##### 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, 2009
 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




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##### 



PART I  FINANCIAL INFORMATION
 ITEM 1.
    
    FINANCIAL STATEMENTS
  Condensed Consolidated Balance Sheets  September 30, 2009 and December 31, 2008
    
    
    2Condensed Consolidated Statements of Income  For the three and nine months ended September 30, 2009 and 2008
    
    
    3Condensed Consolidated Statement of Changes in Shareholders Equity  For the nine months ended September 30, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows  For the nine months ended September 30, 2009 and 2008
    
    
    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, 2009 and December 31, 2008
 (Amounts in thousands, except share and per share data)
 (Unaudited)September 30,
    
    
    December 31,2009
    
    
    2008*ASSETSCash and due from banks
    
    $
    345,209
    
    
    $
    193,095Federal funds sold
    
    
    922
    
    
    
    5,263Cash and cash equivalents
    
    
    346,131
    
    
    
    198,358Interest earning deposits in other banks
    
    
    1,000
    
    
    
    Securities available for sale
    
    
    154,937
    
    
    
    203,562Securities held to maturity (with a market value of $644 and $601)
    
    
    636
    
    
    
    657Loans held for sale
    
    
    1,064
    
    
    
    442Loans, net of unearned interest
    
    
    2,099,267
    
    
    
    2,223,390Allowance for loan losses
    
    
    (50,196
    )
    
    
    (48,811
    )Other real estate owned and repossessed assets
    
    
    56,413
    
    
    
    45,371Premises and equipment, net
    
    
    82,551
    
    
    
    83,359FHLB and other stock, at cost
    
    
    12,734
    
    
    
    13,030Cash surrender value of life insurance
    
    
    29,997
    
    
    
    29,539Goodwill
    
    
    
    
    
    
    143,389Core deposit and other intangibles
    
    
    9,981
    
    
    
    12,085Deferred tax asset
    
    
    10,228
    
    
    
    12,496Other assets
    
    
    39,474
    
    
    
    27,804Total assets
    
    $
    2,794,217
    
    
    $
    2,944,671LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesNon-interest bearing deposits
    
    $
    156,797
    
    
    $
    176,685Interest bearing deposits
    
    
    1,998,157
    
    
    
    1,645,115Brokered deposits
    
    
    59,807
    
    
    
    362,347Total deposits
    
    
    2,214,761
    
    
    
    2,184,147Repurchase agreements
    
    
    25,294
    
    
    
    35,302FHLB advances and notes payable
    
    
    216,578
    
    
    
    229,349Subordinated debentures
    
    
    88,662
    
    
    
    88,662Accrued interest payable and other liabilities
    
    
    21,534
    
    
    
    25,980Total liabilities
    
    $
    2,566,829
    
    
    $
    2,563,440Shareholders equityPreferred stock: no par, 1,000,000 shares authorized, 72,278 shares
outstanding
    
    $
    66,388
    
    
    $
    65,346Common stock: $2 par, 20,000,000 shares authorized, 13,171,474 and
13,112,687 shares outstanding
    
    
    26,343
    
    
    
    26,225Common stock warrants
    
    
    6,934
    
    
    
    6,934Additional paid-in capital
    
    
    188,146
    
    
    
    187,742Retained earnings (deficit)
    
    
    (61,666
    )
    
    
    95,647Accumulated other comprehensive income (loss)
    
    
    1,243
    
    
    
    (663
    )Total shareholders equity
    
    
    227,388
    
    
    
    381,231Total liabilities and shareholders equity
    
    $
    2,794,217
    
    
    $
    2,944,671
 *
    
    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, 2008   2




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##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three and Nine Months Ended September 30, 2009 and 2008
 (Amounts in thousands, except share and per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    32,559
    
    
    $
    38,497
    
    
    $
    97,732
    
    
    $
    120,653Taxable securities
    
    
    1,669
    
    
    
    3,487
    
    
    
    5,732
    
    
    
    9,134Nontaxable securities
    
    
    315
    
    
    
    320
    
    
    
    949
    
    
    
    977FHLB and other stock
    
    
    151
    
    
    
    176
    
    
    
    436
    
    
    
    493Federal funds sold and other
    
    
    102
    
    
    
    86
    
    
    
    183
    
    
    
    112Total interest income
    
    
    34,796
    
    
    
    42,566
    
    
    
    105,032
    
    
    
    131,369Interest expenseDeposits
    
    
    11,480
    
    
    
    14,345
    
    
    
    35,644
    
    
    
    43,657Federal funds purchased and repurchase agreements
    
    
    6
    
    
    
    262
    
    
    
    22
    
    
    
    2,054FHLB advances and notes payable
    
    
    2,416
    
    
    
    2,525
    
    
    
    7,328
    
    
    
    8,268Subordinated debentures
    
    
    556
    
    
    
    1,050
    
    
    
    2,091
    
    
    
    3,490Total interest expense
    
    
    14,458
    
    
    
    18,182
    
    
    
    45,085
    
    
    
    57,469Net interest income
    
    
    20,338
    
    
    
    24,384
    
    
    
    59,947
    
    
    
    73,900Provision for loan losses
    
    
    18,475
    
    
    
    8,620
    
    
    
    43,844
    
    
    
    20,527Net interest income after
provision for loan losses
    
    
    1,863
    
    
    
    15,764
    
    
    
    16,103
    
    
    
    53,373Non-interest incomeService charges on deposit accounts
    
    
    6,446
    
    
    
    6,070
    
    
    
    17,597
    
    
    
    17,525Other charges and fees
    
    
    505
    
    
    
    502
    
    
    
    1,459
    
    
    
    1,511Trust and investment services income
    
    
    595
    
    
    
    564
    
    
    
    1,472
    
    
    
    1,398Mortgage banking income
    
    
    127
    
    
    
    139
    
    
    
    292
    
    
    
    689Security impairment loss recognized
    
    
    (503
    )
    
    
    
    
    
    
    (732
    )
    
    
    Net gain on sale of securities
    
    
    933
    
    
    
    72
    
    
    
    933
    
    
    
    72Other income
    
    
    1,086
    
    
    
    663
    
    
    
    2,423
    
    
    
    2,233Total non-interest income
    
    
    9,189
    
    
    
    8,010
    
    
    
    23,444
    
    
    
    23,428Non-interest expenseEmployee compensation
    
    
    7,315
    
    
    
    8,961
    
    
    
    23,071
    
    
    
    25,620Employee benefits
    
    
    526
    
    
    
