##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 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 principal executive offices)
    
    (Zip Code)
 (423) 639-5111
 N/A
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
  Condensed Consolidated Balance Sheets  June 30, 2008 and December 31, 2007.
    
    
    2Condensed Consolidated Statements of Income and Comprehensive Income  For the three and six
months ended June 30, 2008 and 2007.
    
    
    3Condensed Consolidated Statement of Changes in Shareholders Equity  For the six months
ended June 30, 2008.
    
    
    4Condensed Consolidated Statements of Cash Flows  For the six months ended June 30, 2008 and 2007.
    
    
    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
June 30, 2008 and December 31, 2007
(Amounts in thousands, except share and per share data)
 (Unaudited)June 30,
    
    
    December 31,2008
    
    
    2007*ASSETSCash and due from banks
    
    $
    59,823
    
    
    $
    65,717Federal funds sold
    
    
    34,335
    
    
    
    Securities available for sale
    
    
    276,378
    
    
    
    235,273Securities held to maturity (with a market value of $942 and $1,280)
    
    
    968
    
    
    
    1,303FHLB and other stock, at cost
    
    
    13,042
    
    
    
    12,322Loans held for sale
    
    
    2,540
    
    
    
    2,331Loans, net of unearned income
    
    
    2,347,241
    
    
    
    2,356,376Allowance for loan losses
    
    
    (35,351
    )
    
    
    (34,111
    )Other real estate owned and repossessed assets
    
    
    20,632
    
    
    
    4,859Premises and equipment, net
    
    
    83,010
    
    
    
    82,697Goodwill and other intangible assets
    
    
    156,518
    
    
    
    157,827Other assets
    
    
    59,400
    
    
    
    63,147Total assets
    
    $
    3,018,536
    
    
    $
    2,947,741LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesDeposits
    
    $
    2,260,950
    
    
    $
    1,986,793Federal funds purchased
    
    
    
    
    
    
    87,787Repurchase agreements
    
    
    91,641
    
    
    
    106,738FHLB advances and notes payable
    
    
    230,010
    
    
    
    318,690Subordinated debentures
    
    
    88,662
    
    
    
    88,662Accrued interest payable and other liabilities
    
    
    20,846
    
    
    
    36,594Total liabilities
    
    
    2,692,109
    
    
    
    2,625,264Shareholders equityCommon stock: $2 par, 20,000,000 shares authorized,
13,001,226 and 12,931,015 shares outstanding
    
    
    26,003
    
    
    
    25,862Additional paid-in capital
    
    
    185,428
    
    
    
    185,170Retained earnings
    
    
    115,198
    
    
    
    109,938Accumulated other comprehensive income (loss)
    
    
    (202
    )
    
    
    1,507Total shareholders equity
    
    
    326,427
    
    
    
    322,477Total liabilities and shareholders equity
    
    $
    3,018,536
    
    
    $
    2,947,741
 *
    
    This condensed consolidated balance sheet has been derived from the audited consolidated balance sheet, as filed in
the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007.   2




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##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 2008 and 2007
(Amounts in thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Interest incomeInterest and fees on loans
    
    $
    39,407
    
    
    $
    39,681
    
    
    $
    82,156
    
    
    $
    71,596Investment securities
    
    
    3,265
    
    
    
    2,090
    
    
    
    6,622
    
    
    
    2,798Federal funds sold and other
    
    
    22
    
    
    
    12
    
    
    
    25
    
    
    
    2742,694
    
    
    
    41,783
    
    
    
    88,803
    
    
    
    74,421Interest expenseDeposits
    
    
    13,377
    
    
    
    15,012
    
    
    
    29,312
    
    
    
    26,165Borrowings
    
    
    4,273
    
    
    
    3,838
    
    
    
    9,975
    
    
    
    6,50217,650
    
    
    
    18,850
    
    
    
    39,287
    
    
    
    32,667Net interest income
    
    
    25,044
    
    
    
    22,933
    
    
    
    49,516
    
    
    
    41,754Provision for loan losses
    
    
    11,019
    
    
    
    1,259
    
    
    
    11,907
    
    
    
    2,233Net interest income after provision
for loan losses
    
    
    14,025
    
    
    
    21,674
    
    
    
    37,609
    
    
    
    39,521Noninterest incomeService charges and fees
    
    
    6,787
    
    
    
    5,395
    
    
    
    13,014
    
    
    
    9,684Other
    
    
    1,325
    
    
    
    1,088
    
    
    
    2,404
    
    
    
    2,1988,112
    
    
    
    6,483
    
    
    
    15,418
    
    
    
