##### 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 June 30, 2010
 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 0-14289
 
 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 principle executive offices)
    
    (Zip Code)
 (423) 639-5111
 N/A  (Former name, former address and former fiscal year, if changed since last report)
 YES þ NO o
 YES o NO o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 YES o NO þ




---



##### 



PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSThe unaudited condensed consolidated financial statements of Green Bankshares, Inc. and its wholly
owned subsidiaries are as follows:Condensed Consolidated Balance Sheets  June 30, 2010 and December 31, 2009.Condensed Consolidated Statements of Income  For the three and six months ended June 30, 2010 and 2009.Condensed Consolidated Statement of Changes in Shareholders Equity  For the six months ended June 30, 2010.Condensed Consolidated Statements of Cash Flows  For the six months ended June 30, 2010 and 2009.Notes to Condensed Consolidated Financial Statements.Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30, 2010 and December 31, 2009
 (Amounts in thousands, except share and per share data)
 (Unaudited)June 30,
    
    
    December 31,2010
    
    
    2009*ASSETSCash and due from banks
    
    $
    206,412
    
    
    $
    206,701Federal funds sold
    
    
    1,743
    
    
    
    3,793Cash and cash equivalents
    
    
    208,155
    
    
    
    210,494Interest earning deposits in other banks
    
    
    1,000
    
    
    
    11,000Securities available for sale
    
    
    176,121
    
    
    
    147,724Securities held to maturity (with a market value of $625 and $638)
    
    
    616
    
    
    
    626Loans held for sale
    
    
    830
    
    
    
    1,533Loans, net of unearned interest
    
    
    1,928,174
    
    
    
    2,043,807Allowance for loan losses
    
    
    (50,049
    )
    
    
    (50,161
    )Other real estate owned and repossessed assets
    
    
    76,932
    
    
    
    57,168Premises and equipment, net
    
    
    80,437
    
    
    
    81,818FHLB and other stock, at cost
    
    
    12,734
    
    
    
    12,734Cash surrender value of life insurance
    
    
    30,872
    
    
    
    30,277Core deposit and other intangibles
    
    
    8,044
    
    
    
    9,335Deferred tax asset
    
    
    12,913
    
    
    
    13,600Other assets
    
    
    42,553
    
    
    
    49,184Total assets
    
    $
    2,529,332
    
    
    $
    2,619,139LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesNon-interest bearing deposits
    
    $
    170,396
    
    
    $
    177,602Interest bearing deposits
    
    
    1,820,044
    
    
    
    1,899,910Brokered deposits
    
    
    1,399
    
    
    
    6,584Total deposits
    
    
    1,991,839
    
    
    
    2,084,096Repurchase agreements
    
    
    24,240
    
    
    
    24,449FHLB advances and notes payable
    
    
    171,838
    
    
    
    171,999Subordinated debentures
    
    
    88,662
    
    
    
    88,662Accrued interest payable and other liabilities
    
    
    19,603
    
    
    
    23,164Total liabilities
    
    $
    2,296,182
    
    
    $
    2,392,370Shareholders equityPreferred stock: no par, 1,000,000 shares authorized, 72,278 shares outstanding
    
    $
    67,428
    
    
    $
    66,735Common stock: $2 par, 20,000,000 shares authorized, 13,192,109 and 13,171,474 shares outstanding
    
    
    26,384
    
    
    
    26,343Common stock warrants
    
    
    6,934
    
    
    
    6,934Additional paid-in capital
    
    
    188,585
    
    
    
    188,310Retained earnings (deficit)
    
    
    (58,233
    )
    
    
    (61,742
    )Accumulated other comprehensive income
    
    
    2,052
    
    
    
    189Total shareholders equity
    
    
    233,150
    
    
    
    226,769Total liabilities and shareholders equity
    
    $
    2,529,332
    
    
    $
    2,619,139
 *
    
    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, 2009.   2




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three and Six Months Ended June 30, 2010 and 2009
 (Amounts in thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    29,374
    
    
    $
    32,528
    
    
    $
    59,434
    
    
    $
    65,173Taxable securities
    
    
    1,391
    
    
    
    1,843
    
    
    
    2,679
    
    
    
    4,063Nontaxable securities
    
    
    306
    
    
    
    314
    
    
    
    618
    
    
    
    634FHLB and other stock
    
    
    134
    
    
    
    135
    
    
    
    272
    
    
    
    285Federal funds sold and other
    
    
    99
    
    
    
    36
    
    
    
    193
    
    
    
    81Total interest income
    
    
    31,304
    
    
    
    34,856
    
    
    
    63,196
    
    
    
    70,236Interest expenseDeposits
    
    
    7,626
    
    
    
    11,511
    
    
    
    15,687
    
    
    
    24,164Federal funds purchased and repurchase agreements
    
    
    5
    
    
    
    7
    
    
    
    11
    
    
    
    16FHLB advances and notes payable
    
    
    1,712
    
    
    
    2,469
    
    
    
    3,406
    
    
    
    4,912Subordinated debentures
    
    
    488
    
    
    
    689
    
    
    
    960
    
    
    
    1,535Total interest expense
    
    
    9,831
    
    
    
    14,676
    
    
    
    20,064
    
    
    
    30,627Net interest income
    
    
    21,473
    
    
    
    20,180
    
    
    
    43,132
    
    
    
    39,609Provision for loan losses
    
    
    4,749
    
    
    
    24,384
    
    
    
    8,638
    
    
    
    25,369Net interest income (loss) after provision for loan losses
    
    
    16,724
    
    
    
    (4,204
    )
    
    
    34,494
    
    
    
    14,240Non-interest incomeService charges on deposit accounts
    
    
    6,692
    
    
    
    5,795
    
    
    
    12,632
    
    
    
    11,151Other charges and fees
    
    
    383
    
    
    
    505
    
    
    
    739
    
    
    
    954Trust and investment services income
    
    
    757
    
    
    
    489
    
    
    
    1,339
    
    
    
    877Mortgage banking income
    
    
    123
    
    
    
    110
    
    
    
    241
    
    
    
    165Other income
    
    
    909
    
    
    
    642
    
    
    
    1,599
    
    
    
    1,337Securities gains (losses), netOther-than-temporary impairment
    
    
    (553
    )
    
    
    (960
    )
    
    
    (553
    )
    
    
    (960
    )Less non-credit portion recognized in other comprehensive income
    
    
    460
    
    
    
    227
    
    
    
    460
    
    
    
    227Total non-interest income
    
    
    8,771
    
    
    
    6,808
    
    
    
    16,457
    
    
    
    13,751Non-interest expenseEmployee compensation
    
    
    7,972
    
    
    
    8,064
    
    
    