    1,197
    
    
    
    3,050
    
    
    
    3,643Occupancy expense
    
    
    1,762
    
    
    
    1,746
    
    
    
    5,261
    
    
    
    5,110Equipment expense
    
    
    761
    
    
    
    719
    
    
    
    2,398
    
    
    
    2,566Computer hardware/software expense
    
    
    735
    
    
    
    715
    
    
    
    2,023
    
    
    
    2,066Professional services
    
    
    457
    
    
    
    470
    
    
    
    1,432
    
    
    
    1,428Advertising
    
    
    678
    
    
    
    710
    
    
    
    1,421
    
    
    
    2,398Loss on sale of OREO and repossessed assets
    
    
    3,578
    
    
    
    1,942
    
    
    
    7,005
    
    
    
    3,022FDIC Insurance
    
    
    819
    
    
    
    418
    
    
    
    4,069
    
    
    
    1,181Core deposit and other intangibles amortization
    
    
    648
    
    
    
    649
    
    
    
    2,104
    
    
    
    1,958Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    143,389
    
    
    
    Other expenses
    
    
    5,086
    
    
    
    4,417
    
    
    
    13,887
    
    
    
    12,653Total non-interest expenses
    
    
    22,365
    
    
    
    21,944
    
    
    
    209,110
    
    
    
    61,645Income (loss) before income
taxes
    
    
    (11,313
    )
    
    
    1,830
    
    
    
    (169,563
    )
    
    
    15,156Provision for income taxes (benefit)
    
    
    (4,815
    )
    
    
    596
    
    
    
    (17,695
    )
    
    
    5,282Net income (loss)
    
    $
    (6,498
    )
    
    $
    1,234
    
    
    $
    (151,868
    )
    
    $
    9,874Preferred stock dividends and accretion of discount
    
    
    1,250
    
    
    
    
    
    
    
    3,732
    
    
    
    Net income (loss) available to
common shareholders
    
    $
    (7,748
    )
    
    $
    1,234
    
    
    $
    (155,600
    )
    
    $
    9,874Per share of common stock:Basic earnings (loss)
    
    $
    (0.59
    )
    
    $
    0.10
    
    
    $
    (11.91
    )
    
    $
    0.76Diluted earnings (loss)
    
    
    (0.59
    )
    
    
    0.10
    
    
    
    (11.91
    )
    
    
    0.76Dividends
    
    
    0.00
    
    
    
    0.13
    
    
    
    0.13
    
    
    
    0.39Weighted average shares outstanding:Basic
    
    
    13,070,216
    
    
    
    12,931,774
    
    
    
    13,067,798
    
    
    
    12,931,538Diluted1
    
    
    13,070,216
    
    
    
    12,947,618
    
    
    
    13,067,798
    
    
    
    12,936,084
 1
    
    Diluted weighted average shares outstanding for the three and nine months ended
September 30, 2009 excludes 101,636 and 95,526 shares, respectively, because they are anti-dilutive.   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, 2009
 (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(Loss)
    
    
    EquityBalance, December 31, 2008
    
    $
    65,346
    
    
    
    13,112,687
    
    
    $
    26,225
    
    
    $
    6,934
    
    
    $
    187,742
    
    
    $
    95,647
    
    
    $
    (663
    )
    
    $
    381,231Preferred stock transactions:Accretion of preferred
stock discount
    
    
    1,042
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,042
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,690
    )
    
    
    
    
    
    
    (2,690
    )Common stock transactions:Issuance of restricted
common shares
    
    
    
    
    
    
    58,787
    
    
    
    118
    
    
    
    
    
    
    
    (118
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense:Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    292Restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    230Dividends paid ($.13 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,713
    )
    
    
    
    
    
    
    (1,713
    )Comprehensive (loss):Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,868
    )
    
    
    
    
    
    
    (151,868
    )Change in unrealized gains,
net of reclassification and
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,906
    
    
    
    1,906Total comprehensive (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,962
    )Balance, September 30, 2009
    
    $
    66,388
    
    
    
    13,171,474
    
    
    $
    26,343
    
    
    $
    6,934
    
    
    $
    188,146
    
    
    $
    (61,666
    )
    
    $
    1,243
    
    
    $
    227,388
   4




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##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Nine Months Ended September 30, 2009 and 2008
 (Amounts in thousands, except share and per share data)
 September 30,
    
    
    September 30,2009
    
    
    2008(Unaudited)Cash flows from operating activitiesNet income (loss)
    
    $
    (151,868
    )
    
    $
    9,874Adjustments to reconcile net income (loss) to net cash provided by
operating activitiesProvision for loan losses
    
    
    43,844
    
    
    
    20,527Impairment of goodwill
    
    
    143,389
    
    
    
    Depreciation and amortization
    
    
    5,386
    
    
    
    5,264Security amortization and accretion, net
    
    
    41
    
    
    
    (726
    )Writedown of investments and other securities for impairment
    
    
    1,028
    
    
    
    Gain on sale of securities
    
    
    (933
    )
    
    
    (74
    )FHLB stock dividends
    
    
    
    
    
    
    (464
    )Net gain on sale of mortgage loans
    
    
    (188
    )
    
    
    (487
    )Originations of mortgage loans held for sale
    
    
    (34,514
    )
    
    
    (43,894
    )Proceeds from sales of mortgage loans
    
    
    34,080
    
    
    
    44,887Increase in cash surrender value of life insurance
    
    
    (845
    )
    
    
    (804
    )Gain from settlement of life insurance
    
    
    (305
    )
    
    
    Net (gains) losses from sales of fixed assets
    
    
    (128
    )
    
    
    388Stock-based compensation expense
    
    
    521
    
    
    
    583Net loss (gain) on other real estate and repossessed assets
    
    
    7,005
    
    
    
    1,837Deferred tax expense (benefit)
    
    
    1,037
    
    
    
    (746
    )Net changes:Other assets
    
    
    (11,664
    )
    
    
    5,031Accrued interest payable and other liabilities
    
    
    (4,808
    )
    
    
    (11,142
    )Net cash provided by operating activities
    
    
    31,078
    
    
    
    30,054Cash flows from investing activitiesNet change in interest-bearing deposits with banks
    
    
    (1,000
    )
    
    
    Purchase of securities available for sale
    
    
    (72,094
    )
    
    
    (136,985
    )Proceeds from sale of securities available for sale
    
    
    25,822
    
    
    
    3,398Proceeds from maturities of securities available for sale
    
    
    98,193
    
    
    
