##### 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 September 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
 þ o
 o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



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  September 30, 2010 and December 31, 2009.
    
    
    2Condensed Consolidated Statements of Income  For the three and nine months ended September
30, 2010 and 2009.
    
    
    3Condensed Consolidated Statement of Changes in Shareholders Equity  For the nine months
ended September 30, 2010.
    
    
    4Condensed Consolidated Statements of Cash Flows  For the nine months ended September 30,
2010 and 2009.
    
    
    5Notes to Condensed Consolidated Financial Statements.
    
    
    6Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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##### Table of Contents



GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2010 and December 31, 2009
(Amounts in thousands, except share and per share data)
 
 (Unaudited)September 30,
    
    
    December 31,2010
    
    
    2009*ASSETSCash and due from banks
    
    $
    202,709
    
    
    $
    206,701Federal funds sold
    
    
    3,682
    
    
    
    3,793Cash and cash equivalents
    
    
    206,391
    
    
    
    210,494Interest earning deposits in other banks
    
    
    1,014
    
    
    
    11,000Securities available for sale
    
    
    163,964
    
    
    
    147,724Securities held to maturity (with a market value of $603 and $638)
    
    
    595
    
    
    
    626Loans held for sale
    
    
    2,091
    
    
    
    1,533Loans, net of unearned interest
    
    
    1,835,591
    
    
    
    2,043,807Allowance for loan losses
    
    
    (50,322
    )
    
    
    (50,161
    )Other real estate owned and repossessed assets
    
    
    73,699
    
    
    
    57,168Premises and equipment, net
    
    
    79,657
    
    
    
    81,818FHLB and other stock, at cost
    
    
    12,734
    
    
    
    12,734Cash surrender value of life insurance
    
    
    31,171
    
    
    
    30,277Core deposit and other intangibles
    
    
    7,398
    
    
    
    9,335Deferred tax asset
    
    
    15,476
    
    
    
    13,600Other assets
    
    
    35,555
    
    
    
    49,184Total assets
    
    $
    2,415,014
    
    
    $
    2,619,139LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesNon-interest bearing deposits
    
    $
    165,642
    
    
    $
    177,602Interest bearing deposits
    
    
    1,749,503
    
    
    
    1,899,910Brokered deposits
    
    
    1,399
    
    
    
    6,584Total deposits
    
    
    1,916,544
    
    
    
    2,084,096Repurchase agreements
    
    
    22,641
    
    
    
    24,449FHLB advances and notes payable
    
    
    170,884
    
    
    
    171,999Subordinated debentures
    
    
    88,662
    
    
    
    88,662Accrued interest payable and other liabilities
    
    
    18,459
    
    
    
    23,164Total liabilities
    
    $
    2,217,190
    
    
    $
    2,392,370Shareholders equityPreferred stock: no par, 1,000,000 shares authorized, 72,278 shares
outstanding
    
    $
    67,775
    
    
    $
    66,735Common stock: $2 par, 20,000,000 shares authorized, 13,190,300 and
13,171,474 shares outstanding
    
    
    26,381
    
    
    
    26,343Common stock warrants
    
    
    6,934
    
    
    
    6,934Additional paid-in capital
    
    
    188,749
    
    
    
    188,310Retained earnings (deficit)
    
    
    (94,639
    )
    
    
    (61,742
    )Accumulated other comprehensive income
    
    
    2,624
    
    
    
    189Total shareholders equity
    
    
    197,824
    
    
    
    226,769Total liabilities and shareholders equity
    
    $
    2,415,014
    
    
    $
    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




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##### Table of Contents



GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Months Ended September 30, 2010 and 2009
(Amounts in thousands, except share and per share data)
 
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    27,744
    
    
    $
    32,559
    
    
    $
    87,178
    
    
    $
    97,732Taxable securities
    
    
    1,181
    
    
    
    1,669
    
    
    
    3,860
    
    
    
    5,732Nontaxable securities
    
    
    304
    
    
    
    315
    
    
    
    922
    
    
    
    949FHLB and other stock
    
    
    136
    
    
    
    151
    
    
    
    408
    
    
    
    436Federal funds sold and other
    
    
    90
    
    
    
    102
    
    
    
    283
    
    
    
    183Total interest income
    
    
    29,455
    
    
    
    34,796
    
    
    
    92,651
    
    
    
    105,032Interest expenseDeposits
    
    
    6,444
    
    
    
    11,480
    
    
    
    22,131
    
    
    
    35,644Federal funds purchased and repurchase agreements
    
    
    6
    
    
    
    6
    
    
    
    17
    
    
    
    22FHLB advances and notes payable
    
    
    1,726
    
    
    
    2,416
    
    
    
    5,132
    
    
    
    7,328Subordinated debentures
    
    
    532
    
    
    
    556
    
    
    
    1,492
    
    
    
    2,091Total interest expense
    
    
    8,708
    
    
    
    14,458
    
    
    
    28,772
    
    
    
    45,085Net interest income
    
    
    20,747
    
    
    
    20,338
    
    
    
    63,879
    
    
    
    59,947Provision for loan losses
    
    
    36,823
    
    
    
    18,475
    
    
    
    45,461
    
    
    
    43,844Net interest income (loss) after provision for
loan losses
    
    
    (16,076
    )
    
    
    1,863
    
    
    
    18,418
    
    
    
    16,103Non-interest incomeService charges on deposit accounts
    
    
    6,651
    
    
    
    6,446
    
    
    
    19,283
    
    
    
    17,597Other charges and fees
    
    
    417
    
    
    
    505
    
    
    
    1,156
    
    
    
    1,459Trust and investment services income
    
    
    1,021
    
    
    
    595
    
    
    
    2,360
    
    
    
    1,472Mortgage banking income
    
    
    212
    
    
    
    127
    
    
    
    453
    
    
    