    15,637
    
    
    
    15,756Employee benefits
    
    
    816
    
    
    
    1,229
    
    
    
    1,793
    
    
    
    2,524Occupancy expense
    
    
    1,684
    
    
    
    1,712
    
    
    
    3,383
    
    
    
    3,499Equipment expense
    
    
    668
    
    
    
    895
    
    
    
    1,376
    
    
    
    1,637Computer hardware/software expense
    
    
    886
    
    
    
    651
    
    
    
    1,710
    
    
    
    1,288Professional services
    
    
    576
    
    
    
    446
    
    
    
    1,183
    
    
    
    975Advertising
    
    
    806
    
    
    
    679
    
    
    
    1,404
    
    
    
    743OREO maintenance expense
    
    
    554
    
    
    
    137
    
    
    
    999
    
    
    
    280Collection and repossession expense
    
    
    534
    
    
    
    711
    
    
    
    1,821
    
    
    
    1,009Loss on OREO and repossessed assets
    
    
    926
    
    
    
    3,346
    
    
    
    1,435
    
    
    
    3,427FDIC Insurance
    
    
    1,209
    
    
    
    2,550
    
    
    
    2,060
    
    
    
    3,250Core deposit and other intangibles amortization
    
    
    640
    
    
    
    652
    
    
    
    1,291
    
    
    
    1,456Goodwill impairment
    
    
    
    
    
    
    143,389
    
    
    
    
    
    
    
    143,389Other expenses
    
    
    4,003
    
    
    
    3,949
    
    
    
    7,728
    
    
    
    7,008Total non-interest expenses
    
    
    21,274
    
    
    
    168,410
    
    
    
    41,820
    
    
    
    186,241Income (loss) before income taxes
    
    
    4,221
    
    
    
    (165,806
    )
    
    
    9,131
    
    
    
    (158,250
    )Provision (benefit) for income taxes
    
    
    1,410
    
    
    
    (15,656
    )
    
    
    3,124
    
    
    
    (12,880
    )Net income (loss)
    
    $
    2,811
    
    
    $
    (150,150
    )
    
    $
    6,007
    
    
    $
    (145,370
    )Preferred stock dividends and accretion of discount
    
    
    1,250
    
    
    
    1,250
    
    
    
    2,500
    
    
    
    2,482Net income (loss) available to common shareholders
    
    $
    1,561
    
    
    $
    (151,400
    )
    
    $
    3,507
    
    
    $
    (147,852
    )Per share of common stock:Basic earnings (loss)
    
    $
    0.12
    
    
    $
    (11.58
    )
    
    $
    0.27
    
    
    $
    (11.32
    )Diluted earnings (loss)
    
    
    0.12
    
    
    
    (11.58
    )
    
    
    0.27
    
    
    
    (11.32
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.13Weighted average shares outstanding:Basic
    
    
    13,097,611
    
    
    
    13,070,216
    
    
    
    13,090,021
    
    
    
    13,066,569Diluted1
    
    
    13,158,131
    
    
    
    13,070,216
    
    
    
    13,148,226
    
    
    
    13,066,569
 1
    
    Diluted weighted average shares outstanding exclude 105,734 and 92,420 restricted
average shares for the three and six month periods ended June 30, 2009 because their impact would
be anti-dilutive.   3




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 For the Six Months Ended June 30, 2010
 (Unaudited)
 (Amounts in thousands, except share and per share data)
 Warrants
    
    
    
    
    
    
    
    
    
    
    AccumulatedFor
    
    
    Additional
    
    
    Retained
    
    
    Other
    
    
    TotalPreferred
    
    
    Common Stock
    
    
    Common
    
    
    Paid-in
    
    
    Earnings
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Capital
    
    
    (Deficit)
    
    
    Income
    
    
    EquityBalance, December 31, 2009
    
    $
    66,735
    
    
    
    13,171,474
    
    
    $
    26,343
    
    
    $
    6,934
    
    
    $
    188,310
    
    
    $
    (61,742
    )
    
    $
    189
    
    
    $
    226,769Preferred stock transactions:Accretion of preferred stock discount
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (693
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,805
    )
    
    
    
    
    
    
    (1,805
    )Common stock transactions:Issuance of restricted common shares
    
    
    
    
    
    
    20,635
    
    
    
    41
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense:Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150Restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    166Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,007
    
    
    
    
    
    
    
    6,007Change in unrealized gains, net of reclassification and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,863
    
    
    
    1,863Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,870Balance, June 30, 2010
    
    $
    67,428
    
    
    
    13,192,109
    
    
    $
    26,384
    
    
    $
    6,934
    
    
    $
    188,585
    
    
    $
    (58,233
    )
    
    $
    2,052
    
    
    $
    233,150
   4




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months Ended June 30, 2010 and 2009
 (Amounts in thousands, except share and per share data)
 June 30,
    
    
    June 30,2010
    
    
    2009(Unaudited)Cash flows from operating activitiesNet income (loss)
    
    $
    6,007
    
    
    $
    (145,370
    )Adjustments to reconcile net income to net cash provided by operating activitiesProvision for loan losses
    
    
    8,638
    
    
    
    25,369Impairment of goodwill
    
    
    
    
    
    
    143,389Depreciation and amortization
    
    
    3,619
    
    
    
    3,642Security amortization and accretion, net
    
    
    235
    
    
    
    47Write down of investments and other securities for impairment
    
    
    93
    
    
    
    524Net gain on sale of mortgage loans
    
    
    (222
    )
    
    
    (99
    )Originations of mortgage loans held for sale
    
    
    (18,759
    )
    
    
    (21,582
    )Proceeds from sales of mortgage loans
    
    
    19,685
    
    
    
    18,489Increase in cash surrender value of life insurance
    
    
    (595
    )
    
    
    (574
    )Net losses from sales of fixed assets
    
    
    5
    
    
    
    35Stock-based compensation expense
    
    
    316
    
    
    
    350Net loss on other real estate and repossessed assets
    
    
    1,435
    
    
    
    3,427Deferred tax benefit (expense)
    
    
    (516
    )
    
    
    305Net changes:Other assets
    
    
    6,631
    
    
    
    (5,453
    )Accrued interest payable and other liabilities
    
    
    (3,561
    )
    
    
    (228
    )Net cash provided by operating activities
    
    
    23,011
    
    
    
    22,271Cash flows from investing activitiesPurchase of securities available for sale
    
    
    (85,684
    )
    
    
    (45,873
    )Proceeds from maturities of securities available for sale
    
    
    70,025
    
    
    
    82,098Proceeds from maturities of securities held to maturity
    
    
    10
    
    
    
    10Net change in loans
    
    
    77,775
    
    
    