    74,467Proceeds from maturities of securities held to maturity
    
    
    20
    
    
    
    545Purchase of FHLB stock
    
    
    
    
    
    
    (417
    )Net change in loans
    
    
    53,956
    
    
    
    (13,841
    )Proceeds from settlement of life insurance
    
    
    691
    
    
    
    Proceeds from sale of other real estate
    
    
    9,848
    
    
    
    19,238Improvements to other real estate
    
    
    (187
    )
    
    
    (1,073
    )Proceeds from sale of fixed assets
    
    
    796
    
    
    
    50Premises and equipment expenditures
    
    
    (3,143
    )
    
    
    (4,615
    )Net cash provided (used) by investing activities
    
    
    112,902
    
    
    
    (59,233
    )Cash flows from financing activitiesNet change in core deposits
    
    
    333,154
    
    
    
    215,383Net change in brokered deposits
    
    
    (302,540
    )
    
    
    74,022Net change in repurchase agreements
    
    
    (10,007
    )
    
    
    (129,183
    )Proceeds from FHLB advances and notes payable
    
    
    
    
    
    
    20,916Repayments of FHLB advances and notes payable
    
    
    (12,771
    )
    
    
    (109,701
    )Preferred stock dividends paid
    
    
    (2,330
    )
    
    
    Common stock dividends paid
    
    
    (1,713
    )
    
    
    (5,070
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    14Net cash provided by financing activities
    
    
    3,793
    
    
    
    66,381Net change in cash and cash equivalents
    
    
    147,773
    
    
    
    37,202Cash and cash equivalents, beginning of period
    
    
    198,358
    
    
    
    65,717Cash and cash equivalents, end of period
    
    $
    346,131
    
    
    $
    102,919Supplemental disclosures  cash and noncashInterest paid
    
    $
    48,509
    
    
    $
    60,293Income taxes paid
    
    
    1,675
    
    
    
    5,674Loans converted to other real estate
    
    
    70,088
    
    
    
    29,676Unrealized gain on available for sale securities, net of tax
    
    
    1,906
    
    
    
    111
   5




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##### Table of Contents



GREEN BANKSHARES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 September 30, 2009
 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, 2009U.S. government agencies
    
    $
    49,705
    
    
    $
    330
    
    
    $
    (309
    )
    
    $
    49,726States and political subdivisions
    
    
    31,698
    
    
    
    1,056
    
    
    
    (354
    )
    
    
    32,400Collateralized mortgage obligations
    
    
    53,974
    
    
    
    1,916
    
    
    
    (808
    )
    
    
    55,082Mortgage-backed securities
    
    
    15,369
    
    
    
    263
    
    
    
    (1
    )
    
    
    15,631Trust preferred securities
    
    
    2,145
    
    
    
    
    
    
    
    (47
    )
    
    
    2,098$
    152,891
    
    
    $
    3,565
    
    
    $
    (1,519
    )
    
    $
    154,937December 31, 2008U.S. government agencies
    
    $
    98,143
    
    
    $
    685
    
    
    $
    (22
    )
    
    $
    98,806States and political subdivisions
    
    
    32,641
    
    
    
    139
    
    
    
    (976
    )
    
    
    31,804Collateralized mortgage obligations
    
    
    68,738
    
    
    
    945
    
    
    
    (1,310
    )
    
    
    68,373Mortgage-backed securities
    
    
    2,177
    
    
    
    
    
    
    
    (91
    )
    
    
    2,086Trust preferred securities
    
    
    2,954
    
    
    
    
    
    
    
    (461
    )
    
    
    2,493$
    204,653
    
    
    $
    1,769
    
    
    $
    (2,860
    )
    
    $
    203,562Held to MaturitySeptember 30, 2009States and political subdivisions
    
    $
    384
    
    
    $
    11
    
    
    $
    
    
    
    $
    395Other securities
    
    
    252
    
    
    
    
    
    
    
    (3
    )
    
    
    249$
    636
    
    
    $
    11
    
    
    $
    (3
    )
    
    $
    644December 31, 2008States and political subdivisions
    
    $
    404
    
    
    $
    7
    
    
    $
    
    
    
    $
    411Other securities
    
    
    253
    
    
    
    
    
    
    
    (63
    )
    
    
    190$
    657
    
    
    $
    7
    
    
    $
    (63
    )
    
    $
    601
   6




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
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
    
    $
    
    
    
    $
    
    
    
    $
    Due after one year through five years
    
    
    3,149
    
    
    
    636
    
    
    
    644Due after five years through ten years
    
    
    36,289
    
    
    
    
    
    
    
    Due after ten years
    
    
    44,786
    
    
    
    
    
    
    
    Collateralized mortgage obligations
    
    
    55,082
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    15,631
    
    
    
    
    
    
    
    Total maturities
    
    $
    154,937
    
    
    $
    636
    
    
    $
    644
    Less than 12 months
    
    
    12 months or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossSeptember 30, 2009U. S. government agencies
    
    $
    22,920
    
    
    $
    (309
    )
    
    $
    
    
    
    $
    
    
    
    $
    22,920
    
    
    $
    (309
    )States and political subdivisions
    
    
    304
    
    
    
    
    
    
    
    3,112
    
    
    
    (354
    )
    
    
    3,416
    
    
    
    (354
    )Collateralized mortgage
obligations
    
    
    
    
    
    
    
    
    
    
    3,275
    
    
    
    (809
    )
    
    
    3,275
    
    
    
    (809
    )Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    (1
    )
    
    
    11
    
    
    
    (1
    )Trust preferred securities
    
    
    1,164
    
    
    
    (1
    )
    
    
    138
    
    
    
    (45
    )
    
    
    1,302
    
    
    
    (46
    )Other securities
    
    
    
    
    
    
    
    
    
    
    249
    
    
    
    (3
    )
    
    
    249
    
    
    
    (3
    )Total temporarily impaired
    
    $
    24,388
    
    
    $
    (310
    )
    
    $
    6,885
    
    
    $
    (1,212
    )
    
    $
    31,173
    
    
    $
    (1,522
    )December 31, 2008U. S. government agencies
    
    $
    977
    
    
    $
    (22
    )
    
    $
    
    
    
    $
    
    
    
    $
    977
    
    
    $
    (22
    )States and political subdivisions
    
    
    18,445
    
    
    
    (838
    )
    
    
    643
    
    
    
    (139
    )
    
    
    19,088
    
    
    
    (977
    )Collateralized mortgage
obligations
    
    
    8,721
    
    
    