    11,882Noninterest expenseSalaries and employee benefits
    
    
    9,256
    
    
    
    8,472
    
    
    
    19,104
    
    
    
    15,930Occupancy and furniture and equipment expense
    
    
    3,114
    
    
    
    2,626
    
    
    
    6,563
    
    
    
    4,722Other
    
    
    7,770
    
    
    
    5,611
    
    
    
    14,034
    
    
    
    10,09920,140
    
    
    
    16,709
    
    
    
    39,701
    
    
    
    30,751Income before income taxes
    
    
    1,997
    
    
    
    11,448
    
    
    
    13,326
    
    
    
    20,652Provision for income taxes
    
    
    535
    
    
    
    4,362
    
    
    
    4,686
    
    
    
    7,950Net income
    
    $
    1,462
    
    
    $
    7,086
    
    
    $
    8,640
    
    
    $
    12,702Comprehensive income (loss)
    
    $
    (2,255
    )
    
    $
    4,357
    
    
    $
    6,931
    
    
    $
    10,014Per share of common stock:Basic earnings
    
    $
    0.11
    
    
    $
    0.63
    
    
    $
    0.67
    
    
    $
    1.20Diluted earnings
    
    
    0.11
    
    
    
    0.62
    
    
    
    0.67
    
    
    
    1.19Dividends
    
    
    0.13
    
    
    
    0.13
    
    
    
    0.26
    
    
    
    0.26Weighted average shares outstanding:Basic
    
    
    12,931,669
    
    
    
    11,321,822
    
    
    
    12,931,419
    
    
    
    10,572,798Diluted
    
    
    12,958,439
    
    
    
    11,395,518
    
    
    
    12,939,638
    
    
    
    10,647,638
   3




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GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the Six Months Ended June 30, 2008
(Amounts in thousands, except share and per share data)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (loss)
    
    
    Equity(Unaudited)Balance, December 31, 2007
    
    
    12,931,015
    
    
    $
    25,862
    
    
    $
    185,170
    
    
    $
    109,938
    
    
    $
    1,507
    
    
    $
    322,477Common stock transactions:Exercise of shares under stock
option plan
    
    
    759
    
    
    
    2
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    14Issuance of restricted common
shares
    
    
    69,452
    
    
    
    139
    
    
    
    (139
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense:Stock options
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228Restricted stock
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    157Dividends paid ($.26 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,380
    )
    
    
    
    
    
    
    (3,380
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,640
    
    
    
    
    
    
    
    8,640Change in unrealized gains
(losses) , net of
reclassification and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,709
    )
    
    
    (1,709
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,931Balance, June 30, 2008
    
    
    13,001,226
    
    
    $
    26,003
    
    
    $
    185,428
    
    
    $
    115,198
    
    
    $
    (202
    )
    
    $
    326,427
   4




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##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2008 and 2007
(Amounts in thousands, except share and per share data)
 June 30,
    
    
    June 30,2008
    
    
    2007(Unaudited)Cash flows from operating activitiesNet income
    
    $
    8,640
    
    
    $
    12,702Adjustments to reconcile net income to net cash provided by
operating activitiesProvision for loan losses
    
    
    11,907
    
    
    
    2,233Depreciation and amortization
    
    
    3,509
    
    
    
    2,416Security amortization and accretion, net
    
    
    (548
    )
    
    
    (77
    )Loss on sale of securities
    
    
    
    
    
    
    23FHLB stock dividends
    
    
    (303
    )
    
    
    Net gain on sale of mortgage loans
    
    
    (388
    )
    
    
    (535
    )Originations of mortgage loans held for sale
    
    
    (33,715
    )
    
    
    (33,779
    )Proceeds from sales of mortgage loans
    
    
    33,894
    
    
    
    34,022Increase in cash surrender value of life insurance
    
    
    (536
    )
    
    
    (413
    )Net losses from sales of fixed assets
    
    
    386
    
    
    
    78Stock-based compensation expense
    
    
    385
    
    
    
    235Net gain on other real estate and repossessed assets
    
    
    (105
    )
    
    
    (178
    )Deferred tax expense
    
    
    (1,095
    )
    
    
    (2,996
    )Net changes:Other assets
    
    
    6,482
    
    
    
    (642
    )Accrued interest payable and other liabilities
    
    
    (15,748
    )
    
    
    18,083Net cash provided by operating activities
    
    
    12,765
    
    
    
    31,172Cash flows from investing activitiesPurchase of securities available for sale
    
    
    (80,644
    )
    
    
    (23,682
    )Proceeds from sale of securities available for sale
    
    
    
    
    