    19,980Proceeds from sale of other real estate
    
    
    8,357
    
    
    
    3,110Improvements to other real estate
    
    
    (450
    )
    
    
    Proceeds from sale of fixed assets
    
    
    
    
    
    
    555Premises and equipment expenditures
    
    
    (951
    )
    
    
    (2,865
    )Net cash provided by investing activities
    
    
    69,082
    
    
    
    57,015Cash flows from financing activitiesNet change in core deposits
    
    
    (87,072
    )
    
    
    90,830Net change in brokered deposits
    
    
    (5,185
    )
    
    
    (248,255
    )Net change in repurchase agreements
    
    
    (209
    )
    
    
    (9,312
    )Repayments of FHLB advances and notes payable
    
    
    (161
    )
    
    
    (195
    )Preferred stock dividends paid
    
    
    (1,805
    )
    
    
    (1,426
    )Common stock dividends paid
    
    
    
    
    
    
    (1,713
    )Net cash (used) in financing activities
    
    
    (94,432
    )
    
    
    (170,071
    )Net change in cash and cash equivalents
    
    
    (2,339
    )
    
    
    (90,785
    )Cash and cash equivalents, beginning of period
    
    
    210,494
    
    
    
    198,358Cash and cash equivalents, end of period
    
    $
    208,155
    
    
    $
    107,573Supplemental disclosures  cash and noncashInterest paid
    
    $
    20,639
    
    
    $
    33,944Income taxes paid
    
    
    1,610
    
    
    
    1,675Loans converted to other real estate
    
    
    30,879
    
    
    
    34,193Unrealized gain on available for sale securities, net of tax
    
    
    1,863
    
    
    
    481
   5




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2010
 Unaudited
 (Amounts in thousands, except share and per share data)
 NOTE 1  PRINCIPLES OF CONSOLIDATION
  NOTE 2  SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable for SaleJune 30, 2010U.S. government agencies
    
    $
    71,653
    
    
    $
    489
    
    
    $
    (1
    )
    
    $
    72,141States and political subdivisions
    
    
    31,034
    
    
    
    1,054
    
    
    
    (348
    )
    
    
    31,740Collateralized mortgage obligations
    
    
    52,551
    
    
    
    2,055
    
    
    
    (372
    )
    
    
    54,234Mortgage-backed securities
    
    
    15,504
    
    
    
    650
    
    
    
    (1
    )
    
    
    16,153Trust preferred securities
    
    
    2,003
    
    
    
    
    
    
    
    (150
    )
    
    
    1,853$
    172,745
    
    
    $
    4,248
    
    
    $
    (872
    )
    
    $
    176,121December 31, 2009U.S. government agencies
    
    $
    52,937
    
    
    $
    99
    
    
    $
    (988
    )
    
    $
    52,048States and political subdivisions
    
    
    31,764
    
    
    
    877
    
    
    
    (449
    )
    
    
    32,192Collateralized mortgage obligations
    
    
    44,018
    
    
    
    1,281
    
    
    
    (622
    )
    
    
    44,677Mortgage-backed securities
    
    
    16,607
    
    
    
    291
    
    
    
    (6
    )
    
    
    16,892Trust preferred securities
    
    
    2,088
    
    
    
    
    
    
    
    (173
    )
    
    
    1,915$
    147,414
    
    
    $
    2,548
    
    
    $
    (2,238
    )
    
    $
    147,724Held to MaturityJune 30, 2010States and political subdivisions
    
    $
    251
    
    
    $
    4
    
    
    $
    
    
    
    $
    255Other securities
    
    
    365
    
    
    
    5
    
    
    
    
    
    
    
    370$
    616
    
    
    $
    9
    
    
    $
    
    
    
    $
    625December 31, 2009States and political subdivisions
    
    $
    251
    
    
    $
    4
    
    
    $
    
    
    
    $
    255Other securities
    
    
    375
    
    
    
    8
    
    
    
    
    
    
    
    383$
    626
    
    
    $
    12
    
    
    $
    
    
    
    $
    638
   6




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  SECURITIES
  Available for Sale
    
    
    Held to MaturityFair
    
    
    Carrying
    
    
    FairValue
    
    
    Amount
    
    
    ValueDue in one year or less
    
    $
    
    
    
    $
    566
    
    
    $
    575Due after one year through five years
    
    
    4,134
    
    
    
    50
    
    
    
    50Due after five years through ten years
    
    
    57,655
    
    
    
    
    
    
    
    Due after ten years
    
    
    43,945
    
    
    
    
    
    
    
    Collateralized mortgage obligations
    
    
    54,234
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    16,153
    
    
    
    
    
    
    
    Total maturities
    
    $
    176,121
    
    
    $
    616
    
    
    $
    625
    Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossJune 30, 2010U. S. government agencies
    
    $
    1,005
    
    
    $
    (1
    )
    
    $
    
    
    
    $
    
    
    
    $
    1,005
    
    
    $
    (1
    )States and political subdivisions
    
    
    
    
    
    
    
    
    
    
    3,223
    
    
    
    (348
    )
    
    
    3,223
    
    
    
    (348
    )Collateralized mortgage obligations
    
    
    2,458
    
    
    
    (13
    )
    
    
    3,320
    
    
    
    (359
    )
    
    
    5,778
    
    
    
    (372
    )Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    (1
    )
    
    
    9
    
    
    
    (1
    )Trust preferred securities
    
    
    
    
    
    
    
    
    
    
    1,853
    
    
    
    (150
    )
    
    
    1,853
    
    
    
    (150
    )Total temporarily impaired
    
    $
    3,463
    
    
    $
    (14
    )
    
    $
    8,405
    
    
    $
    (858
    )
    
    $
    11,868
    
    
    $
    (872
    )December 31, 2009U. S. government agencies
    
    $
    40,959
    
    
    $
    (988
    )
    
    $
    
    
    
    $
    
    
    
    $
    40,959
    
    
    $
    (988
    )States and political subdivisions
    
    
    2,463
    
    
    
    (24
    )
    
    
    3,075
    
    
    
    (425
    )
    
    
    5,538
    
    
    
    (449
    )Collateralized mortgage obligations
    
    
    4,997
    
    
    
    (32
    )
    
    
    3,222
    
    
    
    (590
    )
    
    
    8,219
    
    
    
    (622
    )Mortgage-backed securities
    
    
    2,028
    
    
    
    (5
    )
    
    
    11
    
    
    
    (1
    )
    
    
    2,039
    
    
    
    (6
    )Trust preferred securities
    
    
    1,783
    
    
    
    (122
    )
    
    
    132
    
    
    
    (51
    )
    
    
    1,915
    
    
    
