**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-Q/A**
 **(Amendment
        No. 2)**
 
 (Mark
        One)
  x
        QUARTERLY REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934
  **For
        the quarterly period ended March 31, 2005**
 OR
 
 oTRANSITION
        REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For
        the
        transition period from _____________________ to ________________
  Commission
        file number **0-14289**
  **GREENE
                  COUNTY BANCSHARES, INC.**(Exact
                  name of registrant as specified in its
                  charter)
  **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)
  Registrant's
        telephone number, including area code: **(423)
        639-5111**
 
 Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. YES x NO
o
  Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Act.) YES x NO
o
 
 As
        of May
        5, 2005, the number of shares outstanding of the issuer’s common stock was:
        7,650,816.
 
  
  EXPLANATORY
        NOTE  Greene
                County Bancshares, Inc., a Tennessee corporation (the "Company"),
                is filing this
                Amendment No. 2 (the "Amendment No. 2") to its Quarterly Report on
                Form 10-Q for
                the quarter ended March 31, 2005, as filed with the Securities and
                Exchange
                Commission on May 5, 2005 (the “Original Form 10-Q”), as amended by Amendment
                No. 1 filed with the Securities and Exchange Commission on August
                1, 2005 (the
                "Amendment No. 1"), to correct certain typographical errors and reclassify
                certain amounts in Item 2 of Part I of the Original Form 10-Q. Except
                as
                identified above, no other amendments or changes to the Original
                Form 10-Q are
                made by this Amendment No. 2 and the remainder of the Original Form
                10-Q, as
                amended by Amendment No. 1, shall remain in effect as of the date
                of filing of
                the Original Form 10-Q. Additionally, this Amendment No. 2 does not
                purport to
                provide an update or discussion of any other developments subsequent
                to the
                filing of the Original Form 10-Q.
 -1-


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


**Forward-Looking
        Statements**
  **The
        information contained herein contains forward-looking statements that involve
        a
        number of risks and uncertainties.  A number of factors, including
        those
        discussed herein, could cause results to differ materially from those
        anticipated by such forward-looking statements which are within the meaning
        of
        that term in Section 27A of the Securities Act of 1933, as amended, and Section
        21E of the Securities Exchange Act of 1934, as amended. In addition, such
        forward-looking statements are necessarily dependent upon assumptions, estimates
        and data that may be incorrect or imprecise. Accordingly, any forward-looking
        statements included herein do not purport to be predictions of future events
        or
        circumstances and may not be realized.  Forward-looking statements
        can be
        identified by, among other things, the use of forward-looking terminology
        such
        as “intends,”  “believes,”  “expects,”  “may,” 
“will,”  “should,”  “seeks,” or “anticipates,” or the negatives
        thereof, or other variations thereon of comparable terminology, or by
        discussions of strategy or intentions.  Such statements may include,
        but
        are not limited to, projections of income or loss, expenditures, acquisitions,
        plans for future operations, financing needs or plans relating to services
        of
        the Company, as well as assumptions relating to the foregoing. The use of
        “annualized” information statements, which extrapolates three months actual
        financial results as to full year 2005, is also forward-looking. The Company's
        actual results may differ materially from the results anticipated in
        forward-looking statements due to a variety of factors, including, but not
        limited to (1) unanticipated deterioration in the financial condition of
        borrowers resulting in significant increases in loan losses and provisions
        for
        those losses; (2) lack of sustained growth in the economy in the markets
        that
        the Bank serves; (3) increased competition with other financial institutions
        in
        the markets that the Bank serves; (4) changes in the legislative and regulatory
        environment; (5) the Company’s successful implementation of its growth strategy;
        and (6) the loss of key personnel. All forward-looking statements herein
        are
        based on information available to us as of the date the Company’s Quarterly
        Report on Form 10-Q was filed with the Securities and Exchange Commission
        (“SEC”).**
 
 **Presentation
        of Amounts**
  **All
        dollar amounts set forth below, other than per-share amounts, are in thousands
        unless otherwise noted.**
 