    
    1,262Proceeds from maturities of securities available for sale
    
    
    37,276
    
    
    
    13,106Proceeds from sale of securities held to maturity
    
    
    
    
    
    
    496Proceeds from maturities of securities held to maturity
    
    
    335
    
    
    
    690Purchase of FHLB stock
    
    
    (417
    )
    
    
    (819
    )Net change in loans
    
    
    (28,255
    )
    
    
    (152,845
    )Acquisition, net of cash received
    
    
    
    
    
    
    (24,548
    )Proceeds from sale of other real estate
    
    
    11,498
    
    
    
    2,622Improvements to other real estate
    
    
    (443
    )
    
    
    Proceeds from sale of fixed assets
    
    
    50
    
    
    
    13Premises and equipment expenditures
    
    
    (2,949
    )
    
    
    (6,008
    )Net cash used by investing activities
    
    
    (63,549
    )
    
    
    (189,713
    )Cash flows from financing activitiesNet change in deposits
    
    
    274,157
    
    
    
    38,157Net change in federal funds purchased and repurchase agreements
    
    
    (102,884
    )
    
    
    (11,994
    )Tax benefit resulting from stock options
    
    
    
    
    
    
    43Proceeds from FHLB advances and notes payable
    
    
    20,916
    
    
    
    114,200Proceeds from subordinated debentures
    
    
    
    
    
    
    57,732Repayments of FHLB advances and notes payable
    
    
    (109,597
    )
    
    
    (35,790
    )Dividends paid
    
    
    (3,380
    )
    
    
    (2,957
    )Proceeds from issuance of common stock
    
    
    14
    
    
    
    324Net cash provided by financing activities
    
    
    79,226
    
    
    
    159,715Net change in cash and cash equivalents
    
    
    28,442
    
    
    
    1,174Cash and cash equivalents, beginning of year
    
    
    65,717
    
    
    
    70,640Cash and cash equivalents, end of period
    
    $
    94,159
    
    
    $
    71,814Supplemental disclosures  cash and noncashInterest paid
    
    $
    42,901
    
    
    $
    28,866Income taxes paid
    
    
    5,250
    
    
    
    9,499Loans converted to other real estate
    
    
    26,901
    
    
    
    1,785Unrealized gain (loss) on available for sale securities, net of tax
    
    
    (1,709
    )
    
    
    2,688
   5




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GREEN BANKSHARES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 1  PRINCIPLES OF CONSOLIDATION
  NOTE 2  LOANS
  June 30,
    
    
    December 31,2008
    
    
    2007Commercial real estate
    
    $
    1,546,314
    
    
    $
    1,549,457Residential real estate
    
    
    393,196
    
    
    
    398,779Commercial
    
    
    324,779
    
    
    
    320,264Consumer
    
    
    93,910
    
    
    
    97,635Other
    
    
    3,825
    
    
    
    3,871Unearned income
    
    
    (14,783
    )
    
    
    (13,630
    )Loans, net of unearned income
    
    $
    2,347,241
    
    
    $
    2,356,376Allowance for loan losses
    
    $
    (35,351
    )
    
    $
    (34,111
    )
   6




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##### Table of Contents



GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  LOANS
  June 30,
    
    
    December 31,2008
    
    
    2007Balance at beginning of year
    
    $
    34,111
    
    
    $
    22,302Add (deduct):Reserve of acquired bank
    
    
    
    
    
    
    9,022Provision for loan losses
    
    
    11,907
    
    
    
    14,483Loans charged off
    
    
    (12,006
    )
    
    
    (13,471
    )Recoveries of loans charged off
    
    
    1,339
    
    
    
    1,775Ending balance
    
    $
    35,351
    
    
    $
    34,111
 June 30,
    
    
    December 31,2008
    
    
    2007Impaired loans were as follows:Loans with allowance allocated
    
    $
    47,201
    
    
    $
    36,267Amount of allowance allocated
    
    
    7,080
    
    
    
    5,440Nonperforming loans were as follows:Loans past due 90 days still on accrual
    
    $
    161
    
    
    $
    18Nonaccrual loans
    
    
    40,419
    
    
    
    32,060Total
    
    $
    40,580
    
    
    $
    32,078
   7




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GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  EARNINGS PER SHARE OF COMMON STOCK
   Three Months Ended June 30,2008
    
    
    2007Income
    
    
    Shares
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    (Numerator)
    
    
    (Denominator)Basic EPSIncome available to common shareholders
    
    $
    1,462
    
    
    
    12,931,669
    
    
    $
    7,086
    
    
    
    11,321,822Effect of dilutive shares
    
    
    