    (1,310
    )
    
    
    
    
    
    
    
    
    
    
    8,721
    
    
    
    (1,310
    )Mortgage-backed securities
    
    
    640
    
    
    
    (24
    )
    
    
    1,446
    
    
    
    (67
    )
    
    
    2,086
    
    
    
    (91
    )Trust preferred securities
    
    
    1,210
    
    
    
    (14
    )
    
    
    1,284
    
    
    
    (446
    )
    
    
    2,494
    
    
    
    (460
    )Other securities
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    (63
    )
    
    
    190
    
    
    
    (63
    )Total temporarily impaired
    
    $
    29,993
    
    
    $
    (2,208
    )
    
    $
    3,563
    
    
    $
    (715
    )
    
    $
    33,556
    
    
    $
    (2,923
    )
   7




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
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, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  SECURITIES
  September 30, 2009PresentCurrent
    
    
    
    
    
    
    
    
    
    
    
    
    
    ValueCredit
    
    Book
    
    
    Fair
    
    
    Unrealized
    
    
    DiscountedDescription
    
    Cusip#
    
    Rating
    
    Value
    
    
    Value
    
    
    Loss
    
    
    Cash FlowCollateralized mortgage
obligationsWells Fargo  2007 - 4 A21
    
    94985RAW2
    
    B3
    
    $
    2,999
    
    
    $
    2,266
    
    
    $
    (733
    )
    
    $
    3,137Wells Fargo  2005 - 5 2A1
    
    94982MAE6
    
    Ba1
    
    
    1,085
    
    
    
    1,010
    
    
    
    (75
    )
    
    
    1,186$
    4,084
    
    
    $
    3,276
    
    
    $
    (808
    )
    
    $
    4,323Trust preferred securitiesPreTSL IV
    
    74040TAD5
    
    Ca
    
    
    183
    
    
    
    138
    
    
    
    (45
    )
    
    
    186MM Community Fund II LTD
    
    55309TAD0
    
    Baa2
    
    
    1,166
    
    
    
    1,164
    
    
    
    (2
    )
    
    
    N/AWest Tennessee Bancshares, Inc.
    
    956192AA6
    
    N/A
    
    
    796
    
    
    
    796
    
    
    
    
    
    
    
    N/A$
    2,145
    
    
    $
    2,098
    
    
    $
    (47
    )
    
    $
    186
 NOTE 3  LOANS
  September 30,
    
    
    December 31,2009
    
    
    2008Commercial real estate
    
    $
    1,331,367
    
    
    $
    1,430,425Residential real estate
    
    
    404,778
    
    
    
    397,922Commercial
    
    
    291,432
    
    
    
    315,099Consumer
    
    
    84,614
    
    
    
    89,733Other
    
    
    2,466
    
    
    
    4,656Unearned income
    
    
    (15,390
    )
    
    
    (14,245
    )Loans, net of unearned income
    
    $
    2,099,267
    
    
    $
    2,223,390Allowance for loan losses
    
    $
    (50,196
    )
    
    $
    (48,811
    )
   9




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  LOANS
  September 30,
    
    
    December 31,2009
    
    
    2008Balance at beginning of year
    
    $
    48,811
    
    
    $
    34,111Add (deduct):Provision for loan losses
    
    
    43,844
    
    
    
    52,810Loans charged off
    
    
    (47,591
    )
    
    
    (41,269
    )Recoveries of loans charged off
    
    
    5,132
    
    
    
    3,159Ending balance
    
    $
    50,196
    
    
    $
    48,811
 September 30,
    
    
    December 31,2009
    
    
    2008Impaired loans were as follows:Loans with no allowance allocated
    
    $
    79,544
    
    
    $
    29,602Loans with allowance allocated
    
    
    22,718
    
    
    
    17,613Amount of allowance allocated
    
    
    5,557
    
    
    
    2,651Nonperforming loans were as follows:Loans past due 90 days still on accrual
    
    $
    1,531
    
    
    $
    509Nonaccrual loans
    
    
    67,147
    
    
    
    30,926Total
    
    $
    68,678
    
    
    $
    31,435
   10




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  EARNINGS PER SHARE OF COMMON STOCK
   Three Months EndedSeptember 30,2009
    
    
    2008Basic Earnings (Loss) Per ShareNet income (loss)
    
    $
    (6,498
    )
    
    $
    1,234Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,250
    
    
    
    Net income (loss) available to common shareholders
    
    $
    (7,748
    )
    
    $
    1,234Weighted average common shares outstanding
    
    
    13,070,216
    
    
    
    12,931,774Basic earnings (loss) per share
    
    $
    (0.59
    )
    
    $
    0.10Diluted Earnings (Loss) Per ShareNet income (loss)
    
    $
    (6,498
    )
    
    $
    1,234Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,250
    
    
    
    Net income (loss) available to common shareholders
    
    $
    (7,748
    )
    
    $
    1,234Weighted average common shares outstanding
    
    
    13,070,216
    
    
    
    12,931,774Add: Dilutive effects of assumed conversions of restricted stock
and exercises of stock options and warrants1
    
    
    
    
    
    
    15,844Weighted average common and dilutive potential
common shares outstanding
    
    
    13,070,216
    
    
    
    12,947,618Diluted earnings (loss) per share1
    
    $
    (0.59
    )
    
    $
    0.10
 1
    
    Diluted earnings (loss) per share for the three months ended September 30, 2009 is
calculated by using the weighted average common shares outstanding, instead of the diluted weighted
average shares outstanding because all of the contingently issuable shares are anti-dilutive.   11




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  EARNINGS PER SHARE OF COMMON STOCK
 Nine Months EndedSeptember 30,2009
    
    
    2008Basic Earnings (Loss) Per ShareNet income (loss)
    
    $
    (151,868
    )
    
    $
    9,874Less: preferred stock dividends and accretion of discount on
warrants
    
    
    3,732
    
    
    
    Net income (loss) available to common shareholders
    
    $
    (155,600
    )
    
    $
    9,874Weighted average common shares outstanding
    
    
    13,067,798
    
    
    
    12,931,538Basic earnings (loss) per share
    
    $
    (11.91
    )
    
    $
    0.76Diluted Earnings (Loss) Per ShareNet income (loss)
    
    $
    (151,868
    )
    
    $
    9,874Less: preferred stock dividends and accretion of discount on
warrants
    
    
    3,732
    
    
    
    Net income (loss) available to common shareholders
    
    $
    (155,600
    )
    