    292Other income
    
    
    728
    
    
    
    1,086
    
    
    
    2,327
    
    
    
    2,423Securities gains (losses), netRealized gains (losses), net
    
    
    
    
    
    
    933
    
    
    
    
    
    
    
    933Other-than-temporary impairment
    
    
    
    
    
    
    (503
    )
    
    
    (553
    )
    
    
    (960
    )Less non-credit portion
recognized in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    460
    
    
    
    227Total non-interest income
    
    
    9,029
    
    
    
    9,189
    
    
    
    25,486
    
    
    
    23,443Non-interest expenseEmployee compensation
    
    
    8,266
    
    
    
    7,315
    
    
    
    23,903
    
    
    
    23,071Employee benefits
    
    
    816
    
    
    
    526
    
    
    
    2,609
    
    
    
    3,050Occupancy expense
    
    
    1,792
    
    
    
    1,762
    
    
    
    5,175
    
    
    
    5,261Equipment expense
    
    
    742
    
    
    
    761
    
    
    
    2,118
    
    
    
    2,398Computer hardware/software expense
    
    
    916
    
    
    
    735
    
    
    
    2,626
    
    
    
    2,023Professional services
    
    
    741
    
    
    
    457
    
    
    
    1,924
    
    
    
    1,432Advertising
    
    
    657
    
    
    
    678
    
    
    
    2,061
    
    
    
    1,421OREO maintenance expense
    
    
    712
    
    
    
    531
    
    
    
    1,711
    
    
    
    811Collection and repossession expense
    
    
    508
    
    
    
    775
    
    
    
    2,329
    
    
    
    1,784Loss on OREO and repossessed assets
    
    
    6,538
    
    
    
    3,578
    
    
    
    7,973
    
    
    
    7,005FDIC Insurance
    
    
    1,099
    
    
    
    819
    
    
    
    3,159
    
    
    
    4,069Core deposit and other intangibles amortization
    
    
    646
    
    
    
    648
    
    
    
    1,937
    
    
    
    2,104Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143,389Other expenses
    
    
    3,576
    
    
    
    3,780
    
    
    
    11,304
    
    
    
    11,291Total non-interest expenses
    
    
    27,009
    
    
    
    22,365
    
    
    
    68,829
    
    
    
    209,109Loss before income taxes
    
    
    (34,056
    )
    
    
    (11,313
    )
    
    
    (24,925
    )
    
    
    (169,563
    )Provision (benefit) for income taxes
    
    
    1,098
    
    
    
    (4,815
    )
    
    
    4,222
    
    
    
    (17,695
    )Net loss
    
    $
    (35,154
    )
    
    $
    (6,498
    )
    
    $
    (29,147
    )
    
    $
    (151,868
    )Preferred stock dividends and accretion of discount
    
    
    1,251
    
    
    
    1,250
    
    
    
    3,751
    
    
    
    3,732Net loss available to common shareholders
    
    $
    (36,405
    )
    
    $
    (7,748
    )
    
    $
    (32,898
    )
    
    $
    (155,600
    )Per share of common stock:Basic loss
    
    $
    (2.78
    )
    
    $
    (0.59
    )
    
    $
    (2.51
    )
    
    $
    (11.91
    )Diluted loss
    
    
    (2.78
    )
    
    
    (0.59
    )
    
    
    (2.51
    )
    
    
    (11.91
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.13Weighted average shares outstanding:Basic
    
    
    13,097,611
    
    
    
    13,070,216
    
    
    
    13,092,579
    
    
    
    13,067,798Diluted
    
    
    13,097,611
    
    
    
    13,070,216
    
    
    
    13,092,579
    
    
    
    13,067,798
   3




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##### Table of Contents



GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the Nine Months Ended September 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
    
    
    1,040
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,040
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,710
    )
    
    
    
    
    
    
    (2,710
    )Common stock transactions:Issuance of restricted common shares
    
    
    
    
    
    
    18,826
    
    
    
    38
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense:Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    
    
    
    
    222Restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    255Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,147
    )
    
    
    
    
    
    
    (29,147
    )Change in unrealized gains,
net of reclassification and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,435
    
    
    
    2,435Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,712
    )Balance, September 30, 2010
    
    $
    67,775
    
    
    
    13,190,300
    
    
    $
    26,381
    
    
    $
    6,934
    
    
    $
    188,749
    
    
    $
    (94,639
    )
    
    $
    2,624
    
    
    $
    197,824
   4




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##### Table of Contents



GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2010 and 2009
(Amounts in thousands, except share and per share data)
 September 30,
    
    
    September 30,2010
    
    
    2009(Unaudited)Cash flows from operating activitiesNet loss
    
    $
    (29,147
    )
    
    $
    (151,868
    )Adjustments to reconcile net loss to net cash provided by operating
activitiesProvision for loan losses
    
    
    45,461
    
    
    
    43,844Impairment of goodwill
    
    
    
    
    
    
    143,389Depreciation and amortization
    
    
    5,389
    
    
    
    5,386Security amortization and accretion, net
    
    
    406
    
    
    
    41Write down of investments and other securities for impairment
    
    
    93
    
    
    
    1,028Gain on sale of securities available for sale
    
    
    
    
    
    
    (933
    )Net gain on sale of mortgage loans
    
    
    (418
    )
    
    
    (188
    )Originations of mortgage loans held for sale
    
    
    (32,065
    )
    
    
    (34,514
    )Proceeds from sales of mortgage loans
    
    
    31,925
    
    
    
    34,080Increase in cash surrender value of life insurance
    
    
    (894
    )
    
    
    (845
    )Gain from settlement of life insurance
    
    
    
    
    
    
    (305
    )Net losses from sales of fixed assets
    
    
    5
    
    
    
    (128
    )Stock-based compensation expense
    
    
    477
    
    
    