    (173
    )Total temporarily impaired
    
    $
    52,230
    
    
    $
    (1,171
    )
    
    $
    6,440
    
    
    $
    (1,067
    )
    
    $
    58,670
    
    
    $
    (2,238
    )
   7




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  SECURITIES
        8




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  SECURITIES
  PresentCurrent
    
    
    
    
    
    
    
    
    
    
    
    
    
    ValueCredit
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    DiscountedDescription
    
    Cusip#
    
    Rating
    
    Value
    
    
    Value
    
    
    Loss
    
    
    Cash FlowCollateralized mortgage
obligationsWells Fargo  2007 - 4 A21
    
    94985RAW2
    
    Caa2
    
    $
    2,802
    
    
    $
    2,447
    
    
    $
    (355
    )
    
    $
    2,802Wells Fargo  2005 - 5 2A1
    
    94982MAE6
    
    B3
    
    
    877
    
    
    
    873
    
    
    
    (4
    )
    
    
    904$
    3,679
    
    
    $
    3,320
    
    
    $
    (359
    )
    
    $
    3,706Trust preferred securitiesWest Tennessee Bancshares, Inc.
    
    956192AA6
    
    N/A
    
    
    675
    
    
    
    574
    
    
    
    (101
    )
    
    
    675$
    933
    
    
    $
    773
    
    
    $
    (160
    )
    
    $
    934
  Beginning balance of credit losses at January 1, 2010
    
    $
    976Other-than-temporary impairment credit losses
    
    
    93Ending balance of cumulative credit losses recognized in earnings
    
    $
    1,069
   9




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  LOANS
  June 30,
    
    
    December 31,2010
    
    
    2009Commercial real estate
    
    $
    1,222,460
    
    
    $
    1,306,398Residential real estate
    
    
    384,227
    
    
    
    392,365Commercial
    
    
    255,223
    
    
    
    274,346Consumer
    
    
    78,421
    
    
    
    83,382Other
    
    
    2,581
    
    
    
    2,117Unearned income
    
    
    (14,738
    )
    
    
    (14,801
    )Loans, net of unearned income
    
    $
    1,928,174
    
    
    $
    2,043,807Allowance for loan losses
    
    $
    (50,049
    )
    
    $
    (50,161
    )
  June 30,
    
    
    December 31,2010
    
    
    2009Speculative 1-4 family residential real estate:Acquisition and development
    
    $
    176,152
    
    
    $
    185,087Lot warehouse
    
    
    52,520
    
    
    
    66,104Commercial 1-4 family residential
    
    
    49,539
    
    
    
    70,434Sub-total
    
    
    278,211
    
    
    
    321,625Construction:Commercial vacant land
    
    
    100,163
    
    
    
    101,679Commercial construction  non-owner occupied
    
    
    123,330
    
    
    
    164,887Commercial construction  owner occupied
    
    
    6,519
    
    
    
    28,213Consumer residential construction
    
    
    13,511
    
    
    
    19,073Sub-total
    
    
    243,523
    
    
    
    313,852Total speculative and construction
    
    
    521,734
    
    
    
    635,477Non-owner occupied commercial real estate
    
    
    434,238
    
    
    
    397,028Owner occupied commercial real estate
    
    
    242,690
    
    
    
    255,819Commercial and industrial loans
    
    
    267,721
    
    
    
    282,493Home equity lines of credit
    
    
    182,322
    
    
    
    170,818Consumer mortgages
    
    
    177,598
    
    
    
    191,332Farmland
    
    
    19,124
    
    
    
    25,117Agriculture
    
    
    8,902
    
    
    
    8,841Consumer
    
    
    88,583
    
    
    
    91,683Unearned income
    
    
    (14,738
    )
    
    
    (14,801
    )Loans, net of unearned income
    
    $
    1,928,174
    
    
    $
    2,043,807
   10




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  LOANS
  June 30,
    
    
    December 31,2010
    
    
    2009Balance at beginning of year
    
    $
    50,161
    
    
    $
    48,811Add (deduct):Provision for loan losses
    
    
    8,638
    
    
    
    50,246Loans charged off
    
    
    (10,049
    )
    
    
    (54,890
    )Recoveries of loans charged off
    
    
    1,299
    
    
    
    5,994Ending balance
    
    $
    50,049
    
    
    $
    50,161
 June 30,
    
    
    December 31,2010
    
    
    2009Impaired loans were as follows:Loans with no allowance allocated
    
    $
    108,121
    
    
    $
    89,292Loans with allowance allocated
    
    
    20,488
    
    
    
    25,946Amount of allowance allocated
    
    
    4,291
    
    
    
    5,737Nonperforming loans were as follows:Loans past due 90 days still on accrual
    
    $
    641
    
    
    $
    147Nonaccrual loans
    
    
    64,342
    
    
    
    75,411Total
    
    $
    64,983
    
    
    $
    75,558
    11




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  EARNINGS PER SHARE OF COMMON STOCK
   Three Months EndedJune 30,2010
    
    
    2009Basic Earnings (Loss) Per Common ShareNet income (loss)
    
    $
    2,811
    
    
    $
    (150,150
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,250
    
    
    
    1,250Net income (loss) available to common shareholders
    
    $
    1,561
    
    
    $
    (151,400
    )Weighted average common shares outstanding
    
    
    13,097,611
    
    
    
    13,070,216Basic earnings (loss) per share available to common shareholders
    
    $
    0.12
    
    
    $
    (11.58
    )Diluted Earnings (Loss) Per Common ShareNet income (loss)
    
    $
    2,811
    
    
    $
    (150,150
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,250
    
    
    
    1,250Net income (loss) available to common shareholders
    
    $
    1,561
    
    
    $
    (151,400
    )Weighted average common shares outstanding
    
    
    13,097,611
    
    
    
    13,070,216Add: Dilutive effects of assumed conversions of restricted stock
and exercises of stock options and warrants1
    
    
    60,520
    
    
    
    Weighted average common and dilutive potential common shares
outstanding
    
    
    13,158,131
    
    
    
    13,070,216Diluted earnings (loss) per share available to common shareholders
    
    $
    0.12
    
    
    $
    (11.58
    )
 1
    
    Diluted weighted average shares outstanding exclude 105,734 restricted average shares
for the three month period ended June 30, 2009 because their impact would be anti-dilutive.   12




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  EARNINGS PER SHARE OF COMMON STOCK
 Six Months EndedJune 30,2010
    
    
    2009Basic Earnings (Loss) Per Common ShareNet income (loss)
    
    $
    6,007
    
    
    $
    (145,370
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    2,500
    
    
    
    2,482Net income (loss) available to common shareholders
    
    $
    3,507
    
    
    $
    (147,852
    )Weighted average common shares outstanding
    
    
    13,090,021
    
    
    