    
    
    
    26,770
    
    
    
    
    
    
    
    73,696Diluted EPSIncome available to common
shareholders plus
assumed conversions
    
    $
    1,462
    
    
    
    12,958,439
    
    
    $
    7,086
    
    
    
    11,395,518
 Six Months Ended June 30,2008
    
    
    2007Income
    
    
    Shares
    
    
    Income
    
    
    Shares(Numerator)
    
    
    (Denominator)
    
    
    (Numerator)
    
    
    (Denominator)Basic EPSIncome available to common shareholders
    
    $
    8,640
    
    
    
    12,931,419
    
    
    $
    12,702
    
    
    
    10,572,798Effect of dilutive shares
    
    
    
    
    
    
    8,219
    
    
    
    
    
    
    
    74,840Diluted EPSIncome available to common
shareholders plus
assumed conversions
    
    $
    8,640
    
    
    
    12,939,638
    
    
    $
    12,702
    
    
    
    10,647,638
   8




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##### Table of Contents



GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  SEGMENT INFORMATION
   Other
    
    
    HoldingThree months ended June 30, 2008
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    24,078
    
    
    $
    1,974
    
    
    $
    (1,008
    )
    
    $
    
    
    
    $
    25,044Provision for loan losses
    
    
    10,502
    
    
    
    517
    
    
    
    
    
    
    
    
    
    
    
    11,019Noninterest income
    
    
    7,730
    
    
    
    566
    
    
    
    30
    
    
    
    (214
    )
    
    
    8,112Noninterest expense
    
    
    18,553
    
    
    
    1,256
    
    
    
    545
    
    
    
    (214
    )
    
    
    20,140Income tax expense (benefit)
    
    
    815
    
    
    
    301
    
    
    
    (581
    )
    
    
    
    
    
    
    535Segment profit (loss)
    
    $
    1,938
    
    
    $
    466
    
    
    $
    (942
    )
    
    $
    
    
    
    $
    1,462Segment assets at June 30, 2008
    
    $
    2,969,897
    
    
    $
    39,778
    
    
    $
    8,861
    
    
    $
    
    
    
    $
    3,018,536
 Other
    
    
    HoldingThree months ended June 30, 2007
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    22,002
    
    
    $
    1,649
    
    
    $
    (718
    )
    
    $
    
    
    
    $
    22,933Provision for loan losses
    
    
    905
    
    
    
    354
    
    
    
    
    
    
    
    
    
    
    
    1,259Noninterest income
    
    
    6,075
    
    
    
    674
    
    
    
    27
    
    
    
    (293
    )
    
    
    6,483Noninterest expense
    
    
    15,496
    
    
    
    1,282
    
    
    
    224
    
    
    
    (293
    )
    
    
    16,709Income tax expense (benefit)
    
    
    4,442
    
    
    
    270
    
    
    
    (350
    )
    
    
    
    
    
    
    4,362Segment profit (loss)
    
    $
    7,234
    
    
    $
    417
    
    
    $
    (565
    )
    
    $
    
    
    
    $
    7,086Segment assets at June 30, 2007
    
    $
    2,871,987
    
    
    $
    39,998
    
    
    $
    15,313
    
    
    $
    
    
    
    $
    2,927,298
 Six months ended June 30, 2008
    
    Bank
    
    
    Other 
Segments
    
    
    Holding 
Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    48,148
    
    
    $
    3,808
    
    
    $
    (2,440
    )
    
    $
    
    
    
    $
    49,516Provision for loan losses
    
    
    10,916
    
    
    
    991
    
    
    
    
    
    
    
    
    
    
    
    11,907Noninterest income
    
    
    14,604
    
    
    
    1,064
    
    
    
    177
    
    
    
    (427
    )
    
    
    15,418Noninterest expense
    
    
    36,559
    
    
    
    2,549
    
    
    
    1,020
    
    
    
    (427
    )
    
    
    39,701Income tax expense (benefit)
    
    
    5,446
    
    
    
    522
    
    
    
    (1,282
    )
    
    
    
    
    
    
    4,686Segment profit (loss)
    
    $
    9,831
    
    
    $
    810
    
    
    $
    (2,001
    )
    
    $
    
    
    
    $
    8,640
 Other
    
    
    HoldingSix months ended June 30, 2007
    
    Bank
    
    
    Segments
    
    
    Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    39,534
    
    
    $
    3,206
    
    
    $
    (986
    )
    
    $
    
    
    
    $
    41,754Provision for loan losses
    
    
    1,519
    
    
    
    714
    
    
    
    
    
    
    
    
    
    
    