 **General**
  Greene
        County Bancshares, Inc. (the “Company”) is the bank holding company for Greene
        County Bank (the “Bank”), a Tennessee-chartered commercial bank that conducts
        the principal business of the Company. In addition to its commercial banking
        operations, the Bank conducts separate businesses through its three wholly-owned
        subsidiaries: Superior Financial Services, Inc. (“Superior Financial”), a
        consumer finance company; GCB Acceptance Corporation (“GCB Acceptance”), a
        subprime automobile lending company; and Fairway Title Co., a title company
        formed in 1998. The Bank also operates a mortgage banking operation which
        has
        its main office in Knox County, Tennessee and this operation also has
        representatives located throughout the Company’s branch system.
  On
        November 21, 2003, the Company entered the Middle Tennessee market by completing
        its acquisition of Gallatin, Tennessee-based Independent Bankshares Corporation
        ("IBC"). IBC was the bank holding company for First Independent Bank, which
        had
        four offices in Gallatin and Hendersonville, Tennessee, and Rutherford Bank
        and
        Trust, with three offices in Murfreesboro and Smyrna, Tennessee. First
        Independent Bank and Rutherford Bank and Trust were subsequently merged with
        the
        Bank, with the Bank as the surviving entity.
  On
        November 15, 2004 the Company established banking operations in Nashville,
        Tennessee, with the opening of its first full-service branch of Middle Tennessee
        Bank & Trust, which, like all of the Bank’s bank brands, operates within the
        Bank’s structure. This new branch in Davidson County, Tennessee expands the
        Company’s presence in the Middle Tennessee market and helps fill in the market
        between Sumner and Rutherford Counties.
  -2-
  On
        December 10, 2004 the Company purchased three full-service branches from
        National Bank of Commerce located in Lawrence County Tennessee. This purchase
        (“NBC transaction”) fits strategically with the Bank’s operations in Rutherford
        and Sumner Counties, as well as the November 2004 initiative into Davidson
        County.
 
 **Growth
        and Business Strategy**
 
 The
        Company expects that, over the intermediate term, its growth from mergers
        and
        acquisitions, including acquisitions of both entire financial institutions
        and
        selected branches of financial institutions, will continue. De novo branching
        is
        also expected to be a method of growth, particularly in high-growth and other
        demographically-desirable markets.
  The
        Company’s strategic plan outlines a geographic expansion policy within a
        300-mile radius of Greene County, Tennessee. This policy could result in
        the
        Company expanding westward and eastward up to and including Nashville, Tennessee
        and Roanoke, Virginia, respectively, east/southeast up to and including the
        Piedmont area of North Carolina and western North Carolina, southward to
        northern Georgia and northward into eastern and central Kentucky. In particular,
        the Company believes the markets in and around Knoxville, Nashville, and
        Chattanooga, Tennessee are highly desirable areas with respect to expansion
        and
        growth plans.
  The
        Company is continuously investigating and analyzing other lines and areas
        of
        business. These include, but are not limited to, various types of insurance
        and
        real estate activities. Conversely, the Company frequently evaluates and
        analyzes the profitability, risk factors and viability of its various business
        lines and segments and, depending upon the results of these evaluations and
        analyses, may conclude to exit certain segments and/or business lines. Further,
        in conjunction with these ongoing evaluations and analyses, the Company may
        decide to sell, merge or close certain branch facilities.
 
 **Overview**
 
 The
        Company's results of operations for the first quarter ended March 31, 2005,
        compared to the same period in 2004, reflected an increase in net interest
        income due primarily to loan growth as a result of the Company’s expansion
        initiatives.  This increase in net interest income was offset, in
        part, by
        increases in non-interest expense which was reflective of the Company’s
        expansion programs.
 
 **Critical
        Accounting Policies and Estimates**
  The
        Company’s consolidated financial statements and accompanying notes have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America. The preparation of these financial statements requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities, the disclosure of contingent assets and liabilities
        at
        the date of the financial statements and the reported amounts of revenue
        and
        expenses during the reported periods.
  Management
        continually evaluates the Company’s accounting policies and estimates it uses to
        prepare the consolidated financial statements. In general, management’s
        estimates are based on historical experience, information from regulators
        and
        third party professionals and various assumptions that are believed to be
        reasonable under the facts and circumstances. Actual results could differ
        from
        those estimates made by management.
  The
        Company believes its critical accounting policies and estimates include the
        valuation of the allowance for loan losses and the fair value of financial
        instruments and other accounts. Based on management’s calculation, an allowance
        of $16,564, or 1.49%, of total loans, net of unearned interest, was an adequate
        estimate of losses within the loan portfolio as of March 31, 2005. This estimate
        resulted in a provision for loan losses on the income statement of $1,622
        during
        the first quarter of 2005. If the mix and amount of future charge-off
        percentages differ significantly from those assumptions used by management
        in
        making its determination, the allowance for loan losses and provision for
        loan
        losses on the income statement could be materially affected.
  The
        consolidated financial statements include certain accounting and disclosures
        that require management to make estimates about fair values. Estimates of
        fair
        value are used in the accounting for securities available for sale, loans
        held
        for sale, goodwill, other intangible assets, and acquisition purchase accounting
        adjustments. Estimates of fair values are used in disclosures regarding
        securities held to maturity, stock compensation, commitments, and the fair
        values of financial instruments. Fair values are estimated using relevant
        market
        information and other assumptions such as interest rates, credit risk,
        prepayments and other factors. The fair values of financial instruments are
        subject to change as influenced by market conditions.
  -3-
 