    13,066,569Basic earnings (loss) per share available to common shareholders
    
    $
    0.27
    
    
    $
    (11.32
    )Diluted Earnings (Loss) Per Common ShareNet income (loss)
    
    $
    6,007
    
    
    $
    (145,370
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    2,500
    
    
    
    2,482Net income (loss) available to common shareholders
    
    $
    3,507
    
    
    $
    (147,852
    )Weighted average common shares outstanding
    
    
    13,090,021
    
    
    
    13,066,569Add: Dilutive effects of assumed conversions of restricted
stock and exercises of stock options and
warrants1
    
    
    58,205
    
    
    
    Weighted average common and dilutive potential common shares
outstanding
    
    
    13,148,226
    
    
    
    13,066,569Diluted earnings (loss) per share available to common
shareholders
    
    $
    0.27
    
    
    $
    (11.32
    )
 1
    
    Diluted weighted average shares outstanding exclude 92,420 restricted average shares
for the six month period ended June 30, 2009 because their impact would be anti-dilutive.   13




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  SEGMENT INFORMATION
   Other
    
    
    HoldingThree months ended June 30, 2010
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    19,859
    
    
    $
    2,103
    
    
    $
    (489
    )
    
    $
    
    
    
    $
    21,473Provision for loan losses
    
    
    4,439
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    4,749Noninterest income
    
    
    8,529
    
    
    
    417
    
    
    
    52
    
    
    
    (227
    )
    
    
    8,771Noninterest expense
    
    
    19,948
    
    
    
    1,141
    
    
    
    412
    
    
    
    (227
    )
    
    
    21,274Income tax expense (benefit)
    
    
    1,287
    
    
    
    418
    
    
    
    (295
    )
    
    
    
    
    
    
    1,410Segment profit (loss)
    
    
    2,714
    
    
    $
    651
    
    
    $
    (554
    )
    
    $
    
    
    
    $
    2,811Segment assets at June 30, 2010
    
    $
    2,477,386
    
    
    $
    42,234
    
    
    $
    9,712
    
    
    $
    
    
    
    $
    2,529,332
 Other
    
    
    HoldingThree months ended June 30, 2009
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    18,683
    
    
    $
    2,185
    
    
    $
    (688
    )
    
    $
    
    
    
    $
    20,180Provision for loan losses
    
    
    23,645
    
    
    
    739
    
    
    
    
    
    
    
    
    
    
    
    24,384Noninterest income
    
    
    7,204
    
    
    
    540
    
    
    
    24
    
    
    
    (227
    )
    
    
    7,541Noninterest expense
    
    
    167,643
    
    
    
    1,232
    
    
    
    495
    
    
    
    (227
    )
    
    
    169,143Income tax expense (benefit)
    
    
    (15,526
    )
    
    
    298
    
    
    
    (428
    )
    
    
    
    
    
    
    (15,656
    )Segment profit (loss)
    
    
    (149,875
    )
    
    $
    456
    
    
    $
    (731
    )
    
    $
    
    
    
    $
    (150,150
    )Segment assets at June 30, 2009
    
    $
    2,577,886
    
    
    $
    42,282
    
    
    $
    9,666
    
    
    $
    
    
    
    $
    2,629,834
 Other
    
    
    HoldingSix months ended June 30, 2010
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    39,927
    
    
    $
    4,166
    
    
    $
    (961
    )
    
    $
    
    
    
    $
    43,132Provision for loan losses
    
    
    7,795
    
    
    
    843
    
    
    
    
    
    
    
    
    
    
    
    8,638Noninterest income
    
    
    16,057
    
    
    
    788
    
    
    
    66
    
    
    
    (454
    )
    
    
    16,457Noninterest expense
    
    
    39,417
    
    
    
    2,256
    
    
    
    601
    
    
    
    (454
    )
    
    
    41,820Income tax expense (benefit)
    
    
    2,915
    
    
    
    727
    
    
    
    (518
    )
    
    
    
    
    
    
    3,124Segment profit (loss)
    
    
    5,857
    
    
    $
    1,128
    
    
    $
    (978
    )
    
    $
    
    
    
    $
    6,007
 Other
    
    
    HoldingSix months ended June 30, 2009
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    36,893
    
    
    $
    4,251
    
    
    $
    (1,535
    )
    
    $
    
    
    
    $
    39,609Provision for loan losses
    
    
    23,986
    
    
    
    1,383
    
    
    
    
    
    
    
    
    
    
    
    25,369Noninterest income
    
    
    13,801
    
    
    
    989
    
    
    
    149
    
    
    
    (455
    )
    
    
    14,484Noninterest expense
    
    
    183,885
    
    
    
    2,471
    
    
    
    1,073
    
    
    
    (455
    )
    
    
    186,974Income tax expense (benefit)
    
    
    (12,510
    )
    
    
    545
    
    
    
    (915
    )
    
    
    
    
    
    
    (12,880
    )Segment profit (loss)
    
    
    (144,667
    )
    
    $
    841
    
    
    $
    (1,544
    )
    
    $
    
    
    
    $
    (145,370
    )
   14




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
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, 2010
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as a percentage of total loans, net of unearned income
    
    
    3.37
    %
    
    
    1.28
    %
    
    
    3.37
    %Nonperforming assets as a percentage of total assets
    
    
    5.59
    %
    
    
    1.38
    %
    
    
    5.61
    %Allowance for loan losses as a percentage of total loans, net of unearned
income
    
    
    2.44
    %
    
    
    7.89
    %
    
    
    2.60
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    72.35
    %
    
    
    616.49
    %
    
    
    77.02
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.40
    %
    
    
    2.09
    %
    
    
    0.44
    %
 As of and for the period ended June 30, 2009
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as a percentage of total loans, net of unearned income
    
    
    4.33
    %
    
    
    1.89
    %
    
    
    4.34
    %Nonperforming assets as a percentage of total assets
    
    
    4.88
    %
    
    
    2.00
    %
    
    
    4.91
    %Allowance for loan losses as a percentage of total loans, net of unearned
income
    
    
    2.15
    %
    
    
    8.11
    %
    
    
    2.30
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    49.70
    %
    
    
    428.99
    %
    
    
    52.96
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    1.04
    %
    
    
    2.71
    %
    
    
    1.08
    %
 As of and for the year ended December 31, 2009
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as a percentage of total loans, net of unearned income
    
    
    3.69
    %
    
    
    1.50
    %
    
    
    3.70
    %Nonperforming assets as a percentage of total assets
    
    
    5.04
    %
    
    
    2.02
    %
    
    
    5.07
    %Allowance for loan losses as a percentage of total loans, net of unearned
income
    