    2,233Noninterest income
    
    
    11,174
    
    
    
    1,262
    
    
    
    38
    
    
    
    (592
    )
    
    
    11,882Noninterest expense
    
    
    28,362
    
    
    
    2,512
    
    
    
    469
    
    
    
    (592
    )
    
    
    30,751Income tax expense (benefit)
    
    
    8,005
    
    
    
    487
    
    
    
    (542
    )
    
    
    
    
    
    
    7,950Segment profit (loss)
    
    $
    12,822
    
    
    $
    755
    
    
    $
    (875
    )
    
    $
    
    
    
    $
    12,702
   9




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##### Table of Contents



GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  SEGMENT INFORMATION
 Asset Quality Ratios
 As of and for the period ended June 30, 2008
    
    Bank
    
    
    Other
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.71
    %
    
    
    1.51
    %
    
    
    1.73
    %Nonperforming assets as a percentage of total assets
    
    
    2.00
    %
    
    
    2.13
    %
    
    
    2.03
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.37
    %
    
    
    8.02
    %
    
    
    1.51
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    80.34
    %
    
    
    530.82
    %
    
    
    87.11
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.42
    %
    
    
    2.04
    %
    
    
    0.45
    %
 As of and for the period ended June 30, 2007
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    0.19
    %
    
    
    1.47
    %
    
    
    0.21
    %Nonperforming assets as a percentage of total assets
    
    
    0.17
    %
    
    
    1.62
    %
    
    
    0.20
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.30
    %
    
    
    8.02
    %
    
    
    1.42
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    690.29
    %
    
    
    545.98
    %
    
    
    674.48
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.01
    %
    
    
    1.42
    %
    
    
    0.04
    %
 As of and for the year ended December 31, 2007
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.35
    %
    
    
    1.30
    %
    
    
    1.36
    %Nonperforming assets as a percentage of total assets
    
    
    1.22
    %
    
    
    2.11
    %
    
    
    1.25
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.32
    %
    
    
    7.96
    %
    
    
    1.45
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    98.37
    %
    
    
    609.80
    %
    
    
    106.34
    %Net charge-offs to average total loans, net of unearned income
    
    
    0.50
    %
    
    
    4.14
    %
    
    
    0.57
    %
 Net charge-offs
    
    Bank
    
    
    Other
    
    
    TotalActual for the six month period ended June 30, 2008
    
    $
    9,865
    
    
    $
    802
    
    
    $
    10,667Actual for the six month period ended June 30, 2007
    
    $
    124
    
    
    $
    498
    
    
    $
    622Actual for the year ended December 31, 2007
    
    $
    10,193
    
    
    $
    1,503
    
    
    $
    11,696
 NOTE 5  REVOLVING CREDIT AGREEMENT
    10




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##### Table of Contents



GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  BUSINESS COMBINATION
    Cash and due from banks
    
    $
    21,182Securities
    
    
    200,081FHLB stock
    
    
    2,863Bankers Bank stock
    
    
    100Loans held for sale
    
    
    8,642Loans, net of unearned income
    
    
    631,496Allowance for loan losses
    
    
    (9,022
    )Premises and equipment
    
    
    18,332Goodwill
    
    
    111,813Core deposit intangible
    
    
    8,740Mortgage servicing rights
    
    
    745Other assets
    
    
    16,618Total assets acquired
    
    
    1,011,590Deposits
    
    
    (699,089
    )Federal funds purchased
    
    
    (52,500
    )Repurchase agreements
    
    
    (42,790
    )FHLB advances
    
    
    (32,000
    )Subordinated debentures
    
    
    (17,527
    )Other liabilities
    
    
    (3,416
    )Total liabilities assumed
    
    
    (847,322
    )Net assets acquired
    
    $
    164,268
    11




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##### Table of Contents



GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 6  BUSINESS COMBINATION
  Six MonthsEndedJune 30,2007Net interest income
    
    $
    54,348Net income
    
    $
    16,694Basic earnings per share
    
    $
    1.26Diluted earnings per share
    
    $
    1.25
 NOTE 7  BORROWINGS
       12




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GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 8  FAIR VALUE DISCLOSURES
   Level 1
  Level 2
  Level 3
   Investment Securities Available-for-Sale
    13




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GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 8  FAIR VALUE DISCLOSURES
 Loans Held for Sale
  Loans
 
 Loan Servicing Rights
  Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  June 30, 2008Total CarryingAmount inStatement of
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Financial
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    ValueSecurities available for sale
    
    $
    
    
    
    $
    276,378
    
    
    $
    
    
    