 **Liquidity
        and Capital Resources**
 
 **Liquidity.** Liquidity
        refers to the ability or the financial flexibility to manage future cash
        flows
        to meet the needs of depositors and borrowers and fund operations. Maintaining
        appropriate levels of liquidity allows the Company to have sufficient funds
        available for reserve requirements, customer demand for loans, withdrawal
        of
        deposit balances and maturities of deposits and other liabilities. The Company's
        liquid assets include cash and due from banks, federal funds sold, investment
        securities and loans held for sale. Including securities pledged to
        collateralize municipal deposits, these assets represented 11.19% of the
        total
        liquidity base at March 31, 2005, as compared to 10.63% at December 31, 2004.
        The liquidity base is generally defined to include deposits, repurchase
        agreements, notes payable and subordinated debentures. While the Company
        usually
        maintains borrowing availability with the Federal Home Loan Bank of Cincinnati
        (“FHLB”), it had no availability at March 31, 2005, as the Company utilized this
        borrowing capacity in conjunction with the funding of its strong loan demand.
        However, the Company also maintains Federal funds lines of credit totaling
        $106,000 at eight correspondent banks, of which $106,000 was available at
        March
        31, 2005. The Company believes it has sufficient liquidity to satisfy its
        current operating needs.
  For
        the
        three months ended March 31, 2005, operating activities of the Company used
        $81
        of cash flows. Net income of $2,935 comprised a substantial portion of the
        cash
        generated from operations. Cash flows from operating activities were also
        positively affected by various non-cash items, including (i) $1,622 in provision
        for loan losses, and (ii) $875 of depreciation and amortization. These increases
        in cash flows were offset by (i) $1,645 increase in other assets, (ii) $2,497
        decrease in accrued interest payable and other liabilities, and (iii) deferred
        tax benefit of $489. In addition, the cash flows used by the originations
        of
        mortgage loans held for sale exceeded the cash flows provided by the proceeds
        from sales of mortgage loans by $713.
  The
        Company’s net increase in loans used $69,987 in cash flows and was the primary
        component of the $85,135 in net cash used in investing activities. In addition,
        the Company purchased $14,763 in investment securities available for sale.
        The
        increase in cash surrender value of life insurance, reflecting both normal
        increases via earnings and also purchases of additional insurance related
        to
        certain benefit plans, used $1,018 in cash flows, and fixed asset additions,
        net
        of proceeds from sale of fixed assets, used $706 in cash flows.
  The
        net
        increase in deposits of $76,292 was the primary source of cash flows from
        financing activities. Also providing cash from financing activities were
        the
        proceeds from notes payable of $115,000 offset, in part, by repayments of
        notes
        payable of $105,035. In addition, dividends paid in the amount of $918 further
        reduced the total net cash provided from financing activities.
  **Capital
        Resources.** The
        Company’s capital position is reflected in its shareholders’ equity, subject to
        certain adjustments for regulatory purposes. Shareholders’ equity, or capital,
        is a measure of the Company’s net worth, soundness and viability. The Company
        continues to exhibit a strong capital position while consistently paying
        dividends to its shareholders. Further, the capital base of the Company allows
        it to take advantage of business opportunities while maintaining the level
        of
        resources deemed appropriate by management of the Company to address business
        risks inherent in the Company’s daily operations.
  On
        September 25, 2003, the Company issued $10,310 of subordinated debentures,
        as
        part of a privately placed pool of trust preferred securities. The securities,
        due in 2033, bear interest at a floating rate of 2.85% above the three-month
        LIBOR rate, reset quarterly, and are callable in five years without penalty.
        The
        Company used the proceeds of the offering to support its acquisition of IBC,
        and
        the capital raised from the offering qualifies as Tier I capital for regulatory
        purposes.
  Shareholders’
        equity on March 31, 2005 was $110,669, an increase of $1,951, or 1.79%, from
        $108,718 on December 31, 2004. The increase in shareholders’ equity primarily
        reflected net income for the three months ended March 31, 2005 of $2,935
        ($0.38
        per share, assuming dilution). This increase was offset by quarterly dividend
        payments during the three months ended March 31, 2005 totaling $918 ($0.12
        per
        share).
 
