
   19




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##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    2,357,543
    
    
    $
    42,766
    
    
    
    7.30
    %
    
    $
    1,572,640
    
    
    $
    31,937
    
    
    
    8.24
    %Investment securities (2)
    
    
    245,863
    
    
    
    3,536
    
    
    
    5.78
    %
    
    
    51,676
    
    
    
    719
    
    
    
    5.64
    %Other short-term investments
    
    
    458
    
    
    
    3
    
    
    
    2.63
    %
    
    
    1,258
    
    
    
    15
    
    
    
    4.84
    %Total interest-earning assets
    
    $
    2,603,864
    
    
    $
    46,305
    
    
    
    7.15
    %
    
    $
    1,625,574
    
    
    $
    32,671
    
    
    
    8.15
    %Noninterest earning assets
    
    
    324,207
    
    
    
    
    
    
    
    
    
    
    
    153,345Total assets
    
    $
    2,928,071
    
    
    
    
    
    
    
    
    
    
    $
    1,778,919Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    697,424
    
    
    $
    3,325
    
    
    
    1.92
    %
    
    $
    540,648
    
    
    $
    3,546
    
    
    
    2.66
    %Time deposits
    
    
    1,137,188
    
    
    
    12,610
    
    
    
    4.46
    %
    
    
    673,242
    
    
    
    7,607
    
    
    
    4.58
    %Total interest-bearing deposits
    
    $
    1,834,612
    
    
    $
    15,935
    
    
    
    3.49
    %
    
    $
    1,213,890
    
    
    $
    11,153
    
    
    
    3.73
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    153,059
    
    
    
    1,092
    
    
    
    2.87
    %
    
    
    25,856
    
    
    
    286
    
    
    
    4.49
    %Notes payable
    
    
    310,868
    
    
    
    3,178
    
    
    
    4.11
    %
    
    
    171,909
    
    
    
    2,110
    
    
    
    4.98
    %Subordinated debentures
    
    
    88,662
    
    
    
    1,432
    
    
    
    6.50
    %
    
    
    13,403
    
    
    
    268
    
    
    
    8.11
    %Total interest-bearing liabilities
    
    $
    2,387,201
    
    
    $
    21,637
    
    
    
    3.65
    %
    
    $
    1,425,058
    
    
    $
    13,817
    
    
    
    3.93
    %Noninterest bearing liabilities:Demand deposits
    
    
    186,454
    
    
    
    
    
    
    
    
    
    
    
    145,185Other liabilities
    
    
    25,640
    
    
    
    
    
    
    
    
    
    
    
    20,398Total noninterest bearing liabilities
    
    
    212,094
    
    
    
    
    
    
    
    
    
    
    
    165,583Total liabilities
    
    
    2,599,295
    
    
    
    
    
    
    
    
    
    
    
    1,590,641Shareholders equity
    
    
    328,776
    
    
    
    
    
    
    
    
    
    
    
    188,278Total liabilities and shareholders
Equity
    
    $
    2,928,071
    
    
    
    
    
    
    
    
    
    
    $
    1,778,919Net interest income
    
    
    
    
    
    $
    24,668
    
    
    
    
    
    
    
    
    
    
    $
    18,854Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.51
    %
    
    
    
    
    
    
    
    
    
    
    4.22
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.81
    %
    
    
    
    
    
    
    
    
    
    
    4.70
    %
 1
    
    Average loan balances included nonaccrual loans. Interest income collected on
nonaccrual loans has been included.2
    
    Fully Taxable Equivalent (FTE) at the rate of 35%. The FTE basis adjusts for the tax
benefits of income on certain tax-exempt loans and investments using the federal statutory rate of
35% for each period presented. The Company believes this measure to be the preferred industry
measurement of net interest income and provides relevant comparison between taxable and non-taxable
amounts.  20




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##### Table of Contents



Provision for Loan Losses.
   Noninterest Income.
  Noninterest Expense.
  21




---



##### Table of Contents



Income Taxes.
 Changes in Financial Condition
    Liquidity and Capital Resources
 Liquidity.
    22




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##### Table of Contents



Capital Resources.
     Required
    
    
    RequiredMinimum
    
    
    to beRatio
    
    
    Well Capitalized
    
    
    Bank
    
    
    CompanyTier 1 risk-based
capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    10.22
    %
    
    
    10.66
    %Total risk-based capital
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    11.48
    %
    
    
    11.91
    %Leverage Ratio
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    8.85
    %
    
    
    9.24
    %
   23




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##### Table of Contents



Off-Balance Sheet Arrangements
  Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than 5 Years
    
    
    TotalCommitments to make loans  fixed
    
    $
    14,390
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    14,390Commitments to make loans 
variable
    
    
    82,893
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,893Unused lines of credit
    
    
    417,732
    
    
    
    118,754
    
    
    
    6,925
    
    
    
    88,504
    
    
    
    631,915Letters of credit
    
    
    35,249
    
    
    
    1,466
    
    
    
    8,785
    
    
    
    6,894
    
    
    
    52,394Total
    
    $
    550,264
    
    
    $
    120,220
    
    
    $
    15,710
    
    
    $
    95,398
    
    
    $
    781,592
 Disclosure of Contractual Obligations
  Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than 5 Years
    
    
    TotalCertificates of deposits
    
    $
    1,055,808
    
    
    $
    85,227
    
    
    $
    7,243
    
    
    $
    4,463
    
    
    $
    1,152,741Federal funds purchased and repurchase
agreements
    
    
    132,796
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,796FHLB advances and notes payable
    
    
    43,576
    
    
    
    67,333
    
    
    
    80,913
    
    
    
    80,520
    
    
    
    272,342Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,662
    
    
    
    88,662Operating lease obligations
    
    
    984
    
    
    
    1,481
    
    
    
    1,063
    
    
    
    1,299
    
    
    
    4,827Deferred compensation
    
    
    1,995
    
    
    
    
    
    
    
    
    
    
    
    1,736
    
    
    
    3,731Purchase obligations
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335Total
    
    $
    1,235,494
    
    
    $
    154,041
    
    
    $
    89,219
    
    
    $
    176,680
    
    
    $
    1,655,434
  Effect of New Accounting Standards
 Business Combinations Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an
amendment of ARB No. 51"
  24




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting
   25




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##### Table of Contents



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  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
  Item 5. Other Information
  Item 6. Exhibits
   26




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##### Table of Contents



SIGNATURES
  Green Bankshares, Inc.
RegistrantDate: May 8, 2008
    By:
    /s/      James E. AdamsJames E. AdamsExecutive Vice President, Chief Financial
Officer and Assistant Secretary  27




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a)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 200232.2
    
    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