    $
    276,378
    
    
    $
    276,378
   14




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##### Table of Contents



GREEN BANKSHARES, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2008
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 8  FAIR VALUE DISCLOSURES
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
  June 30, 2008Total CarryingAmount inStatement of
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Financial
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    ValueLoans
    
    $
    
    
    
    $
    
    
    
    $
    29,011
    
    
    $
    29,011
    
    
    $
    29,011
   15




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##### Table of Contents



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




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##### Table of Contents



Growth and Business Strategy
      Overview
    17




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##### Table of Contents



On a year-to-date non-interest
   Critical Accounting Policies and Estimates
      18




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##### Table of Contents



Changes in Results of Operations
 Net Income.
   Net Interest Income.
    19




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##### Table of Contents



Beginning
    
    
    Increase/
    
    
    EndingFOMC Meeting Date
    
    Rate
    
    
    Decrease
    
    
    RateMarch 21, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %May 9, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %June 28, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %August 7, 2007
    
    
    5.25
    %
    
    
    0.00
    %
    
    
    5.25
    %September 18, 2007
    
    
    5.25
    %
    
    
    (0.50
    %)
    
    
    4.75
    %October 31, 2007
    
    
    4.75
    %
    
    
    (0.25
    %)
    
    
    4.50
    %December 11, 2007
    
    
    4.50
    %
    
    
    (0.25
    %)
    
    
    4.25
    %January 22, 2008
    
    
    4.25
    %
    
    
    (0.75
    %)
    
    
    3.50
    %January 30, 2008
    
    
    3.50
    %
    
    
    (0.50
    %)
    
    
    3.00
    %March 18, 2008
    
    
    3.00
    %
    
    
    (0.75
    %)
    
    
    2.25
    %April 30, 2008
    
    
    2.25
    %
    
    
    (0.25
    %)
    
    
    2.00
    %June 25, 2008
    
    
    2.00
    %
    
    
    0.00
    %
    
    
    2.00
    %
    20




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##### Table of Contents



Three Months EndedJune 30,2008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    2,340,923
    
    
    $
    39,421
    
    
    
    6.77
    %
    
    $
    1,962,127
    
    
    $
    39,703
    
    
    
    8.12
    %Investment securities (2)
    
    
    246,541
    
    
    
    3,439
    
    
    
    5.61
    %
    
    
    154,110
    
    
    
    2,182
    
    
    
    5.68
    %Other short-term investments
    
    
    4,358
    
    
    
    22
    
    
    
    2.03
    %
    
    
    1,121
    
    
    
    12
    
    
    
    4.29
    %Total interest-earning assets
    
    $
    2,591,822
    
    
    $
    42,882
    
    
    
    6.65
    %
    
    $
    2,117,358
    
    
    $
    41,897
    
    
    
    7.94
    %Noninterest earning assets
    
    
    352,299
    
    
    
    
    
    
    
    
    
    
    
    230,119Total assets
    
    $
    2,944,121
    
    
    
    
    
    
    
    
    
    
    $
    2,347,477Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    675,467
    
    
    $
    2,255
    
    
    
    1.34
    %
    
    $
    693,235
    
    
    $
    4,865
    
    
    
    2.81
    %Time deposits
    
    
    1,233,075
    
    
    
    11,122
    
    
    
    3.63
    %
    
    
    874,466
    
    
    
    10,147
    
    
    
    4.65
    %Total interest-bearing deposits
    
    $
    1,908,542
    
    
    $
    13,377
    
    
    
    2.82
    %
    
    $
    1,567,701
    
    
    $
    15,012
    
    
    
    3.84
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    157,317
    
    
    
    700
    
    
    
    1.79
    %
    
    
    67,307
    
    
    
    768
    
    
    
    4.58
    %Notes payable
    
    
    246,776
    
    
    
    2,565
    
    
    
    4.18
    %
    
    
    192,668
    
    
    
    2,352
    
    
    
    4.90
    %Subordinated debentures (3)
    
    
    88,662
    
    
    
    1,008
    
    
    
    4.57
    %
    
    
    51,061
    
    
    
    718
    
    
    
    5.64
    %Total interest-bearing liabilities
    
    $
    2,401,297
    
    
    $
    17,650
    
    
    
    2.96
    %
    
    $
    1,878,737
    
    
    $
    18,850
    
    
    
    4.02
    %Noninterest bearing liabilities:Demand deposits
    
    
    186,136
    
    
    
    
    
    
    
    
    
    
    
    180,185Other liabilities
    
    
    23,311
    
    
    
    
    
    
    
    
    
    
    
    36,566Total noninterest bearing liabilities
    
    
    209,447
    
    
    