    521Net loss on other real estate and repossessed assets
    
    
    7,973
    
    
    
    7,005Deferred tax
    
    
    11,427
    
    
    
    1,037Net changes:Other assets
    
    
    (1,246
    )
    
    
    (11,664
    )Accrued interest payable and other liabilities
    
    
    (4,705
    )
    
    
    (4,808
    )Net cash provided by operating activities
    
    
    34,681
    
    
    
    31,078Cash flows from investing activitiesNet change in interest-bearing deposits with banks
    
    
    9,986
    
    
    
    (1,000
    )Purchase of securities available for sale
    
    
    (113,921
    )
    
    
    (72,094
    )Proceeds from sale of securities available for sale
    
    
    
    
    
    
    25,822Proceeds from maturities of securities available for sale
    
    
    101,189
    
    
    
    98,193Proceeds from maturities of securities held to maturity
    
    
    30
    
    
    
    20Proceeds from settlement of life insurance
    
    
    
    
    
    
    691Net change in loans
    
    
    128,133
    
    
    
    53,956Proceeds from sale of other real estate
    
    
    10,904
    
    
    
    9,848Improvements to other real estate
    
    
    (624
    )
    
    
    (187
    )Proceeds from sale of fixed assets
    
    
    
    
    
    
    796Premises and equipment expenditures
    
    
    (1,295
    )
    
    
    (3,143
    )Net cash provided by investing activities
    
    
    134,402
    
    
    
    112,902Cash flows from financing activitiesNet change in core deposits
    
    
    (162,367
    )
    
    
    333,154Net change in brokered deposits
    
    
    (5,185
    )
    
    
    (302,540
    )Net change in repurchase agreements
    
    
    (1,808
    )
    
    
    (10,007
    )Repayments of FHLB advances and notes payable
    
    
    (1,115
    )
    
    
    (12,771
    )Preferred stock dividends paid
    
    
    (2,711
    )
    
    
    (2,330
    )Common stock dividends paid
    
    
    
    
    
    
    (1,713
    )Net cash (used) provided in financing activities
    
    
    (173,186
    )
    
    
    3,793Net change in cash and cash equivalents
    
    
    (4,103
    )
    
    
    147,773Cash and cash equivalents, beginning of period
    
    
    210,494
    
    
    
    198,358Cash and cash equivalents, end of period
    
    $
    206,391
    
    
    $
    346,131Supplemental disclosures  cash and noncashInterest paid
    
    $
    29,560
    
    
    $
    48,509Income taxes paid net of refunds
    
    
    (148
    )
    
    
    1,675Loans converted to other real estate
    
    
    39,195
    
    
    
    70,088Unrealized gain on available for sale securities, net of tax
    
    
    2,435
    
    
    
    1,906
   5




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 SaleSeptember 30, 2010U.S. government agencies
    
    $
    54,212
    
    
    $
    310
    
    
    $
    (25
    )
    
    $
    54,497States and political subdivisions
    
    
    31,105
    
    
    
    1,385
    
    
    
    (215
    )
    
    
    32,275Collateralized mortgage obligations
    
    
    57,359
    
    
    
    2,287
    
    
    
    (75
    )
    
    
    59,571Mortgage-backed securities
    
    
    14,968
    
    
    
    821
    
    
    
    (1
    )
    
    
    15,788Trust preferred securities
    
    
    2,003
    
    
    
    
    
    
    
    (170
    )
    
    
    1,833$
    159,647
    
    
    $
    4,803
    
    
    $
    (486
    )
    
    $
    163,964December 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 MaturitySeptember 30, 2010States and political subdivisions
    
    $
    345
    
    
    $
    4
    
    
    $
    
    
    
    $
    349Other securities
    
    
    250
    
    
    
    4
    
    
    
    
    
    
    
    254$
    595
    
    
    $
    8
    
    
    $
    
    
    
    $
    603December 31, 2009States and political subdivisions
    
    $
    375
    
    
    $
    8
    
    
    $
    
    
    
    $
    383Other securities
    
    
    251
    
    
    
    4
    
    
    
    
    
    
    
    255$
    626
    
    
    $
    12
    
    
    $
    
    
    
    $
    638
   6




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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
    
    $
    
    
    
    $
    595
    
    
    $
    603Due after one year through five years
    
    
    4,367
    
    
    
    
    
    
    
    Due after five years through ten years
    
    
    53,757
    
    
    
    
    
    
    
    Due after ten years
    
    
    30,481
    
    
    
    
    
    
    
    Collateralized mortgage obligations
    
    
    59,571
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    15,788
    
    
    
    
    
    
    
    Total maturities
    
    $
    163,964
    
    
    $
    595
    
    
    $
    603
    Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossSeptember 30, 2010U. S. government agencies
    
    $
    5,025
    
    
    $
    (25
    )
    
    $
    
    
    
    $
    
    
    
    $
    5,025
    
    
    $
    (25
    )States and political subdivisions
    
    
    1,671
    
    
    
    (40
    )
    
    
    1,746
    
    
    
    (175
    )
    
    
    3,417
    
    
    
    (215
    )Collateralized mortgage obligations
    
    
    2,253
    
    
    
    (15
    )
    
    
    2,741
    
    
    
    (60
    )
    
    
    4,994
    
    
    
    (75
    )Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    (1
    )
    
    
    9
    
    
    
    (1
    )Trust preferred securities
    
    
    
    
    
    
    
    
    
    
    1,833
    
    
    
    (170
    )
    
    
    1,833
    
    
    
    (170
    )Total temporarily impaired
    
    $
    8,949
    
    
    $
    (80
    )
    
    $
    6,329
    
    
    $
    (406
    )
    
    $
    15,278
    
    
    $
    (486
    )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




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##### Table of Contents



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




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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
    
    
    $
    2,741
    
    
    $
    (61
    )
    
    $
    2,828Trust preferred securitiesWest Tennessee Bancshares, Inc.
    