    $
    9,874Weighted average common shares outstanding
    
    
    13,067,798
    
    
    
    12,931,538Add: Dilutive effects of assumed conversions of restricted stock
and exercises of stock options and warrants1
    
    
    
    
    
    
    4,546Weighted average common and dilutive potential
common shares outstanding
    
    
    13,067,798
    
    
    
    12,936,084Diluted earnings (loss) per share1
    
    $
    (11.91
    )
    
    $
    0.76
 1
    
    Diluted earnings (loss) per share for the nine months ended September 30, 2009 is
calculated by using the weighted average common shares outstanding, instead of the diluted weighted
average shares outstanding because all of the contingently issuable shares are anti-dilutive.   12




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  SEGMENT INFORMATION
   Other
    
    
    HoldingThree months ended September 30, 2009
    
    Bank
    
    
    Segments
    
    
    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
 Other
    
    
    HoldingThree months ended September 30, 2008
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    23,499
    
    
    $
    1,935
    
    
    $
    (1,050
    )
    
    $
    
    
    
    $
    24,384Provision for loan losses
    
    
    7,636
    
    
    
    984
    
    
    
    
    
    
    
    
    
    
    
    8,620Noninterest income
    
    
    7,711
    
    
    
    485
    
    
    
    32
    
    
    
    (218
    )
    
    
    8,010Noninterest expense
    
    
    20,347
    
    
    
    1,289
    
    
    
    526
    
    
    
    (218
    )
    
    
    21,944Income tax expense (benefit)
    
    
    1,002
    
    
    
    57
    
    
    
    (463
    )
    
    
    
    
    
    
    596Segment profit (loss)
    
    $
    2,225
    
    
    $
    90
    
    
    $
    (1,081
    )
    
    $
    
    
    
    $
    1,234Segment assets at June 30, 2008
    
    $
    2,963,181
    
    
    $
    39,106
    
    
    $
    9,754
    
    
    $
    
    
    
    $
    3,012,041
 Other
    
    
    HoldingNine months ended September 30, 2009
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    55,621
    
    
    $
    6,416
    
    
    $
    (2,090
    )
    
    $
    
    
    
    $
    59,947Provision for loan losses
    
    
    41,756
    
    
    
    2,088
    
    
    
    
    
    
    
    
    
    
    
    43,844Noninterest income
    
    
    22,466
    
    
    
    1,529
    
    
    
    165
    
    
    
    (716
    )
    
    
    23,444Noninterest expense
    
    
    204,625
    
    
    
    3,654
    
    
    
    1,547
    
    
    
    (716
    )
    
    
    209,110Income tax expense (benefit)
    
    
    (17,314
    )
    
    
    864
    
    
    
    (1,245
    )
    
    
    
    
    
    
    (17,695
    )Segment profit (loss)
    
    $
    (150,980
    )
    
    $
    1,339
    
    
    $
    (2,227
    )
    
    $
    
    
    
    $
    (151,868
    )
 Other
    
    
    HoldingNine months ended September 30, 2008
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    71,647
    
    
    $
    5,743
    
    
    $
    (3,490
    )
    
    $
    
    
    
    $
    73,900Provision for loan losses
    
    
    18,552
    
    
    
    1,975
    
    
    
    
    
    
    
    
    
    
    
    20,527Noninterest income
    
    
    22,315
    
    
    
    1,549
    
    
    
    209
    
    
    
    (645
    )
    
    
    23,428Noninterest expense
    
    
    56,906
    
    
    
    3,838
    
    
    
    1,546
    
    
    
    (645
    )
    
    
    61,645Income tax expense (benefit)
    
    
    6,448
    
    
    
    579
    
    
    
    (1,745
    )
    
    
    
    
    
    
    5,282Segment profit (loss)
    
    $
    12,056
    
    
    $
    900
    
    
    $
    (3,082
    )
    
    $
    
    
    
    $
    9,874
   13




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  SEGMENT INFORMATION
 Asset Quality Ratios
 As of and for the period ended September 30, 2009
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as 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 period ended September 30, 2008
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.74
    %
    
    
    1.57
    %
    
    
    1.75
    %Nonperforming assets as a percentage of total assets
    
    
    1.73
    %
    
    
    1.69
    %
    
    
    1.76
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.37
    %
    
    
    8.01
    %
    
    
    1.50
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    78.93
    %
    
    
    510.88
    %
    
    
    85.56
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.77
    %
    
    
    4.64
    %
    
    
    0.84
    %
 As of and for the year ended December 31, 2008
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.38
    %
    
    
    2.48
    %
    
    
    1.41
    %Nonperforming assets as a percentage of total assets
    
    
    2.58
    %
    
    
    2.57
    %
    
    
    2.61
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    2.06
    %
    
    
    8.27
    %
    
    
    2.20
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    149.59
    %
    
    
    333.81
    %
    
    
    155.28
    %Net charge-offs to average total loans, net of unearned income
    
    
    1.53
    %
    
    
    6.42
    %
    
    
    1.63
    %
 Net charge-offs
    
    Bank
    
    
    Other
    
    
    TotalFor the nine month period ended September 30, 2009
    
    $
    40,662
    
    
    $
    1,797
    
    
    $
    42,459For the nine month period ended September 30, 2008
    
    $
    17,950
    
    
    $
    1,832
    
    
    $
    19,782For the year ended December 31, 2008
    
    $
    35,564
    
    
    $
    2,546
    
    
    $
    38,110
   14




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
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
    15




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE
6  FAIR VALUE DISCLOSURES
 Impaired Loans
  Other Real Estate
  Loan Servicing Rights
    16




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GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE
6  FAIR VALUE DISCLOSURES
 Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  Total CarryingAmount inStatement of
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Financial
    
    
    Measured atDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    Fair ValueSeptember 30, 2009Securities available for saleU.S. government agencies
    
    $
    
    
    
    $
    49,726
    
    
    $
    
    
    
    $
    49,726
    
    
    $
    49,726States and political subdivisions
    
    
    
    
    
    
    32,400
    
    
    
    
    
    
    
    32,400
    
    
    
    32,400Collateralized mortgage obligations
    
    
    
    
    
    
    55,082
    
    
    
    
    
    
    
    55,082
    
    
    
    55,082Mortgage-backed securities
    
    
    
    
    
    
    15,631
    
    
    
    
    
    
    
    15,631
    
    
    
    15,631Trust preferred securities
    
    
    
    
    
    
    1,302
    
    
    
    796
    
    
    
    2,098
    
    
    