 -4-
  On
        September 18, 2002 the Company announced that its Board of Directors had
        authorized the repurchase of up to $2,000 of the Company’s outstanding shares of
        common stock beginning in October 2002. The repurchase plan was renewed by
        the
        Board of Directors in September 2003. On June 4, 2004 the Company announced
        that
        its Board of Directors had approved an increase in the amount authorized
        to be
        repurchased from $2,000 to $5,000. The repurchase plan is dependent upon
        market
        conditions. To date, the Company has purchased 25,700 shares at an aggregate
        cost of approximately $538 under this program which was renewed by the Company’s
        Board of Directors on November 15, 2004. Unless extended, the repurchase
        program
        will terminate on the earlier to occur of the Company’s repurchase of the total
        authorized dollar amount of the Company's common stock or December 1, 2005.
  The
        Company’s primary source of liquidity is dividends paid by the Bank. Applicable
        Tennessee statutes and regulations impose restrictions on the amount of
        dividends that may be declared by the Bank. Further, any dividend payments
        are
        subject to the continuing ability of the Bank to maintain its compliance
        with
        minimum federal regulatory capital requirements and to retain its
        characterization under federal regulations as a “well-capitalized” institution.
  Risk-based
        capital regulations adopted by the Board of Governors of the Federal Reserve
        Board (“FRB”) and the Federal Deposit Insurance Corporation (the “FDIC”) require
        bank holding companies and banks, respectively, to achieve and maintain
        specified ratios of capital to risk-weighted assets. The risk-based capital
        rules are designed to measure Tier 1 Capital and Total Capital in relation
        to
        the credit risk of both on- and off-balance sheet items. Under the guidelines,
        one of four risk weights is applied to the different on-balance sheet items.
        Off-balance sheet items, such as loan commitments, are also subject to
        risk-weighting after conversion to balance sheet equivalent amounts. All
        bank
        holding companies and banks must maintain a minimum total capital to total
        risk-weighted assets ratio of 8.00%, at least half of which must be in the
        form
        of core, or Tier 1, capital (consisting of shareholders’ equity, less goodwill
        and other intangible assets and accumulated other comprehensive income).
        At
        March 31, 2005, the Bank and the Company each satisfied their respective
        minimum
        regulatory capital requirements, and the Bank was “well-capitalized” within the
        meaning of federal regulatory requirements.
   **Required**
                **Minimum**
                **Ratio**
              
              **Bank**
              
              **Company**Tier
                  1 risk-based capital
              
              
              4.00
              %
              
              8.87
              %
              
              8.76
              %Total
                  risk-based capital
              
              
              8.00
              %
              
              10.12
              %
              
              10.02
              %Leverage
                  Ratio
              
              
              4.00
              %
              
              7.92
              %
              
              7.82
              %
 
 
 The
        FRB
        has recently issued regulations which will allow continued inclusion of
        outstanding and prospective issuances of trust preferred securities as Tier
        1
        capital subject to stricter quantitative and qualitative limits than allowed
        under prior regulations.  The new limits will phase in over a five-year
        transition period and would permit the Company's trust preferred securities
        to
        continue to be treated as Tier 1 capital.
  -5-
 
 **Off-Balance
        Sheet Arrangements**
  At
        March
        31, 2005, the Company had outstanding unused lines of credit and standby
        letters
        of credit totaling $266,262 and unfunded loan commitments outstanding of
        $46,080. Because these commitments generally have fixed expiration dates
        and
        many will expire without being drawn upon, the total commitment level does
        not
        necessarily represent future cash requirements. If needed to fund these
        outstanding commitments, the Company has the ability to liquidate Federal
        funds
        sold or securities available-for-sale or, on a short-term basis, to borrow
        any
        then available amounts from the FHLB and/or purchase Federal funds from other
        financial institutions. At March 31, 2005, the Company had accommodations
        with
        upstream correspondent banks for unsecured Federal funds lines. These
        accommodations have various covenants related to their term and availability,
        and in most cases must be repaid within less than a month. The following
        table
        presents additional information about the Company’s off-balance sheet
        commitments as of March 31, 2005, which by their terms have contractual maturity
        dates subsequent to March 31, 2005:
  Less
                    than
                