    
    956192AA6
    
    
    
    N/A
    
    
    
    675
    
    
    
    574
    
    
    
    (101
    )
    
    
    675
  September 30,
    
    
    September 30,2010
    
    
    2009Beginning balance of credit losses at January 1, 2010 and 2009
    
    $
    976
    
    
    $
    Other-than-temporary impairment credit losses
    
    
    93
    
    
    
    733Ending balance of cumulative credit losses recognized in earnings
    
    $
    1,069
    
    
    $
    733
   9




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  LOANS
  September 30,
    
    
    December 31,2010
    
    
    2009Commercial real estate
    
    $
    877,112
    
    
    $
    1,032,505Commercial real estate  owner occupied
    
    
    234,739
    
    
    
    255,819Residential real estate
    
    
    362,534
    
    
    
    362,150Commercial and industrial
    
    
    260,133
    
    
    
    282,493Consumer
    
    
    88,223
    
    
    
    91,683Farmland and Agricultural
    
    
    27,409
    
    
    
    33,958Unearned income
    
    
    (14,559
    )
    
    
    (14,801
    )Loans, net of unearned income
    
    $
    1,835,591
    
    
    $
    2,043,807Allowance for loan losses
    
    $
    (50,322
    )
    
    $
    (50,161
    )
  September 30,
    
    
    December 31,2010
    
    
    2009Speculative 1-4 family residential real estate:Acquisition and development
    
    $
    145,500
    
    
    $
    185,087Lot warehouse
    
    
    46,306
    
    
    
    66,104Commercial 1-4 family residential
    
    
    41,847
    
    
    
    70,434Sub-total
    
    
    233,653
    
    
    
    321,625Construction:Commercial vacant land
    
    
    84,321
    
    
    
    101,679Commercial construction  non-owner occupied
    
    
    100,364
    
    
    
    164,887Commercial construction  owner occupied
    
    
    5,454
    
    
    
    28,213Consumer residential construction
    
    
    13,801
    
    
    
    19,073Sub-total
    
    
    203,940
    
    
    
    313,852Total speculative and construction
    
    
    437,593
    
    
    
    635,477Non-owner occupied commercial real estate
    
    
    439,519
    
    
    
    397,028Total commercial real estate
    
    
    877,112
    
    
    
    1,032,505Home equity lines of credit
    
    
    188,411
    
    
    
    170,818Consumer mortgages
    
    
    174,123
    
    
    
    191,332Total residential real estate
    
    
    362,534
    
    
    
    362,150
   10




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  LOANS
  September 30,
    
    
    December 31,
    
    
    September 30,2010
    
    
    2009
    
    
    2009Balance at beginning of year
    
    $
    50,161
    
    
    $
    48,811
    
    
    $
    48,811Add (deduct):Provision for loan losses
    
    
    45,461
    
    
    
    50,246
    
    
    
    43,844Loans charged off
    
    
    (47,248
    )
    
    
    (54,890
    )
    
    
    (47,591
    )Recoveries of loans charged off
    
    
    1,948
    
    
    
    5,994
    
    
    
    5,132Ending balance
    
    $
    50,322
    
    
    $
    50,161
    
    
    $
    50,196
 September 30,
    
    
    December 31,2010
    
    
    2009Impaired loans were as follows:Loans with no allowance allocated
    
    $
    94,552
    
    
    $
    89,292Loans with allowance allocated
    
    
    42,419
    
    
    
    25,946Amount of allowance allocated
    
    
    9,409
    
    
    
    5,737Nonperforming loans were as follows:Loans past due 90 days still on accrual
    
    $
    970
    
    
    $
    147Nonaccrual loans
    
    
    122,490
    
    
    
    75,411Total
    
    $
    123,460
    
    
    $
    75,558
    11




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  EARNINGS PER SHARE OF COMMON STOCK
   Three Months EndedSeptember 30,2010
    
    
    2009Basic Earnings (Loss) Per Common ShareNet loss
    
    $
    (35,154
    )
    
    $
    (6,498
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,251
    
    
    
    1,250Net loss available to common shareholders
    
    $
    (36,405
    )
    
    $
    (7,748
    )Weighted average common shares outstanding
    
    
    13,097,611
    
    
    
    13,070,216Basic loss per share available to common shareholders
    
    $
    (2.78
    )
    
    $
    (0.59
    )Diluted Earnings (Loss) Per Common ShareNet loss
    
    $
    (35,154
    )
    
    $
    (6,498
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,251
    
    
    
    1,250Net loss available to common shareholders
    
    $
    (36,405
    )
    
    $
    (7,748
    )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
    
    
    
    
    
    
    Weighted average common and dilutive potential
common shares outstanding
    
    
    13,097,611
    
    
    
    13,070,216Diluted loss per share available to common shareholders
    
    $
    (2.78
    )
    
    $
    (0.59
    )
 
 1
    
    Diluted weighted average shares outstanding exclude 93,791 and 101,636 restricted
average shares for the three month periods ended September 30, 2010 and 2009, respectively, because
their impact would be anti-dilutive.   12




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  EARNINGS PER SHARE OF COMMON STOCK
 Nine Months EndedSeptember 30,2010
    
    
    2009Basic Earnings (Loss) Per Common ShareNet loss
    
    $
    (29,147
    )
    
    $
    (151,868
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    3,751
    
    
    
    3,732Net loss available to common shareholders
    
    $
    (32,898
    )
    
    $
    (155,600
    )Weighted average common shares outstanding
    
    
    13,092,579
    
    
    
    13,067,798Basic loss per share available to common shareholders
    
    $
    (2.51
    )
    
    $
    (11.91
    )Diluted Earnings (Loss) Per Common ShareNet loss
    
    $
    (29,147
    )
    