    
    2.30
    %
    
    
    8.05
    %
    
    
    2.45
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    62.29
    %
    
    
    538.31
    %
    
    
    66.39
    %Net charge-offs to average total loans, net of unearned income
    
    
    2.15
    %
    
    
    5.88
    %
    
    
    2.25
    %
 Net charge-offs
    
    Bank
    
    
    Other
    
    
    TotalFor the six month period ended June 30, 2010
    
    $
    7,847
    
    
    $
    903
    
    
    $
    8,750For the six month period ended June 30, 2009
    
    $
    22,893
    
    
    $
    1,130
    
    
    $
    24,023For the year ended December 31, 2009
    
    $
    46,394
    
    
    $
    2,502
    
    
    $
    48,896
   15




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES
  Level 1
 Level 2
 Level 3
  Investment Securities Available-for-Sale
 Loans Held for Sale
   16




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES (continued)
 Impaired Loans
 Other Real Estate
   17




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES (continued)
 Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  Total Carrying
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Amount in
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Balance Sheet
    
    
    ValueJune 30, 2010Securities available for saleU.S. government agencies
    
    $
    
    
    
    $
    72,141
    
    
    $
    
    
    
    $
    72,141
    
    
    $
    72,141States and political subdivisions
    
    
    
    
    
    
    31,740
    
    
    
    
    
    
    
    31,740
    
    
    
    31,740Collateralized mortgage obligations
    
    
    
    
    
    
    54,234
    
    
    
    
    
    
    
    54,234
    
    
    
    54,234Mortgage-backed securities
    
    
    
    
    
    
    16,153
    
    
    
    
    
    
    
    16,153
    
    
    
    16,153Trust preferred securities
    
    
    
    
    
    
    1,279
    
    
    
    574
    
    
    
    1,853
    
    
    
    1,853December 31, 2009Securities available for saleU.S. government agencies
    
    $
    
    
    
    $
    52,048
    
    
    $
    
    
    
    $
    52,048
    
    
    $
    52,048States and political subdivisions
    
    
    
    
    
    
    32,192
    
    
    
    
    
    
    
    32,192
    
    
    
    32,192Collateralized mortgage obligations
    
    
    
    
    
    
    44,677
    
    
    
    
    
    
    
    44,677
    
    
    
    44,677Mortgage-backed securities
    
    
    
    
    
    
    16,892
    
    
    
    
    
    
    
    16,892
    
    
    
    16,892Trust preferred securities
    
    
    
    
    
    
    1,277
    
    
    
    638
    
    
    
    1,915
    
    
    
    1,915
 Level 3 Valuations
     18




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES (continued)
  June 30,
    
    
    December 31,2010
    
    
    2009Balance, beginning of period
    
    $
    638
    
    
    $
    Total gains or (loss) (realized/unrealized)Included in earnings
    
    
    (75
    )
    
    
    (778
    )Included in other comprehensive income
    
    
    11
    
    
    
    (112
    )Paydowns and maturities
    
    
    
    
    
    
    Transfers into Level 3
    
    
    
    
    
    
    1,528Balance, end of period
    
    $
    574
    
    
    $
    638
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
  Total Carrying
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Amount in
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Balance Sheet
    
    
    ValueJune 30, 2010Other real estate
    
    $
    
    
    
    $
    
    
    
    $
    25,818
    
    
    $
    25,818
    
    
    $
    25,818Impaired loans
    
    
    
    
    
    
    
    
    
    
    65,488
    
    
    
    65,488
    
    
    
    65,488Total assets at fair value
    
    $
    
    
    
    $
    
    
    
    $
    91,306
    
    
    $
    91,306
    
    
    $
    91,306December 31, 2009Other real estate
    
    $
    
    
    
    $
    
    
    
    $
    23,508
    
    
    $
    23,508
    
    
    $
    23,508Impaired loans
    
    
    
    
    
    
    
    
    
    
    57,914
    
    
    
    57,914
    
    
    
    57,914Total assets at fair value
    
    $
    
    
    
    $
    
    
    
    $
    81,422
    
    
    $
    81,422
    
    
    $
    81,422
   19




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES
  June 30,
    
    
    December 31,2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    209,155
    
    
    $
    209,155
    
    
    $
    221,494
    
    
    $
    221,494Securities available for sale
    
    
    176,121
    
    
    
    176,121
    
    
    
    147,724
    
    
    
    147,724Securities held to maturity
    
    
    616
    
    
    
    625
    
    
    
    626
    
    
    
    638Loans held for sale
    
    
    830
    
    
    
    842
    
    
    
    1,533
    
    
    
    1,552Loans, net
    
    
    1,878,125
    
    
    
    1,839,401
    
    
    
    1,993,646
    
    
    
    1,950,684FHLB and other stock
    
    
    12,734
    
    
    
    12,734
    
    
    
    12,734
    
    
    
    12,734Cash surrender value of life insurance
    
    
    30,872
    
    
    
    30,872
    
    
    
    30,277
    
    
    
    30,277Accrued interest receivable
    
    
    8,839
    
    
    
    8,839
    
    
    
    9,130
    
    
    
    9,130Financial liabilities:Deposit accounts
    
    $
    1,991,839
    
    
    $
    1,999,337
    
    
    $
    2,084,096
    
    
    $
    2,095,611Federal funds purchased and repurchase
agreements
    
    
    24,240
    
    
    
    24,240
    
    
    
    24,449
    
    
    
    24,449FHLB Advances and notes payable
    
    
    171,838
    
    
    
    181,150
    
    
    
    171,999
    
    
    
    176,602Subordinated debentures
    
    
    88,662
    
    
    
    71,349
    
    
    
    88,662
    
    
    
    70,527Accrued interest payable
    
    
    1,986
    
    
    
    1,986
    
    
    
    2,561
    
    
    
    2,561
 NOTE 7  SUBSEQUENT EVENTS
   20




---



##### 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 2009 10-K in Part I, Item 1A thereof and (1)
deterioration in the financial condition of borrowers resulting in significant increases in loan
losses and provisions for those losses; (2) continuation of the historically low short-term
interest rate environment; (3) changes in loan underwriting, credit review or loss reserve policies
associated with economic conditions, examination conclusions, or regulatory developments; (4)
increased levels of non-performing and repossessed assets and the ability to resolve these may
result in future losses; (5) greater than anticipated deterioration or lack of sustained growth in
the national or local economies; (6) rapid fluctuations or unanticipated changes in interest rates;
(7) the impact of governmental restrictions on entities participating in the Capital Purchase
Program of the United States Department of the Treasury; (8) changes in state and federal
legislation, regulations or policies applicable to banks or other financial service providers,
including regulatory or legislative developments arising out of current unsettled conditions in the
economy including implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act;
(9) the results of regulatory examinations; (10) increased competition with other financial
institutions in the markets that GreenBank (the Bank) serves; (11) exploring alternatives
available for the future repayment of TARP as economic conditions begin to improve; and (12) the
loss of key personnel, as well as other factors discussed throughout this document, including,
without limitation the factors described under Critical Accounting Policies and Estimates on page
24 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 2009 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.
  21