                
                
                
                
                More
                    than1
                    Year
                
                1-3
                    Years
                
                3-5
                    Years
                
                5
                    Years
                
                TotalCommitments
                    to make loans - fixed
                
                $
                11,205
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                11,205Commitments
                    to make loans - variable
                
                
                34,875
                
                
                —
                
                
                —
                
                
                —
                
                
                34,875Unused
                    lines of credit
                
                
                157,793
                
                
                42,845
                
                
                2,520
                
                
                36,037
                
                
                239,195Letters
                    of credit
                
                
                278
                
                
                24,789
                
                
                2,000
                
                
                —
                
                
                27,067Total
                
                $
                204,151
                
                $
                67,634
                
                $
                4,520
                
                $
                36,037
                
                $
                312,342
 
 **Disclosure
        of Contractual Obligations**
  In
        the
        ordinary course of operations, the Company enters into certain contractual
        obligations. Such obligations include the funding of operations through debt
        issuances as well as leases for premises and equipment. The following table
        summarizes the Company’s significant fixed and determinable contractual
        obligations as of March 31, 2005:
  Less
                    than1
                    Year
                
                1-3
                    Years
                
                3-5
                    Years
                
                More
                    than5 Years
                
                TotalDeposits
                    without a stated maturity
                
                $
                516,713
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                516,713Certificate
                    of deposits
                
                
                392,330
                
                
                113,185
                
                
                51,462
                
                
                623
                
                
                557,600Repurchase
                    agreements
                
                
                15,117
                
                
                —
                
                
                —
                
                
                —
                
                
                15,117FHLB
                    advances and notes payable
                
                
                30,000
                
                
                1,800
                
                
                59,580
                
                
                3,807
                
                
                95,187Subordinated
                    debentures
                
                
                —
                
                
                —
                
                
                —
                
                
                10,310
                
                
                10,310Operating
                    lease obligations
                
                
                449
                
                
                822
                
                
                306
                
                
                134
                
                
                1,711Deferred
                    compensation
                
                
                419
                
                
                1,124
                
                
                —
                
                
                657
                
                
                2,200Purchase
                    obligations
                
                
                18
                
                
                —
                
                
                —
                
                
                —
                
                
                18Total
                
                $
                955,046
                
                $
                116,931
                
                $
                111,348
                
                $
                15,531
                
                $
                1,198,856
 
 Additionally,
        the Company routinely enters into contracts for services. These contracts
        may
        require payment for services to be provided in the future and may also contain
        penalty clauses for early termination of the contract. Management is not
        aware
        of any additional commitments or contingent liabilities which may have a
        material adverse impact on the liquidity or capital resources of the Company.
 
 **Changes
        in Results of Operations**
  **Net
        income.** Net
        income for the three months ended March 31, 2005 was $2,935, as compared
        to
        $2,852 for the same period in 2004. This increase of $83, or 2.91%, resulted
        primarily from a $1,447, or 12.18%, increase in net interest income reflecting
        principally increased volume of interest-earning assets arising primarily
        from
        the Company’s expansion initiatives. Offsetting this increase was a $1,324, or
        14.79%, increase in total non-interest expense from $8,951 for the three
        months
        ended March 31, 2004 to $10,275 for the same period of 2005. This increase
        is
        also primarily attributable to the Company’s expansion initiatives.
 