    $
    (151,868
    )Less: preferred stock dividends and accretion of discount on
warrants
    
    
    3,751
    
    
    
    3,732Net loss available to common shareholders
    
    $
    (32,898
    )
    
    $
    (155,600
    )Weighted average common shares outstanding
    
    
    13,092,579
    
    
    
    13,067,798Add: Dilutive effects of assumed conversions of restricted stock
and exercises of stock options and warrants1
    
    
    
    
    
    
    Weighted average common and dilutive potential
common shares outstanding
    
    
    13,092,579
    
    
    
    13,067,798Diluted loss per share available to common shareholders
    
    $
    (2.51
    )
    
    $
    (11.91
    )
 
 1
    
    Diluted weighted average shares outstanding exclude 93,082 and 95,526 restricted
average shares for the nine month periods ended September 30, 2010 and 2009, respectively, because
their impact would be anti-dilutive.   13




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  SEGMENT INFORMATION
   Three months ended September 30, 2010
    
    Bank
    
    
    Other Segments
    
    
    Holding Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    19,171
    
    
    $
    2,107
    
    
    $
    (531
    )
    
    $
    
    
    
    $
    20,747Provision for loan losses
    
    
    36,449
    
    
    
    374
    
    
    
    
    
    
    
    
    
    
    
    36,823Noninterest income
    
    
    8,793
    
    
    
    448
    
    
    
    15
    
    
    
    (227
    )
    
    
    9,029Noninterest expense
    
    
    25,199
    
    
    
    1,167
    
    
    
    870
    
    
    
    (227
    )
    
    
    27,009Income tax expense (benefit)
    
    
    926
    
    
    
    397
    
    
    
    (225
    )
    
    
    
    
    
    
    1,098Segment profit (loss)
    
    
    (34,610
    )
    
    $
    617
    
    
    $
    (1,161
    )
    
    $
    
    
    
    $
    (35,154
    )Segment assets at September 30, 2010
    
    $
    2,364,169
    
    
    $
    42,139
    
    
    $
    8,706
    
    
    $
    
    
    
    $
    2,415,014
 Three months ended September 30, 2009
    
    Bank
    
    
    Other Segments
    
    
    Holding Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    18,729
    
    
    $
    2,165
    
    
    $
    (556
    )
    
    $
    
    
    
    $
    20,338Provision for loan losses
    
    
    17,770
    
    
    
    705
    
    
    
    
    
    
    
    
    
    
    
    18,475Noninterest income
    
    
    8,894
    
    
    
    540
    
    
    
    16
    
    
    
    (261
    )
    
    
    9,189Noninterest expense
    
    
    20,969
    
    
    
    1,183
    
    
    
    474
    
    
    
    (261
    )
    
    
    22,365Income tax expense (benefit)
    
    
    (4,804
    )
    
    
    319
    
    
    
    (330
    )
    
    
    
    
    
    
    (4,815
    )Segment profit (loss)
    
    
    (6,312
    )
    
    $
    498
    
    
    $
    (684
    )
    
    $
    
    
    
    $
    (6,498
    )Segment assets at September 30, 2009
    
    $
    2,742,039
    
    
    $
    42,453
    
    
    $
    9,725
    
    
    $
    
    
    
    $
    2,794,217
 Nine months ended September 30, 2010
    
    Bank
    
    
    Other Segments
    
    
    Holding Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    59,098
    
    
    $
    6,273
    
    
    $
    (1,492
    )
    
    $
    
    
    
    $
    63,879Provision for loan losses
    
    
    44,244
    
    
    
    1,217
    
    
    
    
    
    
    
    
    
    
    
    45,461Noninterest income
    
    
    24,850
    
    
    
    1,236
    
    
    
    81
    
    
    
    (681
    )
    
    
    25,486Noninterest expense
    
    
    64,616
    
    
    
    3,423
    
    
    
    1,471
    
    
    
    (681
    )
    
    
    68,829Income tax expense (benefit)
    
    
    3,841
    
    
    
    1,124
    
    
    
    (743
    )
    
    
    
    
    
    
    4,222Segment profit (loss)
    
    
    (28,753
    )
    
    $
    1,745
    
    
    $
    (2,139
    )
    
    $
    
    
    
    $
    (29,147
    )
 Nine months ended September 30, 2009
    
    Bank
    
    
    Other Segments
    
    
    Holding Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    55,621
    
    
    $
    6,416
    
    
    $
    (2,090
    )
    
    $
    
    
    
    $
    59,947Provision for loan losses
    
    
    41,756
    
    
    
    2,088
    
    
    
    
    
    
    
    
    
    
    
    43,844Noninterest income
    
    
    22,465
    
    
    
    1,529
    
    
    
    165
    
    
    
    (716
    )
    
    
    23,443Noninterest expense
    
    
    204,624
    
    
    
    3,654
    
    
    
    1,547
    
    
    
    (716
    )
    
    
    209,109Income tax expense (benefit)
    
    
    (17,314
    )
    
    
    864
    
    
    
    (1,245
    )
    
    
    
    
    
    
    (17,695
    )Segment profit (loss)
    
    
    (150,980
    )
    
    $
    1,339
    
    
    $
    (2,227
    )
    
    $
    
    
    
    $
    (151,868
    )
   14




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  SEGMENT INFORMATION
 Asset Quality Ratios
 As of and for the nine months ended September 30, 2010
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as a percentage of total loans, net of unearned income
    
    
    6.75
    %
    
    
    1.50
    %
    
    
    6.73
    %Nonperforming assets as a percentage of total assets
    
    
    8.13
    %
    
    
    1.54
    %
    
    
    8.16
    %Allowance for loan losses as a percentage of total loans, net of unearned
income
    