    
    
    
    
    
    
    
    
    216,751Total liabilities
    
    
    2,610,744
    
    
    
    
    
    
    
    
    
    
    
    2,095,488Shareholders equity
    
    
    333,377
    
    
    
    
    
    
    
    
    
    
    
    251,989Total liabilities and shareholders
Equity
    
    $
    2,944,121
    
    
    
    
    
    
    
    
    
    
    $
    2,347,477Net interest income
    
    
    
    
    
    $
    25,232
    
    
    
    
    
    
    
    
    
    
    $
    23,047Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.70
    %
    
    
    
    
    
    
    
    
    
    
    3.91
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.92
    %
    
    
    
    
    
    
    
    
    
    
    4.37
    %
 1
    
    2008 average loan balances exclude nonaccrual loans for the periods presented. 2007
average loan balances include nonaccrual loans for the periods presented, as they are not material.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.3
    
    The interest expense and average interest rates paid on the Subordinated Debentures
for the three and six month periods ended June 30, 2007 should have been $938 and $1,206 and 7.37%
and 7.53%, respectively. The impact of this timing difference on the 2007 second quarter and six
month results was deemed immaterial to the overall financial statements.  21




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##### Table of Contents



Six Months EndedJune 30,2008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    2,332,642
    
    
    $
    82,187
    
    
    
    7.09
    %
    
    $
    1,768,459
    
    
    $
    71,640
    
    
    
    8.16
    %Investment securities (2)
    
    
    246,202
    
    
    
    6,975
    
    
    
    5.70
    %
    
    
    103,176
    
    
    
    2,900
    
    
    
    5.47
    %Other short-term investments
    
    
    2,408
    
    
    
    25
    
    
    
    2.09
    %
    
    
    1,189
    
    
    
    27
    
    
    
    4.58
    %Total interest-earning assets
    
    $
    2,581,252
    
    
    $
    89,187
    
    
    
    6.95
    %
    
    $
    1,872,824
    
    
    $
    74,567
    
    
    
    8.03
    %Noninterest earning assets
    
    
    355,007
    
    
    
    
    
    
    
    
    
    
    
    191,240Total assets
    
    $
    2,936,259
    
    
    
    
    
    
    
    
    
    
    $
    2,064,064Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    686,444
    
    
    $
    5,580
    
    
    
    1.63
    %
    
    $
    617,363
    
    
    $
    8,411
    
    
    
    2.75
    %Time deposits
    
    
    1,185,132
    
    
    
    23,732
    
    
    
    4.03
    %
    
    
    774,411
    
    
    
    17,754
    
    
    
    4.62
    %Total interest-bearing deposits
    
    $
    1,871,576
    
    
    $
    29,312
    
    
    
    3.15
    %
    
    $
    1,391,774
    
    
    $
    26,165
    
    
    
    3.79
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    155,188
    
    
    
    1,792
    
    
    
    2.32
    %
    
    
    46,696
    
    
    
    1,054
    
    
    
    4.55
    %Notes payable
    
    
    278,822
    
    
    
    5,743
    
    
    
    4.14
    %
    
    
    182,346
    
    
    
    4,462
    
    
    
    4.94
    %Subordinated debentures (3)
    
    
    88,662
    
    
    
    2,440
    
    
    
    5.53
    %
    
    
    32,336
    
    
    
    986
    
    
    
    6.15
    %Total interest-bearing liabilities
    
    $
    2,394,248
    
    
    $
    39,287
    
    
    
    3.30
    %
    
    $
    1,653,152
    
    
    $
    32,667
    
    
    
    3.98
    %Noninterest bearing liabilities:Demand deposits
    
    
    186,295
    
    
    
    
    
    
    
    
    
    
    
    162,782Other liabilities
    
    
    24,639
    
    
    
    
    
    
    
    
    
    
    
    27,820Total noninterest bearing liabilities
    
    
    210,934
    
    
    
    
    
    
    
    
    
    
    
    190,602Total liabilities
    
    
    2,605,182
    
    
    
    
    
    
    
    
    
    
    
    1,843,754Shareholders equity
    
    
    331,077
    
    
    
    
    
    
    
    
    
    
    
    220,310Total liabilities and shareholders
Equity
    
    $
    2,936,259
    
    
    
    
    
    
    
    
    
    
    $
    2,064,064Net interest income
    
    
    
    
    
    $
    49,900
    
    
    
    
    
    
    
    
    
    
    $
    41,900Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.65
    %
    
    
    
    
    
    
    
    
    
    
    4.04
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.89
    %
    
    
    
    
    
    
    
    
    