    2,098December 31, 2008Securities available for saleU.S. government agencies
    
    $
    
    
    
    $
    98,806
    
    
    $
    
    
    
    $
    98,806
    
    
    $
    98,806States and political subdivisions
    
    
    
    
    
    
    31,804
    
    
    
    
    
    
    
    31,804
    
    
    
    31,804Collateralized mortgage obligations
    
    
    
    
    
    
    68,373
    
    
    
    
    
    
    
    68,373
    
    
    
    68,373Mortgage-backed securities
    
    
    
    
    
    
    2,086
    
    
    
    
    
    
    
    2,086
    
    
    
    2,086Trust preferred securities
    
    
    
    
    
    
    2,493
    
    
    
    
    
    
    
    2,493
    
    
    
    2,493
 Level 3 Valuations
     17




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE
6  FAIR VALUE DISCLOSURES
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2009
    
    
    September 30, 2009Beginning balance
    
    $
    1,299
    
    
    $
    Total gains or (loss) (realized/unrealized)Included in earnings
    
    
    (503
    )
    
    
    (732
    )Included in other comprehensive income
    
    
    
    
    
    
    Paydowns and maturities
    
    
    
    
    
    
    Transfers into Level 3
    
    
    
    
    
    
    1,528Ending balance September 30, 2009
    
    $
    796
    
    
    $
    796
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
  Total CarryingAmount inStatement of
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Financial
    
    
    Measured atDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    Fair ValueSeptember 30, 2009Other real estate
    
    $
    
    
    
    $
    
    
    
    $
    23,646
    
    
    $
    23,646
    
    
    $
    23,646Impaired loans
    
    
    
    
    
    
    
    
    
    
    17,647
    
    
    
    17,647
    
    
    
    17,647Total assets at fair value
    
    $
    
    
    
    $
    
    
    
    $
    41,293
    
    
    $
    41,293
    
    
    $
    41,293December 31, 2008Impaired loans
    
    
    
    
    
    
    
    
    
    
    43,364
    
    
    
    43,364
    
    
    
    43,364Total assets at fair value
    
    $
    
    
    
    $
    
    
    
    $
    43,364
    
    
    $
    43,364
    
    
    $
    43,364
   18




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##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  FAIR VALUE DISCLOSURES
  September 30,
    
    
    December 31,2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    346,131
    
    
    $
    346,131
    
    
    $
    198,358
    
    
    $
    198,358Securities available for sale
    
    
    154,937
    
    
    
    154,937
    
    
    
    203,562
    
    
    
    203,562Securities held to maturity
    
    
    636
    
    
    
    644
    
    
    
    657
    
    
    
    601Loans held for sale
    
    
    1,064
    
    
    
    1,074
    
    
    
    442
    
    
    
    445Loans, net
    
    
    2,050,273
    
    
    
    2,007,113
    
    
    
    2,174,579
    
    
    
    2,135,732FHLB and other stock
    
    
    12,734
    
    
    
    12,734
    
    
    
    13,030
    
    
    
    13,030Cash surrender value of life insurance
    
    
    29,997
    
    
    
    29,997
    
    
    
    29,539
    
    
    
    29,539Accrued interest receivable
    
    
    9,063
    
    
    
    9,063
    
    
    
    10,808
    
    
    
    10,808Financial liabilities:Deposit accounts
    
    $
    2,223,873
    
    
    $
    2,236,047
    
    
    $
    2,184,147
    
    
    $
    2,195,459Federal funds purchased and repurchase
agreements
    
    
    25,294
    
    
    
    25,294
    
    
    
    35,302
    
    
    
    35,302FHLB Advances and notes payable
    
    
    216,578
    
    
    
    222,652
    
    
    
    229,349
    
    
    
    232,731Subordinated debentures
    
    
    88,662
    
    
    
    70,453
    
    
    
    88,662
    
    
    
    74,570Accrued interest payable
    
    
    3,404
    
    
    
    3,404
    
    
    
    6,828
    
    
    
    6,828
  NOTE 7  SUBSEQUENT EVENTS
    19




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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 Part II, Item 1A Risk Factors 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
competition with other financial institutions in the markets that the Bank serves; (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 and (9) 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 23 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 below
under Part II, Item 1A Risk Factors. 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.
   20




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##### Table of Contents



Growth and Business Strategy
     Overview
   21




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##### Table of Contents



GREEN BANKSHARES, INC.
Reconciliation of Non-GAAP Measures  (Dollars in thousands)
 Three Months Ended
    
    
    Nine Months EndedSept. 30,
    
    
    Sept. 30,
    
    
    Sept. 30,
    
    
    Sept. 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Total non-interest expense
    
    $
    22,365
    
    
    $
    21,944
    
    
    $
    209,110
    
    
    $
    61,645Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    (143,389
    )
    
    
    Operating expenses
    
    $
    22,365
    
    
    $
    21,944
    
    
    $
    65,721
    
    
    $
    61,645Net income (loss) available
to common shareholders
    
    $
    (7,748
    )
    
    $
    1,234
    
    
    $
    (155,600
    )
    
    $
    9,874Goodwill impairment charge,
net of tax
    
    
    
    
    
    
    
    
    
    
    137,414
    
    
    
    Net operating income (loss)
    
    $
    (7,748
    )
    
    $
    1,234
    
    
    $
    (18,186
    )
    
    $
    9,874Per Diluted Share:Net income (loss) available
to common shareholders
    
    $
    (0.59
    )
    
    $
    0.10
    
    
    $
    (11.91
    )
    
    $
    0.76Goodwill impairment charge,
net of tax
    
    
    
    
    
    
    
    
    
    
    10.51
    
    
    
    Net operating income (loss)
    
    $
    (0.59
    )
    
    $
    0.10
    
    
    $
    (1.40
    )
    
    $
    0.76
   22




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##### Table of Contents



Critical Accounting Policies and Estimates
       23




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##### Table of Contents



Changes in Results of Operations
 Net Income (Loss).
 Net Interest Income.
    24




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##### Table of Contents



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
    %
   25




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##### Table of Contents



Three Months EndedSeptember 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    2,075,096
    
    
    $
    32,577
    
    
    
    6.23
    %
    
    $
    2,302,465
    
    
    $
    38,510
    
    
    
    6.65
    %Investment securities (2)
    
    
    184,433
    
    
    
    2,305
    
    
    
    4.96
    %
    
    
    306,616
    
    
    
    4,154
    
    
    
    5.39
    %Other short-term investments
    
    
    183,448
    
    
    