    
    2.58
    %
    
    
    7.80
    %
    
    
    2.74
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    38.22
    %
    
    
    518.99
    %
    
    
    40.76
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    2.26
    %
    
    
    3.06
    %
    
    
    2.31
    %
 As of and for the nine months ended September 30, 2009
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as a percentage of total loans, net of unearned income
    
    
    3.24
    %
    
    
    2.70
    %
    
    
    3.27
    %Nonperforming assets as a percentage of total assets
    
    
    4.43
    %
    
    
    2.89
    %
    
    
    4.48
    %Allowance for loan losses as a percentage of total loans, net of unearned
income
    
    
    2.24
    %
    
    
    8.12
    %
    
    
    2.39
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    69.13
    %
    
    
    301.11
    %
    
    
    73.09
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    1.86
    %
    
    
    4.25
    %
    
    
    1.93
    %
 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 nine month period ended September 30, 2010
    
    $
    43,973
    
    
    $
    1,326
    
    
    $
    45,299For the nine month period ended September 30, 2009
    
    $
    40,662
    
    
    $
    1,797
    
    
    $
    42,459For the year ended December 31, 2009
    
    $
    46,394
    
    
    $
    2,502
    
    
    $
    48,896
   15




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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




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




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GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 Balance
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Sheet
    
    
    ValueSeptember 30, 2010Securities available for saleU.S. government agencies
    
    $
    
    
    
    $
    54,497
    
    
    $
    
    
    
    $
    54,497
    
    
    $
    54,497States and political subdivisions
    
    
    
    
    
    
    32,275
    
    
    
    
    
    
    
    32,275
    
    
    
    32,275Collateralized mortgage obligations
    
    
    
    
    
    
    59,571
    
    
    
    
    
    
    
    59,571
    
    
    
    59,571Mortgage-backed securities
    
    
    
    
    
    
    15,788
    
    
    
    
    
    
    
    15,788
    
    
    
    15,788Trust preferred securities
    
    
    
    
    
    
    1,259
    
    
    
    574
    
    
    
    1,833
    
    
    
    1,833December 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




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GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES (continued)
  September 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
    
    
    ValueSeptember 30, 2010Other real estate
    
    $
    
    
    
    $
    
    
    
    $
    28,327
    
    
    $
    28,327
    
    
    $
    28,327Impaired loans
    
    
    
    
    
    
    
    
    
    
    95,475
    
    
    
    95,475
    
    
    
    95,475Total assets at fair value
    
    $
    
    
    
    $
    
    
    
    $
    123,802
    
    
    $
    123,802
    
    
    $
    123,802December 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




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GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES
  September 30,
    
    
    December 31,2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    206,391
    
    
    $
    206,391
    
    
    $
    221,494
    
    
    $
    221,494Securities available for sale
    
    
    163,964
    
    
    
    163,964
    
    
    
    147,724
    
    
    
    147,724Securities held to maturity
    
    
    595
    
    
    
    603
    
    
    
    626
    
    
    
    638Loans held for sale
    
    
    2,091
    
    
    
    2,126
    
    
    
    1,533
    
    
    
    1,552Loans, net
    
    
    1,785,269
    
    
    
    1,746,265
    
    
    
    1,993,646
    
    
    
    1,950,684FHLB and other stock
    
    
    12,734
    
    
    
    12,734
    
    
    
    12,734
    
    
    
    12,734Cash surrender value of life insurance
    
    
    31,171
    
    
    
    31,171
    
    
    
    30,277
    
    
    
    30,277Accrued interest receivable
    
    
    8,099
    
    
    
    8,099
    
    
    
    9,130
    
    
    
    9,130Financial liabilities:Deposit accounts
    
    $
    1,916,544
    
    
    $
    1,921,420
    
    
    $
    2,084,096
    
    
    $
    2,095,611Federal funds purchased and repurchase
Agreements
    
    
    22,641
    
    
    
    22,641
    
    
    
    24,449
    
    
    
    24,449FHLB Advances and notes payable
    
    
    170,884
    
    
    
    182,834
    
    
    
    171,999
    
    
    
    176,602Subordinated debentures
    
    
    88,662
    
    
    
    70,914
    
    
    
    88,662
    
    
    
    70,527Accrued interest payable
    
    
    1,773
    
    
    
    1,773
    
    
    
    2,561
    
    
    
    2,561
   20




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Forward-looking
statements, which are based on assumptions and estimates and describe our future plans, strategies
and expectations, are generally identifiable by the use of forward-looking terminology and words
such as trends, assumptions, target, guidance, outlook, opportunity, future, plans,
goals, objectives, expectations, near-term, long-term, projection, may, will,
would, could, expect, intend, estimate, anticipate, believe, potential, regular,
or continue (or the negative or other derivatives of each of these terms) or similar terminology
and expressions.
 Although the Company believes that the assumptions underlying any forward-looking statements
are reasonable, any of the assumptions could be inaccurate, and therefore, actual results may
differ materially from those projected in or implied by the forward-looking statements. Factors and
risks that may result in actual results differing from this forward-looking information include,
but are not limited to, those contained in the 2009 10-K in Part I, Item 1A thereof as updated in
the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 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 (the CPP) 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) the
Company recording a further valuation allowance related to its deferred tax asset (DTA); (12)
exploring alternatives available for the future repayment or conversion of the preferred stock
issued in the CPP; (13) further deterioration in the valuation of other real estate owned; (14)
inability to comply with regulatory capital requirements and to secure any required regulatory
approvals for capital actions; and (15) 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




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Growth and Business Strategy
      Overview
   22




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##### Table of Contents



GREEN BANKSHARES, INC.
Reconciliation of Non-GAAP Measures  (Dollars in thousands)
 Three Months Ended
    