    
    4.51
    %
 1
    
    2008 average loan balances exclude nonaccrual loans for the periods presented. 2007
average loan balances include nonaccrual loans for the periods presented, as they are not material.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.3
    
    The interest expense and average interest rates paid on the Subordinated Debentures
for the three and six month periods ended June 30, 2007 should have been $938 and $1,206 and 7.37%
and 7.53%, respectively. The impact of this timing difference on the 2007 second quarter and six
month results was deemed immaterial to the overall financial statements.  22




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Provision for Loan Losses.
   Noninterest Income.
  Noninterest Expense.
  23




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##### Table of Contents



Income Taxes.
 Changes in Financial Condition
    Liquidity and Capital Resources
 Liquidity.
  24




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Capital Resources.
     25




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Required
    
    
    RequiredMinimum
    
    
    to beRatio
    
    
    Well Capitalized
    
    
    Bank
    
    
    CompanyTier 1 risk-based
capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    10.24
    %
    
    
    10.51
    %Total risk-based capital
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    11.49
    %
    
    
    11.76
    %Leverage Ratio
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    8.94
    %
    
    
    9.21
    %
  Off-Balance Sheet Arrangements
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCommitments to make loans  fixed
    
    $
    6,940
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,940Commitments to make loans 
variable
    
    
    14,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,650Unused lines of credit
    
    
    318,906
    
    
    
    113,543
    
    
    
    11,908
    
    
    
    87,778
    
    
    
    532,135Letters of credit
    
    
    35,729
    
    
    
    1,027
    
    
    
    8,772
    
    
    
    6,894
    
    
    
    52,422Total
    
    $
    376,225
    
    
    $
    114,570
    
    
    $
    20,680
    
    
    $
    94,672
    
    
    $
    606,147
  26




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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
    
    $
    1,336,045
    
    
    $
    79,781
    
    
    $
    7,178
    
    
    $
    4,800
    
    
    $
    1,427,804Repurchase agreements
    
    
    91,641
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,641FHLB advances and notes payable
    
    
    453
    
    
    
    67,392
    
    
    
    80,975
    
    
    
    81,190
    
    
    
    230,010Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,662
    
    
    
    88,662Operating lease obligations
    
    
    1,119
    
    
    
    1,610
    
    
    
    1,304
    
    
    
    1,181
    
    
    
    5,214Deferred compensation
    
    
    1,975
    
    
    
    
    
    
    
    
    
    
    
    1,846
    
    
    
    3,821Purchase obligations
    
    
    231
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    231Total
    
    $
    1,431,464
    
    
    $
    148,783
    
    
    $
    89,457
    
    
    $
    177,679
    
    
    $
    1,847,383
  Effect of New Accounting Standards
 Business Combinations
      27




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
 13a-15(e).
 Internal Control Over Financial Reporting
   28




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PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The annual meeting of shareholders (the Annual Meeting) of the Company was
held on April 29, 2008. In addition to the election of directors, the proposals
described in section (c) below were considered by shareholders at the Annual Meeting.
 (b)
    
    Proxies for the Annual Meeting were solicited in accordance with Regulation 14
of the Exchange Act; there was no solicitation in opposition to managements nominees
and all of managements nominees were elected. Each director is elected to serve for a
3-year term and until his or her successor is elected and qualified. Accordingly, in
section (c) below, the Company has reported the voting results only with respect to
those directors who were voted on at the Annual Meeting.
 (c)
    
    The following sets forth the results of voting on each matter at the Annual
Meeting:
 Proposal 1  Election of directors
 Votes
    
    
    VotesFor
    
    
    WithheldBruce Campbell
    
    
    8,148,088
    
    
    
    1,221,769Samuel E. Lynch
    
    
    9,299,953
    
    
    
    69,904R. Stan Puckett
    
    
    9,209,999
    
    
    
    159,858John Tolsma
    
    
    8,150,219
    
    
    
    1,219,639
  29




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##### Table of Contents



Proposal 2  To approve the selection of Dixon Hughes PLLC as the
Companys independent registered public accounting firm for 2008
 Votes
    
    Votes
    
    
    
    
    
    
    BrokerFor
    
    Against
    
    
    Abstentions
    
    
    Non-Votes9,006,966
    
    
    9,772
    
    
    
    353,120
    
    
    
    9,772
 Item 5. Other Information
  Item 6. Exhibits
   30




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SIGNATURES
  Green Bankshares, Inc.
RegistrantDate: August 8, 2008
    By
    /s/      James E. AdamsJames E. AdamsExecutive Vice President, Chief Financial
Officer and Assistant Secretary  31




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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