    102
    
    
    
    0.22
    %
    
    
    16,739
    
    
    
    87
    
    
    
    2.07
    %Total interest-earning assets
    
    $
    2,442,977
    
    
    $
    34,984
    
    
    
    5.68
    %
    
    $
    2,625,820
    
    
    $
    42,751
    
    
    
    6.48
    %Non-interest earning assets
    
    
    303,665
    
    
    
    
    
    
    
    
    
    
    
    373,449Total assets
    
    $
    2,746,642
    
    
    
    
    
    
    
    
    
    
    $
    2,999,269Interest-bearing liabilities:Deposits:Interest checking, savings and
money
market
    
    $
    870,091
    
    
    $
    3,163
    
    
    
    1.44
    %
    
    $
    617,156
    
    
    $
    2,146
    
    
    
    1.38
    %Time deposits
    
    
    1,121,349
    
    
    
    8,317
    
    
    
    2.94
    %
    
    
    1,440,693
    
    
    
    12,199
    
    
    
    3.37
    %Total interest-bearing deposits
    
    $
    1,991,440
    
    
    $
    11,480
    
    
    
    2.29
    %
    
    $
    2,057,849
    
    
    $
    14,345
    
    
    
    2.77
    %Securities sold under repurchase
agreements and short-term
borrowings
    
    
    25,454
    
    
    
    6
    
    
    
    0.09
    %
    
    
    74,385
    
    
    
    262
    
    
    
    1.40
    %Notes payable
    
    
    220,591
    
    
    
    2,416
    
    
    
    4.35
    %
    
    
    229,928
    
    
    
    2,525
    
    
    
    4.37
    %Subordinated debentures
    
    
    88,662
    
    
    
    556
    
    
    
    2.49
    %
    
    
    88,662
    
    
    
    1,050
    
    
    
    4.71
    %Total interest-bearing
liabilities
    
    $
    2,326,147
    
    
    $
    14,458
    
    
    
    2.47
    %
    
    $
    2,450,824
    
    
    $
    18,182
    
    
    
    2.95
    %Non-interest bearing liabilities:Demand deposits
    
    
    160,653
    
    
    
    
    
    
    
    
    
    
    
    193,566Other liabilities
    
    
    22,872
    
    
    
    
    
    
    
    
    
    
    
    24,698Total non-interest bearing
liabilities
    
    
    183,525
    
    
    
    
    
    
    
    
    
    
    
    218,264Total liabilities
    
    
    2,509,672
    
    
    
    
    
    
    
    
    
    
    
    2,669,088Shareholders equity
    
    
    236,970
    
    
    
    
    
    
    
    
    
    
    
    330,181Total liabilities and
shareholders
equity
    
    $
    2,746,642
    
    
    
    
    
    
    
    
    
    
    $
    2,999,269Net interest income
    
    
    
    
    
    $
    20,526
    
    
    
    
    
    
    
    
    
    
    $
    24,569Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.22
    %
    
    
    
    
    
    
    
    
    
    
    3.53
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.33
    %
    
    
    
    
    
    
    
    
    
    
    3.72
    %
 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 30,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    2,125,547
    
    
    $
    97,771
    
    
    
    6.15
    %
    
    $
    2,322,510
    
    
    $
    120,698
    
    
    
    7.09
    %Investment securities (2)
    
    
    198,741
    
    
    
    7,628
    
    
    
    5.13
    %
    
    
    266,453
    
    
    
    11,132
    
    
    
    5.70
    %Other short-term investments
    
    
    105,011
    
    
    
    183
    
    
    
    0.23
    %
    
    
    7,254
    
    
    
    111
    
    
    
    2.09
    %Total interest-earning assets
    
    $
    2,429,299
    
    
    $
    105,582
    
    
    
    5.81
    %
    
    $
    2,596,217
    
    
    $
    131,941
    
    
    
    6.95
    %Non-interest earning assets
    
    
    369,023
    
    
    
    
    
    
    
    
    
    
    
    362,035Total assets
    
    $
    2,798,322
    
    
    
    
    
    
    
    
    
    
    $
    2,958,252Interest-bearing liabilities:Deposits:Interest checking, savings and
money
market
    
    $
    742,643
    
    
    $
    7,557
    
    
    
    1.36
    %
    
    $
    663,195
    
    
    $
    7,726
    
    
    
    1.63
    %Time deposits
    
    
    1,190,412
    
    
    
    28,087
    
    
    
    3.15
    %
    
    
    1,270,940
    
    
    
    35,931
    
    
    
    4.03
    %Total interest-bearing deposits
    
    $
    1,933,055
    
    
    $
    35,644
    
    
    
    2.47
    %
    
    $
    1,934,135
    
    
    $
    43,657
    
    
    
    3.15
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    28,872
    
    
    
    22
    
    
    
    0.10
    %
    
    
    128,057
    
    
    
    2,054
    
    
    
    2.32
    %Notes payable
    
    
    226,314
    
    
    
    7,328
    
    
    
    4.33
    %
    
    
    262,405
    
    
    
    8,268
    
    
    
    4.14
    %Subordinated debentures
    
    
    88,662
    
    
    
    2,091
    
    
    
    3.15
    %
    
    
    88,662
    
    
    
    3,490
    
    
    
    5.53
    %Total interest-bearing
liabilities
    
    $
    2,276,903
    
    
    $
    45,085
    
    
    
    2.65
    %
    
    $
    2,413,259
    
    
    $
    57,469
    
    
    
    3.30
    %Non-interest bearing liabilities:Demand deposits
    
    
    163,713
    
    
    
    
    
    
    
    
    
    
    
    188,737Other liabilities
    
    
    22,359
    
    
    
    
    
    
    
    
    
    
    
    25,480Total non-interest bearing
liabilities
    
    
    186,072
    
    
    
    
    
    
    
    
    
    
    
    214,217Total liabilities
    
    
    2,462,975
    
    
    
    
    
    
    
    
    
    
    
    2,627,476Shareholders equity
    
    
    335,347
    
    
    
    
    
    
    
    
    
    
    
    330,776Total liabilities and
shareholders
equity
    
    $
    2,798,322
    
    
    
    
    
    
    
    
    
    
    $
    2,958,252Net interest income
    
    
    
    
    
    $
    60,497
    
    
    
    
    
    
    
    
    
    
    $
    74,472Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.16
    %
    
    
    
    
    
    
    
    
    
    
    3.61
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.33
    %
    
    
    
    
    
    
    