---



##### Table of Contents



Growth and Business Strategy
      Overview
   22




---



##### Table of Contents



GREEN BANKSHARES, INC.
Reconciliation of Non-GAAP Measures  (Dollars in thousands)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Total non-interest expense
    
    $
    21,274
    
    
    $
    168,410
    
    
    $
    41,820
    
    
    $
    186,241Goodwill impairment charge
    
    
    
    
    
    
    (143,389
    )
    
    
    
    
    
    
    (143,389
    )Operating expenses
    
    $
    21,274
    
    
    $
    25,021
    
    
    $
    41,820
    
    
    $
    42,852Net income (loss) available
to common shareholders
    
    $
    1,561
    
    
    $
    (151,400
    )
    
    $
    3,507
    
    
    $
    (147,852
    )Goodwill impairment charge,
net of tax
    
    
    
    
    
    
    137,414
    
    
    
    
    
    
    
    137,414Net operating income (loss)
    
    $
    1,561
    
    
    $
    (13,986
    )
    
    $
    3,507
    
    
    $
    (10,438
    )Per Diluted Share:Net income (loss) available
to common shareholders
    
    $
    0.12
    
    
    $
    (11.58
    )
    
    $
    0.27
    
    
    $
    (11.32
    )Goodwill impairment charge,
net of tax
    
    
    
    
    
    
    10.51
    
    
    
    
    
    
    
    10.52Net operating income (loss)
    
    $
    0.12
    
    
    $
    (1.07
    )
    
    $
    0.27
    
    
    $
    (0.80
    )
     23




---



##### Table of Contents



Critical Accounting Policies and Estimates
     Changes in Results of Operations
 Net Income.
  24




---



##### Table of Contents



Net Interest Income.
    FOMC Meeting
    
    Beginning
    
    
    Increase/
    
    
    EndingDate
    
    Rate
    
    
    Decrease
    
    
    RateJanuary 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
    %April 30, 2008
    
    
    2.25
    %
    
    
    (0.25
    %)
    
    
    2.00
    %June 25, 2008
    
    
    2.00
    %
    
    
    0.00
    %
    
    
    2.00
    %August 6, 2008
    
    
    2.00
    %
    
    
    0.00
    %
    
    
    2.00
    %September 16, 2008
    
    
    2.00
    %
    
    
    0.00
    %
    
    
    2.00
    %September 29, 2008
    
    
    2.00
    %
    
    
    0.00
    %
    
    
    2.00
    %October 7, 2008
    
    
    2.00
    %
    
    
    (0.50
    %)
    
    
    1.50
    %October 29, 2008
    
    
    1.50
    %
    
    
    (0.50
    %)
    
    
    1.00
    %December 16, 2008
    
    
    1.00
    %
    
    
    (0.75%) - (1.00
    %)
    
    
    0.00% - 0.25
    %January 28, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %March 17, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %April 30, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %June 25, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %August 12, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %September 23, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %November 4, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %December 16, 2009
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %January 27, 2010
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %March 16, 2010
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %April 28, 2010
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %June 23, 2010
    
    
    0.00% - 0.25
    %
    
    
    0.00
    %
    
    
    0.00% - 0.25
    %
   25




---



##### Table of Contents



Three Months EndedJune 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    1,896,071
    
    
    $
    29,390
    
    
    
    6.22
    %
    
    $
    2,127,104
    
    
    $
    32,538
    
    
    
    6.14
    %Investment securities (2)
    
    
    193,961
    
    
    
    1,996
    
    
    
    4.13
    %
    
    
    195,390
    
    
    
    2,461
    
    
    
    5.05
    %Other short-term investments
    
    
    158,208
    
    
    
    99
    
    
    
    0.25
    %
    
    
    59,883
    
    
    
    36
    
    
    
    0.24
    %Total interest-earning assets
    
    $
    2,248,240
    
    
    $
    31,485
    
    
    
    5.62
    %
    
    $
    2,382,377
    
    
    $
    35,035
    
    
    
    5.90
    %Non-interest earning assets
    
    
    305,374
    
    
    
    
    
    
    
    
    
    
    
    420,404Total assets
    
    $
    2,553,614
    
    
    
    
    
    
    
    
    
    
    $
    2,802,781Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    970,304
    
    
    $
    2,488
    
    
    
    1.03
    %
    
    $
    731,422
    
    
    $
    2,542
    
    
    
    1.39
    %Time deposits
    
    
    884,038
    
    
    
    5,138
    
    
    
    2.33
    %
    
    
    1,155,533
    
    
    
    8,969
    
    
    
    3.11
    %Total interest-bearing deposits
    
    $
    1,854,342
    
    
    $
    7,626
    
    
    
    1.65
    %
    
    $
    1,886,955
    
    
    $
    11,511
    
    
    
    2.45
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    21,943
    
    
    
    5
    
    
    
    0.09
    %
    
    
    28,171
    
    
    
    7
    
    
    
    0.10
    %Notes payable
    
    
    171,847
    
    
    
    1,712
    
    
    
    4.00
    %
    
    
    229,165
    
    
    
    2,469
    
    
    
    4.32
    %Subordinated debentures
    
    
    88,662
    
    
    
    488
    
    
    
    2.21
    %
    
    
    88,662
    
    
    
    689
    
    
    
    3.12
    %Total interest-bearing liabilities
    
    $
    2,136,794
    
    
    $
    9,831
    
    
    
    1.85
    %
    
    $
    2,232,953
    
    
    $
    14,676
    
    
    
    2.64
    %Non-interest bearing liabilities:Demand deposits
    
    
    165,554
    
    
    
    
    
    
    
    
    
    
    
    162,458Other liabilities
    
    
    17,477
    
    
    
    
    
    
    
    
    
    
    
    21,597Total non-interest bearing liabilities
    
    
    183,031
    
    
    
    
    
    
    
    
    
    
    
    184,055Total liabilities
    
    
    2,319,825
    
    
    
    
    
    
    
    
    
    
    
    2,417,008Shareholders equity
    
    
    233,789
    
    
    
    
    
    
    
    
    
    
    
    385,773Total liabilities and shareholders
Equity
    
    $
    2,553,614
    
    
    
    
    
    
    
    
    