    
    Nine Months EndedSeptember
    
    
    September
    
    
    September
    
    
    September30, 2010
    
    
    30, 2009
    
    
    30, 2010
    
    
    30, 2009Total non-interest expense
    
    $
    27,009
    
    
    $
    22,365
    
    
    $
    68,829
    
    
    $
    209,109Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (143,389
    )Operating expenses
    
    $
    27,009
    
    
    $
    22,365
    
    
    $
    68,829
    
    
    $
    65,720Net loss available to common
shareholders
    
    $
    (36,405
    )
    
    $
    (7,748
    )
    
    $
    (32,898
    )
    
    $
    (155,600
    )Goodwill impairment charge,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,414Net operating loss
    
    $
    (36,405
    )
    
    $
    (7,748
    )
    
    $
    (32,898
    )
    
    $
    (18,186
    )Per Diluted Share:Net loss available to
common shareholders
    
    $
    (2.78
    )
    
    $
    (0.59
    )
    
    $
    (2.51
    )
    
    $
    (11.91
    )Goodwill impairment charge,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.52Net operating loss
    
    $
    (2.78
    )
    
    $
    (0.59
    )
    
    $
    (2.51
    )
    
    $
    (1.39
    )
 The above table presents computations and other financial information excluding the
goodwill impairment charge incurred by the Company in the second quarter of 2009 (non-GAAP).
The goodwill impairment charge is included in the financial results presented in accordance
with generally accepted accounting principles (GAAP). The Company believes that the
exclusion of goodwill impairment in expressing net operating income (loss), operating
expenses and earnings (loss) per share data provides a more meaningful base for period to
period comparisons which will assist investors in analyzing the operating results of the
Company and predicting operating performance. The Company utilizes these non-GAAP financial
measures to compare the operating performance with comparable periods in prior years and
with internally prepared projections. Non-GAAP financial measures have inherent limitations,
are not required to be uniformly applied and are not audited. To mitigate these limitations,
the Company has policies in place to address goodwill impairment from other normal operating
expenses to ensure that the Companys operating results are properly reflected for period to
period comparisons.
    23




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##### Table of Contents



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




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##### Table of Contents



Net Interest Income.
      25




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##### Table of Contents



Three Months EndedSeptember 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    1,812,154
    
    
    $
    27,759
    
    
    
    6.08
    %
    
    $
    2,075,096
    
    
    $
    32,577
    
    
    
    6.23
    %Investment securities (2)
    
    
    179,586
    
    
    
    1,785
    
    
    
    3.94
    %
    
    
    184,433
    
    
    
    2,305
    
    
    
    4.96
    %Other short-term investments
    
    
    138,599
    
    
    
    90
    
    
    
    0.26
    %
    
    
    183,448
    
    
    
    102
    
    
    
    0.22
    %Total interest-earning assets
    
    $
    2,130,339
    
    
    $
    29,634
    
    
    
    5.52
    %
    
    $
    2,442,977
    
    
    $
    34,984
    
    
    
    5.68
    %Non-interest earning assets
    
    
    333,199
    
    
    
    
    
    
    
    
    
    
    
    303,665Total assets
    
    $
    2,463,538
    
    
    
    
    
    
    
    
    
    
    $
    2,746,642Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    992,222
    
    
    $
    2,522
    
    
    
    1.01
    %
    
    $
    870,091
    
    
    $
    3,163
    
    
    
    1.44
    %Time deposits
    
    
    765,960
    
    
    
    3,922
    
    
    
    2.03
    %
    
    
    1,121,349
    
    
    
    8,317
    
    
    
    2.94
    %Total interest-bearing deposits
    
    $
    1,758,182
    
    
    $
    6,444
    
    
    
    1.45
    %
    
    $
    1,991,440
    
    
    $
    11,480
    
    
    
    2.29
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    22,990
    
    
    
    6
    
    
    
    0.10
    %
    
    
    25,454
    
    
    
    6
    
    
    
    0.09
    %Notes payable
    
    
    171,216
    
    
    
    1,726
    
    
    
    4.00
    %
    
    
    220,591
    
    
    
    2,416
    
    
    
    4.35
    %Subordinated debentures
    
    
    88,662
    
    
    
    532
    
    
    
    2.38
    %
    
    
    88,662
    
    
    
    556
    
    
    
    2.49
    %Total interest-bearing liabilities
    
    $
    2,041,050
    
    
    $
    8,708
    
    
    
    1.69
    %
    
    $
    2,326,147
    
    
    $
    14,458
    
    
    
    2.47
    %Non-interest bearing liabilities:Demand deposits
    
    
    171,237
    
    
    
    
    
    
    
    
    
    
    
    160,653Other liabilities
    
    
    19,161
    
    
    
    
    
    
    
    
    
    
    
    22,872Total non-interest bearing liabilities
    
    
    190,398
    
    
    
    
    
    
    
    
    
    
    
    183,525Total liabilities
    
    
    2,231,448
    
    
    
    
    
    
    
    
    
    
    
    2,509,672Shareholders equity
    
    
    232,090
    
    
    
    
    
    
    
    
    
    
    
    236,970Total liabilities and shareholders
Equity
    
    $
    2,463,538
    
    
    
    
    
    
    
    
    
    
    $
    2,746,642Net interest income
    
    
    
    
    
    $
    20,926
    
    
    
    
    
    
    
    
    
    
    $
    20,526Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.83
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.90
    %
    
    
    
    
    
    
    
    
    
    
    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.  26




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##### Table of Contents



Nine Months EndedSeptember 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    1,886,937
    
    
    $
    87,230
    
    
    
    6.18
    %
    
    $
    2,125,547
    
    
    $
    97,771
    
    
    
    6.15
    %Investment securities (2)
    
    
    180,894
    
    
    
    5,686
    
    
    
    4.20
    %
    
    
    198,741
    
    
    
    7,628
    
    
    
    5.13
    %Other short-term investments
    
    
    148,365
    
    
    