 -6-
  **Net
        Interest Income.** The
        largest source of earnings for the Company is net interest income, which
        is the
        difference between interest income on interest-earning assets and interest
        paid
        on deposits and other interest-bearing liabilities. The primary factors which
        affect net interest income are changes in volume and yields of interest-earning
        assets and interest-bearing liabilities, which are affected in part by
        management’s responses to changes in interest rates through asset/liability
        management. During the three months ended March 31, 2005, net interest income
        was $13,327, as compared to $11,880 for the same period in 2004, representing
        an
        increase of 12.18%. While the Company’s average balances of interest-earning
        assets increased more than the average balances of interest-bearing liabilities
        in the three months ended March 31, 2005, as compared to the same quarter
        in
        2004, thus enhancing net interest income, such increase was offset, in part,
        by
        the smaller increase in yield on these interest-earning assets as compared
        to
        the cost of interest-bearing liabilities. Nevertheless, the Company experienced
        a substantial increase in net interest income, as noted above, in the three
        months ended March 31, 2005 as compared to the same quarter in 2004. The
        Company’s net interest margin decreased slightly for the three months ended
        March 31, 2005 as compared to the same period in 2004 (from 4.68% to 4.64%),
        and
        declined 17 basis points from the 4.81% net interest margin for the three
        months
        ended December 31, 2004. In order to fund its strong loan growth, the Company
        has pursued aggressive deposit rates, resulting in margin compression that
        is
        not expected to abate in the near term despite the Company’s asset-sensitive
        interest rate risk position. In addition, management has been controlling
        the
        growth of higher-yielding subprime loans in the Bank’s subsidiaries and focusing
        on increasing the balances of its traditional commercial, commercial real
        estate
        and residential real estate loans, thus reducing the percentage of subprime
        loans in the Company’s portfolio. This trend in the loan mix also constrains the
        increases in loan yields during a rising interest rate environment
        notwithstanding the Company’s asset-sensitive balance sheet. Nevertheless, if
        interest rates continue to increase, based on the Company’s current mix of
        interest-earning assets and interest-bearing liabilities, the Company believes
        its net interest margin will begin to increase and will demonstrate an
        increasing trend when viewed over the entire interest rate cycle. Further,
        in
        view of the Company’s asset-sensitive position, management anticipates declines
        in net interest margin if product mixes remain relatively unchanged and interest
        rates reverse their upward trend and begin to decline. In addition, even
        if
        interest rates remain stable, the Company’s net interest margin could decline
        due to competitive pressures related to both loan and deposit pricing.
  **Provision
        for Loan Losses.** During
        the three months ended March 31, 2005, loan charge-offs were $1,200 and
        recoveries of charged-off loans were $421. The Company’s provision for loan
        losses increased by $99, or 6.50%, to $1,622 for the three months ended March
        31, 2005, as compared to $1,523 for the same period in 2004. The Company’s
        allowance for loan losses increased by $843 to $16,564 at March 31, 2005
        from
        $15,721 at December 31, 2004, with the ratio of the allowance for loan losses
        to
        total loans, net of unearned income, declining slightly to 1.49% at March
        31,
        2005 from 1.50% and 1.52% at December 31, 2004 and March 31, 2004, respectively.
        As of March 31, 2005, most indicators of credit quality, as discussed below,
        have improved compared to December 31, 2004 and March 31, 2004. The ratio
        of
        allowance for loan losses to nonperforming assets was 187.12%, 185.56% and
        169.03% at March 31, 2005, December 31, 2004 and March 31, 2004, respectively,
        and the ratio of nonperforming assets to total assets was 0.67%, 0.69% and
        0.78%
        at March 31, 2005, December 31, 2004 and March 31, 2004, respectively. The
        ratio
        of nonperforming loans to total loans, excluding loans held for sale, was
        0.58%,
        0.66% and 0.52% at March 31, 2005, December 31, 2004 and March 31, 2004,
        respectively. Within the Bank, the Company’s largest subsidiary, the ratio of
        nonperforming assets to total assets was 0.61%, 0.61% and 0.70% at March
        31,
        2005, December 31, 2004 and March 31, 2004, respectively. At Superior Financial,
        the ratio of nonperforming assets to total assets was 3.18%, 3.67% and 3.47%
        at
        March 31, 2005, December 31, 2004 and March 31, 2004, respectively. At GCB
        Acceptance, the ratio of nonperforming assets to total assets was 2.23%,
        2.25%
        and 2.23% at March 31, 2005, December 31, 2004 and March 31, 2004, respectively.
  The
        Company’s annualized net charge-offs for the three months ended March 31, 2005
        were $3,116 compared to actual net charge-offs of $5,042 for the year ended
        December 31, 2004. Annualized net charge-offs as a percentage of average
        loans
        improved from 0.48% for the three months ended March 31, 2004 to 0.29% for
        the
        three months ended March 31, 2005. Net charge-offs as a percentage of average
        loans were 0.51% for the year ended December 31, 2004. Within the Bank,
        annualized net charge-offs as a percentage of average loans fell from 0.27%
        for
        the three months ended March 31, 2004 to 0.16% for the same period in 2005.
        Net
        charge-offs within the Bank as a percentage of average loans were 0.35% for
        the
        year ended December 31, 2004. Annualized net charge-offs in Superior Financial
        for the three months ended March 31, 2005 were $495 compared to actual net
        charge-offs of $525 for the year ended December 31, 2004. Annualized net
        charge-offs in the Bank for the three months ended March 31, 2005 were $1,738
        compared to actual net charge-offs of $3,418 for the year ended December
        31,
        2004. Annualized net charge-offs in GCB Acceptance for the three months ended
        March 31, 2005 were $885 compared to actual net charge-offs of $1,099 for
        the
        year ended December 31, 2004. At this point, management believes that total
        net
        charge-offs for 2005 within the Bank and its subsidiaries will decline slightly
        compared to 2004 based on an improving economy and asset quality trends.
  -7-
 