    
    
    
    3.83
    %
 1
    
    Average loan balances excluded nonaccrual loans for the periods presented.2
    
    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.
  29




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Changes in Financial Condition
         30




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Liquidity and Capital Resources
 Liquidity.
    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
    %
    
    
    13.17
    %
    
    
    13.39
    %Total risk-based capital
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    14.43
    %
    
    
    14.65
    %Leverage Ratio
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    10.49
    %
    
    
    10.60
    %
 Off-Balance Sheet Arrangements
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCommitments to make loans  fixed
    
    $
    4,952
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,952Commitments to make loans  variable
    
    
    3,708
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,708Unused lines of credit
    
    
    143,565
    
    
    
    18,521
    
    
    
    10,458
    
    
    
    80,264
    
    
    
    252,808Letters of credit
    
    
    22,498
    
    
    
    7,736
    
    
    
    
    
    
    
    
    
    
    
    30,234Total
    
    $
    174,723
    
    
    $
    26,257
    
    
    $
    10,458
    
    
    $
    80,264
    
    
    $
    291,702
  32




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##### Table of Contents



Disclosure of Contractual Obligations
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCertificates of deposits
    
    $
    995,051
    
    
    $
    142,347
    
    
    $
    13,807
    
    
    $
    3,556
    
    
    $
    1,154,761FHLB advances and notes payable
    
    
    44,850
    
    
    
    62,691
    
    
    
    40,740
    
    
    
    68,297
    
    
    
    216,578Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,662
    
    
    
    88,662Operating lease obligations
    
    
    1,185
    
    
    
    1,973
    
    
    
    1,305
    
    
    
    1,172
    
    
    
    5,635Deferred compensation
    
    
    1,682
    
    
    
    
    
    
    
    
    
    
    
    2,302
    
    
    
    3,984Purchase obligations
    
    
    358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    358Total
    
    $
    1,043,126
    
    
    $
    207,011
    
    
    $
    55,852
    
    
    $
    163,989
    
    
    $
    1,469,978
  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
  We could sustain losses if our asset quality declines further.
  Our loan portfolio includes a significant amount of residential construction and land development
loans, which loans have a greater credit risk then residential mortgage loans.
  Recent 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.
   35




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Recent negative developments in the financial services industry and U.S. and global credit markets
may adversely impact our operations and results.
  Our business is subject to the success of the local economies where we operate.
   An inadequate allowance for loan losses would reduce our earnings.
    36




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We have increased levels of other real estate, primarily as a result of foreclosures, and we
anticipate higher levels of foreclosed real estate expense.
  Liquidity needs could adversely affect our results of operations and financial condition.
  We rely on dividends from our bank subsidiary as our primary source of liquidity and payment of
these dividends is limited under Tennessee law.
  Changes in interest rates could adversely affect our results of operations and financial condition.
  Recent legislative and regulatory initiatives that were enacted in response to the recent financial
crisis are beginning to wind down.
   37




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##### Table of Contents



Competition from financial institutions and other financial service providers may adversely affect
our profitability.
    If we continue to experience losses at levels that we experienced during the first nine months of
2009 we may need to raise additional capital in the future, but that capital may not be available
when it is needed.
   We rely heavily on the services of key personnel.
    38




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##### Table of Contents



We are subject to extensive regulation that could limit or restrict our activities.
    The amount of common stock owned by, and other compensation arrangements with, our officers and
directors may make it more difficult to obtain shareholder approval of potential takeovers that
they oppose.
  Our long-term business strategy includes the continuation of growth plans, and our financial
condition and results of operations could be affected if our long-term business strategies are not
effectively executed.
  
    
    Maintaining loan quality;
 
    
    Maintaining adequate management personnel and information systems to oversee such
growth; and,
 
    
    Maintaining adequate control and compliance functions.
 Operating Results:
 Development of Offices:
 Expansion into New Markets:
  39




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##### Table of Contents



Regulatory and Economic Factors:
  We may face risks with respect to future expansion.
  
    
    the time and costs associated with identifying and evaluating potential acquisitions and
merger partners;
 
    
    inaccuracies in the estimates and judgments used to evaluate credit, operations,
management and market risks with respect to the target institution;
 
    
    the time and costs of evaluating new markets, hiring experienced local management and
opening new offices, and the time lags between these activities and the generation of
sufficient assets and deposits to support the costs of the expansion;
 
    
    our ability to finance an acquisition and possible dilution to our existing
shareholders;
 
    
    the diversion of our managements attention to the negotiation of a transaction, and the
integration of the operations and personnel of the combining businesses;
 
    
    entry into new markets where we lack experience;
 
    
    the introduction of new products and services into our business;
 
    
    the incurrence and possible impairment of goodwill associated with an acquisition and
possible adverse short-term effects on our results of operations; and
 
    
    the risk of loss of key employees and customers.
  We are subject to Tennessee anti-takeover statutes and certain charter provisions which could
decrease our chances of being acquired even if the acquisition is in our shareholders best
interests.
  The success and growth of our business will depend on our ability to adapt to technological
changes.
   40




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##### Table of Contents



Even though our common stock is currently traded on The Nasdaq Global Select Market, the trading
volume in our common stock has been thin and the sale of substantial amounts of our common stock in
the public market could depress the price of our common stock.
    We may issue additional common stock or other equity securities in the future which could dilute
the ownership interest of existing common shareholders.
  Our ability to declare and pay dividends is limited by law and by the terms of the Series A
preferred stock and we may be unable to pay future dividends.
  The limitations on bonuses, retention awards, severance payments and incentive compensation
contained in ARRA may adversely affect our ability to retain our highest performing employees.
  Holders of our junior subordinated debentures have rights that are senior to those of our common
and Series A preferred shareholders.
   41




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##### Table of Contents



The Series A preferred stock impacts net income available to our common shareholders and our
earnings per share.
  Holders of the Series A preferred stock have rights that are senior to those of our common
shareholders.
  Holders of the Series A preferred stock may, under certain circumstances, have the right to elect
two directors to our board of directors.
   42




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##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3.
    
    Defaults Upon Senior Securities
  Item 4.
    
    Submission of Matters to a Vote of Security Holders
  Item 5.
    
    Other Information
  Item 6.
    
    Exhibits
   43




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##### Table of Contents



SIGNATURES
  Green Bankshares, Inc.
RegistrantDate: November 09, 2009
    By:
    /s/ James E. AdamsJames E. AdamsExecutive Vice President,
Chief Financial Office and Secretary  44




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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