    283
    
    
    
    0.26
    %
    
    
    105,011
    
    
    
    183
    
    
    
    0.23
    %Total interest-earning assets
    
    $
    2,216,196
    
    
    $
    93,199
    
    
    
    5.62
    %
    
    $
    2,429,299
    
    
    $
    105,582
    
    
    
    5.81
    %Non-interest earning assets
    
    
    315,147
    
    
    
    
    
    
    
    
    
    
    
    369,023Total assets
    
    $
    2,531,343
    
    
    
    
    
    
    
    
    
    
    $
    2,798,322Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    968,322
    
    
    $
    7,407
    
    
    
    1.02
    %
    
    $
    742,643
    
    
    $
    7,557
    
    
    
    1.36
    %Time deposits
    
    
    862,823
    
    
    
    14,724
    
    
    
    2.28
    %
    
    
    1,190,412
    
    
    
    28,087
    
    
    
    3.15
    %Total interest-bearing deposits
    
    $
    1,831,145
    
    
    $
    22,131
    
    
    
    1.62
    %
    
    $
    1,933,055
    
    
    $
    35,644
    
    
    
    2.47
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    22,847
    
    
    
    17
    
    
    
    0.10
    %
    
    
    28,872
    
    
    
    22
    
    
    
    0.10
    %Notes payable
    
    
    171,673
    
    
    
    5,132
    
    
    
    4.00
    %
    
    
    226,314
    
    
    
    7,328
    
    
    
    4.33
    %Subordinated debentures
    
    
    88,662
    
    
    
    1,492
    
    
    
    2.25
    %
    
    
    88,662
    
    
    
    2,091
    
    
    
    3.15
    %Total interest-bearing liabilities
    
    $
    2,114,327
    
    
    $
    28,772
    
    
    
    1.82
    %
    
    $
    2,276,903
    
    
    $
    45,085
    
    
    
    2.65
    %Non-interest bearing liabilities:Demand deposits
    
    
    166,685
    
    
    
    
    
    
    
    
    
    
    
    163,713Other liabilities
    
    
    18,243
    
    
    
    
    
    
    
    
    
    
    
    22,359Total non-interest bearing liabilities
    
    
    184,928
    
    
    
    
    
    
    
    
    
    
    
    186,072Total liabilities
    
    
    2,299,255
    
    
    
    
    
    
    
    
    
    
    
    2,462,975Shareholders equity
    
    
    232,088
    
    
    
    
    
    
    
    
    
    
    
    335,347Total liabilities and shareholders
equity
    
    $
    2,531,343
    
    
    
    
    
    
    
    
    
    
    $
    2,798,322Net interest income
    
    
    
    
    
    $
    64,427
    
    
    
    
    
    
    
    
    
    
    $
    60,497Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.80
    %
    
    
    
    
    
    
    
    
    
    
    3.16
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.89
    %
    
    
    
    
    
    
    
    
    
    
    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




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Provision for Loan Losses.
     Non-interest Income.
  28




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




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Liquidity and Capital Resources
 Liquidity.
   30




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Capital Resources.
    31




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##### Table of Contents



Required
    
    
    RequiredMinimum
    
    
    to beRatio
    
    
    Well Capitalized
    
    
    Bank
    
    
    CompanyTier 1 risk-based capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    13.53
    %
    
    
    13.63
    %Total risk-based capital
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    14.80
    %
    
    
    14.89
    %Leverage Ratio
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    10.78
    %
    
    
    10.80
    %
  Off-Balance Sheet Arrangements
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCommitments to make loans  fixed
    
    $
    5,533
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,533Commitments to make loans 
variable
    
    
    8,895
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,895Unused lines of credit
    
    
    102,551
    
    
    
    11,292
    
    
    
    12,489
    
    
    
    76,787
    
    
    
    203,119Letters of credit
    
    
    20,652
    
    
    
    7,554
    
    
    
    
    
    
    
    
    
    
    
    28,206Total
    
    $
    137,631
    
    
    $
    18,846
    
    
    $
    12,489
    
    
    $
    76,787
    
    
    $
    245,753
 Disclosure of Contractual Obligations
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCertificates of deposits
    
    $
    490,871
    
    
    $
    189,950
    
    
    $
    67,785
    
    
    $
    4,230
    
    
    $
    752,836FHLB advances and notes payable
    
    
    12,298
    
    
    
    80,587
    
    
    
    30,621
    
    
    
    47,378
    
    
    
    170,884Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,662
    
    
    
    88,662Operating lease obligations
    
    
    1,098
    
    
    
    1,738
    
    
    
    872
    
    
    
    822
    
    
    
    4,530Deferred compensation
    
    
    2,027
    
    
    
    200
    
    
    
    454
    
    
    
    1,605
    
    
    
    4,286Purchase obligations
    
    
    579
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    579Total
    
    $
    506,873
    
    
    $
    272,475
    
    
    $
    99,732
    
    
    $
    142,697
    
    
    $
    1,021,777
  32




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Effect of New Accounting Standards
     33




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##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting
   34




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##### Table of Contents



PART II  OTHER INFORMATION
 Item 1.
    
    Legal Proceedings
  Item 1A.
    
    Risk Factors
  Negative developments in the U.S. and local economy and in local real estate markets have adversely
impacted our operations and results and may continue to adversely impact our results in the future.
   We rely on dividends from our bank subsidiary as our primary source of liquidity and payment
of these dividends is limited under Tennessee law.
  We have a significant deferred tax asset and cannot assure you that it will be fully realized.
   35




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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
   36




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##### Table of Contents



SIGNATURES
  Green Bankshares, Inc.
RegistrantDate: November 9, 2010
    By:
    /s/ James E. AdamsJames E. AdamsExecutive Vice President,
Chief Financial Officer and Secretary  37




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002
  38