 Based
        on
        the Company's allowance for loan loss calculation and review of the loan
        portfolio, management believes the allowance for loan losses is adequate
        at
        March 31, 2005.
  **Non-Interest
        Income.** Income
        that is not related to interest-earning assets, consisting primarily of service
        charges, commissions and fees, has become an important supplement to the
        Company’s traditional method of earning income through interest rate spreads.
  Total
        non-interest income for the three months ended March 31, 2005 was $3,176
        as
        compared to $3,094 for the same period in 2004. Service charges, commissions
        and
        fees remain the largest component of total non-interest income and decreased
        $253, or 10.56%, to $2,142 for the three months ended March 31, 2005 from
        $2,395
        for the same period in 2004. This decrease primarily reflects a reduction
        in
        fees from deposit-related products due primarily to declining volume. In
        addition, other non-interest income increased by $335, or 47.93%, to $1,034
        for
        the three months ended March 31, 2005 from $699 for the same period in 2004.
        The
        increase is primarily attributable to increased fees from the sale of mutual
        funds and annuities and income from the sale of the Company’s interest in an ATM
        network vendor.
  **Non-Interest
        Expense.** Control
        of non-interest expense also is an important aspect in enhancing income.
        Non-interest expense includes personnel, occupancy, and other expenses such
        as
        data processing, printing and supplies, legal and professional fees, postage,
        Federal Deposit Insurance Corporation assessment, etc. Total non-interest
        expense was $10,275 for the three months ended March 31, 2005 compared to
        $8,951
        for the same period in 2004. The $1,324, or 14.79%, increase in total
        non-interest expense for the three months ended March 31, 2005 compared to
        the
        same period of 2004 principally reflects increases in all expense categories
        primarily as a result of the Company’s expansion program and in costs associated
        with the Bank’s High Performance Checking Program. This program is designed to
        generate significant numbers and balances of core transaction accounts.
  Personnel
        costs are the primary element of the Company's non-interest expenses. For
        the
        three months ended March 31, 2005, salaries and benefits represented $5,245,
        or
        51.05%, of total non-interest expense. This was an increase of $538, or 11.43%
        from the $4,707 for the three months ended March 31, 2004. The Company had
        53
        branches at March 31, 2005 and at December 31, 2004, as compared to 50 at
        March
        31, 2004, and the number of full-time equivalent employees increased 7.6%
        from
        447 at March 31, 2004 to 481 at March 31, 2005. These increases in personnel
        costs, number of branches and employees are primarily the result of the
        Company’s expansion initiative.
  Primarily
        as a result of this overall increase in non-interest expense, the Company’s
        efficiency ratio was negatively affected, as the ratio increased from 59.78%
        at
        March 31, 2004 to 62.26% at March 31, 2005. The efficiency ratio illustrates
        how
        much it cost the Company to generate revenue; for example, it cost the Company
        62.26 cents to generate one dollar of revenue for the three months ended
        March
        31, 2005.
  **Income
        Taxes.** The
        effective income tax rate for the three months ended March 31, 2005 was 36.28%
        compared to 36.62% for the same period in 2004.
 
 **Changes
        in Financial Condition**
  Total
        assets at March 31, 2005 were $1,320,363, an increase of $86,960, or 7.05%,
        from
        total assets of $1,233,403 at December 31, 2004. The increase in assets was
        primarily reflective of the $67,021, or 6.50%, increase, as reflected on
        the
        Condensed Consolidated Balance Sheets, in net loans, excluding loans held
        for
        sale, and was funded by the $76,291, or 7.64%, increase in deposits.
  At
        March
        31, 2005, loans, net of unearned income and allowance for loan losses, were
        $1,098,167 compared to $1,031,146 at December 31, 2004, an increase of $67,021,
        or 6.50%, from December 31, 2004. The increase in loans during the first
        three
        months of 2005 primarily reflects an increase in commercial real estate loans
        and commercial loans.
 