    
    $
    2,802,781Net interest income
    
    
    
    
    
    $
    21,654
    
    
    
    
    
    
    
    
    
    
    $
    20,359Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.77
    %
    
    
    
    
    
    
    
    
    
    
    3.26
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.86
    %
    
    
    
    
    
    
    
    
    
    
    3.43
    %
 1
    
    Average loan balances excluded nonaccrual loans for the periods presented.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.  26




---



##### Table of Contents



Six Months EndedJune 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    1,924,943
    
    
    $
    59,470
    
    
    
    6.23
    %
    
    $
    2,151,190
    
    
    $
    65,193
    
    
    
    6.11
    %Investment securities (2)
    
    
    181,559
    
    
    
    3,902
    
    
    
    4.33
    %
    
    
    206,015
    
    
    
    5,323
    
    
    
    5.21
    %Other short-term investments
    
    
    153,328
    
    
    
    193
    
    
    
    0.25
    %
    
    
    65,141
    
    
    
    81
    
    
    
    0.25
    %Total interest-earning assets
    
    $
    2,259,830
    
    
    $
    63,565
    
    
    
    5.67
    %
    
    $
    2,422,346
    
    
    $
    70,597
    
    
    
    5.88
    %Non-interest earning assets
    
    
    305,977
    
    
    
    
    
    
    
    
    
    
    
    402,244Total assets
    
    $
    2,565,807
    
    
    
    
    
    
    
    
    
    
    $
    2,824,590Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    956,174
    
    
    $
    4,885
    
    
    
    1.03
    %
    
    $
    677,863
    
    
    $
    4,394
    
    
    
    1.31
    %Time deposits
    
    
    912,057
    
    
    
    10,802
    
    
    
    2.39
    %
    
    
    1,225,516
    
    
    
    19,770
    
    
    
    3.25
    %Total interest-bearing deposits
    
    $
    1,868,231
    
    
    $
    15,687
    
    
    
    1.69
    %
    
    $
    1,903,379
    
    
    $
    24,164
    
    
    
    2.56
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    22,774
    
    
    
    11
    
    
    
    0.10
    %
    
    
    30,609
    
    
    
    16
    
    
    
    0.11
    %Notes payable
    
    
    171,897
    
    
    
    3,406
    
    
    
    4.00
    %
    
    
    229,223
    
    
    
    4,912
    
    
    
    4.32
    %Subordinated debentures
    
    
    88,662
    
    
    
    960
    
    
    
    2.19
    %
    
    
    88,662
    
    
    
    1,535
    
    
    
    3.49
    %Total interest-bearing liabilities
    
    $
    2,151,564
    
    
    $
    20,064
    
    
    
    1.88
    %
    
    $
    2,251,873
    
    
    $
    30,627
    
    
    
    2.74
    %Non-interest bearing liabilities:Demand deposits
    
    
    164,370
    
    
    
    
    
    
    
    
    
    
    
    165,268Other liabilities
    
    
    17,786
    
    
    
    
    
    
    
    
    
    
    
    22,098Total non-interest bearing liabilities
    
    
    182,156
    
    
    
    
    
    
    
    
    
    
    
    187,366Total liabilities
    
    
    2,333,720
    
    
    
    
    
    
    
    
    
    
    
    2,439,239Shareholders equity
    
    
    232,087
    
    
    
    
    
    
    
    
    
    
    
    385,351Total liabilities and shareholders
equity
    
    $
    2,565,807
    
    
    
    
    
    
    
    
    
    
    $
    2,824,590Net interest income
    
    
    
    
    
    $
    43,501
    
    
    
    
    
    
    
    
    
    
    $
    39,970Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.79
    %
    
    
    
    
    
    
    
    
    
    
    3.13
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.88
    %
    
    
    
    
    
    
    
    
    
    
    3.33
    %
 1
    
    Average loan balances excluded nonaccrual loans for the periods presented.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.  27




---



##### Table of Contents



Provision for Loan Losses.
     Non-interest Income.
   28




---



##### Table of Contents



Non-interest Expense.
  Income Taxes.
 Changes in Financial Condition
       29




---



##### Table of Contents



Liquidity and Capital Resources
 Liquidity.
      30




---



##### Table of Contents



Capital Resources.
   Required
    
    
    RequiredMinimum
    
    
    to beRatio
    
    
    Well Capitalized
    
    
    Bank
    
    
    CompanyTier 1 risk-based
capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    14.73
    %
    
    
    14.88
    %Total risk-based capital
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    15.99
    %
    
    
    16.15
    %Leverage Ratio
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    11.86
    %
    
    
    12.00
    %
 Off-Balance Sheet Arrangements
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCommitments to make loans  fixed
    
    $
    3,528
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,528Commitments to make loans 
variable
    
    
    14,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,900Unused lines of credit
    
    
    120,844
    
    
    
    9,735
    
    
    
    13,527
    
    
    
    78,221
    
    
    
    222,327Letters of credit
    
    
    21,731
    
    
    
    7,593
    
    
    
    
    
    
    
    
    
    
    
    29,324Total
    
    $
    161,003
    
    
    $
    17,328
    
    
    $
    13,527
    
    
    $
    78,221
    
    
    $
    270,079
  31




---



##### Table of Contents



Disclosure of Contractual Obligations
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCertificates of deposits
    
    $
    670,653
    
    
    $
    153,375
    
    
    $
    20,119
    
    
    $
    3,588
    
    
    $
    847,735FHLB advances and notes payable
    
    
    12,361
    
    
    
    80,714
    
    
    
    30,756
    
    
    
    48,007
    
    
    
    171,838Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,662
    
    
    
    88,662Operating lease obligations
    
    
    1,092
    
    
    
    1,846
    
    
    
    926
    
    
    
    909
    
    
    
    4,773Deferred compensation
    
    
    1,951
    
    
    
    
    
    
    
    251
    
    
    
    2,017
    
    
    
    4,219Purchase obligations
    
    
    562
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    562Total
    
    $
    686,619
    
    
    $
    235,935
    
    
    $
    52,052
    
    
    $
    143,183
    
    
    $
    1,117,789
  Effect of New Accounting Standards
     32




---



##### 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
   33




---



##### Table of Contents



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  The impact on our future results of operations and financial condition of the recently enacted
Dodd-Frank Wall Street Reform and Consumer Protection Act is not yet known.
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Removed and Reserved
 Item 5. Other Information
  Item 6. Exhibits
   34




---



##### Table of Contents



SIGNATURES
  Green Bankshares, Inc.
RegistrantDate: August 6, 2010
    By:
    /s/ James E. AdamsJames E. AdamsExecutive Vice President,
Chief Financial Officer and Secretary  35




---



##### 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
 
  36