 -8-
 
 Non-performing
        loans include non-accrual loans and loans 90 or more days past due. All loans
        that are 90 days past due are considered non-accrual unless they are adequately
        secured and there is reasonable assurance of full collection of principal
        and
        interest. Non-accrual loans that are 120 days past due without assurance
        of
        repayment are charged off against the allowance for loan losses. Nonaccrual
        loans and loans past due 90 days and still accruing decreased by $473, or
        6.85%,
        during the three months ended March 31, 2005 to $6,433. At March 31, 2005,
        the
        ratio of the Company’s allowance for loan losses to non-performing assets (which
        include non-accrual loans) was 187.12%.
  The
        Company maintains an investment portfolio to provide liquidity and earnings.
        Investments at March 31, 2005 with an amortized cost of $53,695 had a market
        value of $53,526. At year-end 2004, investments with an amortized cost of
        $39,742 had a market value of $39,824. The increase in investments from December
        31, 2004 to March 31, 2005 results from the purchase of short-term federal
        agency securities as well as mortgage-backed securities reflecting management’s
        decision to channel more of the Company’s liquid assets into more favorable
        positions on the yield curve.
 
 **Effect
        of New Accounting Standards**
  In
        December 2004, the FASB issued SFAS No. 123(R), *Accounting
        for Stock-Based Compensation* (SFAS
        No.
        123(R)). SFAS No. 123(R) establishes standards for the accounting for
        transactions in which an entity exchanges its equity instruments for goods
        or
        services. This Statement focuses primarily on accounting for transactions
        in
        which an entity obtains employee services in share-based payment transactions.
        SFAS No. 123(R) requires that the fair value of such equity instruments be
        recognized as an expense in the historical financial statements as services
        are
        performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of
        fair
        value were required. The provisions of this Statement are effective for the
        first fiscal year reporting period beginning after June 15, 2005. Accordingly,
        the Company will adopt SFAS No. 123(R) commencing with the quarter ending
        March
        31, 2006.
  -9-
 
 **PART
        II - OTHER INFORMATION**
  **Item
        6.****Exhibits**
  (a)
        Exhibits
  Exhibit
                  No. 10.1
              First
                  amendment dated March 31, 2005 to non-competition agreement dated
                  August
                  10, 2004, by and between the Company and Kenneth R. Vaught*Exhibit
                  No. 10.2
              First
                  amendment dated April 15, 2005 to non-competition agreement dated
                  November
                  24, 2003, by and between the Company and R. Stan Puckett*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. 31.3
              Chief
                  Executive Officer Certification Pursuant to Rule
                  13a-14(a)/15d-14(a)**Exhibit
                  No. 31.4
              Chief
                  Financial Officer Certification Pursuant to Rule
                  13a-14(a)/15d-14(a)**Exhibit
                  No. 31.5
              Chief
                  Executive Officer Certification Pursuant to Rule
                  13a-14(a)/15d-14(a)Exhibit
                  No. 31.6
              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*
  *
        Previously filed with the Company's Quarterly Report on Form 10-Q for the
        quarter ended March 31, 2005 as filed with the Securities and Exchange
        Commission on May 5, 2005.
 
 **
        Previously filed with Amendment No. 1 to the
        Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005,
        as
        filed with the Securities and Exchange Commission on August 1,
        2005.
  -10-
 
 
 **SIGNATURES**
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this Amendment No. 2 to Quarterly Report on Form 10-Q to
        be signed on its behalf by the undersigned thereunto duly authorized.
 Greene
                  County Bancshares, Inc.RegistrantDate: September
                  12, 2005
                By:
                /s/ R.
                  Stan PuckettR.
                  Stan PuckettChairman
                    of the Board and Chief Executive Officer
                  (Duly
                    authorized
                    representative)
 Date: September
                  12, 2005
                
                /s/ William
                  F. RichmondWilliam
                  F. RichmondSenior
                    Vice President, Chief Financial Officer
                  (Principal
                      financial and accounting officer) and Assistant
                      Secretary