##### 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 March 31, 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
    
    (I.R.S. Employer Identification No.)incorporation or organization)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
 YES o
NO o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if you are a smaller reporting company)
 o þ




---



##### 



PART I  FINANCIAL INFORMATION
 ITEM 1. FINANCIAL STATEMENTS
  Condensed Consolidated Balance Sheets  March 31, 2009 and December 31, 2008.
    
    
    2Condensed Consolidated Statements of Income and Comprehensive Income  For the three months
ended March 31, 2009 and 2008.
    
    
    3Condensed Consolidated Statement of Changes in Shareholders Equity  For the three months
ended March 31, 2009.
    
    
    4Condensed Consolidated Statements of Cash Flows  For the three months ended March 31, 2009
and 2008.
    
    
    5Notes to Condensed Consolidated Financial Statements.
    
    
    6Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2009 and December 31, 2008
 (Amounts in thousands, except share and per share data)
 (Unaudited)March 31,
    
    
    December 31,2009
    
    
    2008*ASSETSCash and due from banks
    
    $
    71,804
    
    
    $
    193,095Federal funds sold
    
    
    6,027
    
    
    
    5,263Cash and cash equivalents
    
    
    77,831
    
    
    
    198,358Securities available for sale
    
    
    193,271
    
    
    
    203,562Securities held to maturity (with a market value of $595 and $601)
    
    
    647
    
    
    
    657Loans held for sale
    
    
    595
    
    
    
    442Loans, net of unearned interest
    
    
    2,244,848
    
    
    
    2,223,390Allowance for loan losses
    
    
    (49,054
    )
    
    
    (48,811
    )Other real estate owned and repossessed assets
    
    
    12,651
    
    
    
    45,371Premises and equipment, net
    
    
    84,639
    
    
    
    83,359FHLB and other stock, at cost
    
    
    13,030
    
    
    
    13,030Cash surrender value of life insurance
    
    
    29,844
    
    
    
    29,539Goodwill
    
    
    143,389
    
    
    
    143,389Core deposit and other intangibles
    
    
    11,281
    
    
    
    12,085Other assets
    
    
    32,867
    
    
    
    40,300Total assets
    
    $
    2,795,839
    
    
    $
    2,944,671LIABILITIES AND SHAREHOLDERS EQUITYLiabilitiesNon-interest bearing deposits
    
    $
    168,178
    
    
    $
    176,685Interest bearing deposits
    
    
    1,707,625
    
    
    
    1,649,744Brokered deposits
    
    
    162,717
    
    
    
    357,718Total deposits
    
    
    2,038,520
    
    
    
    2,184,147Repurchase agreements
    
    
    31,018
    
    
    
    35,302FHLB advances and notes payable
    
    
    229,252
    
    
    
    229,349Subordinated debentures
    
    
    88,662
    
    
    
    88,662Accrued interest payable and other liabilities
    
    
    23,913
    
    
    
    25,980Total liabilities
    
    $
    2,411,365
    
    
    $
    2,563,440Shareholders equityPreferred stock: no par, 1,000,000 shares authorized, 72,278 and
72,278 shares outstanding
    
    $
    65,694
    
    
    $
    65,346Common stock: $2 par, 20,000,000 shares authorized, 13,176,681 and
13,112,687 shares outstanding
    
    
    26,353
    
    
    
    26,225Common stock warrants
    
    
    6,934
    
    
    
    6,934Additional paid-in capital
    
    
    187,783
    
    
    
    187,742Retained earnings
    
    
    97,485
    
    
    
    95,647Accumulated other comprehensive income (loss)
    
    
    225
    
    
    
    (663
    )Total shareholders equity
    
    
    384,474
    
    
    
    381,231Total liabilities and shareholders equity
    
    $
    2,795,839
    
    
    $
    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




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended March 31, 2009 and 2008
(Amounts in thousands, except share and per share data)
 Three Months EndedMarch 31,2009
    
    
    2008(Unaudited)Interest incomeInterest and fees on loans
    
    $
    32,645
    
    
    $
    42,749Taxable securities
    
    
    2,220
    
    
    
    2,863Nontaxable securities
    
    
    320
    
    
    
    333FHLB and other stock
    
    
    150
    
    
    
    160Federal funds sold and other
    
    
    45
    
    
    
    4Total interest income
    
    
    35,380
    
    
    
    46,109Interest expenseDeposits
    
    
    12,653
    
    
    
    15,935Federal funds purchased and repurchase agreements
    
    
    9
    
    
    
    1,092FHLB advances and notes payable
    
    
    2,443
    
    
    
    3,178Subordinated debentures
    
    
    846
    
    
    
    1,432Total interest expense
    
    
    15,951
    
    
    
    21,637Net interest income
    
    
    19,429
    
    
    
    24,472Provision for loan losses
    
    
    985
    
    
    
    888Net interest income after provision for loan losses
    
    
    18,444
    
    
    
    23,584Non-interest incomeService charges on deposit accounts
    
    
    5,356
    
    
    
    5,467Other charges and fees
    
    
    449
    
    
    
    504Trust and investment services income
    
    
    388
    
    
    
    286Mortgage banking income
    
    
    55
    
    
    
    257Other income
    
    
    695
    
    
    
    792Total non-interest income
    
    
    6,943
    
    
    
    7,306Non-interest expenseEmployee compensation
    
    
    7,692
    
    
    
    8,590Employee benefits
    
    
    1,295
    
    
    
    1,259Occupancy expense
    
    
    1,787
    
    
    
    1,715Equipment expense
    
    
    742
    
    
    
    1,102Computer hardware/software expense
    
    
    637
    
    
    
    632Professional services
    
    
    529
    
    
    
    454Advertising
    
    
    64
    
    
    
    874Loss on sale of OREO and repossessed assets
    
    
    81
    
    
    
    14Core deposit and other intangibles amortization
    
    
    804
    
    
    
    654Other expenses
    
    
    4,200
    
    
    
    4,267Total non-interest expenses
    
    
    17,831
    
    
    
    19,561Income before income taxes
    
    
    7,556
    
    
    
    11,329Provision for income taxes
    
    
    2,776
    
    
    
    4,151Net income
    
    $
    4,780
    
    
    $
    7,178Preferred stock dividends and accretion of discount
    
    
    1,232
    
    
    
    Net income available to common shareholders
    
    $
    3,548
    
    
    $
    7,178Per share of common stock:Basic earnings
    
    $
    0.27
    
    
    $
    0.56Diluted earnings
    
    
    0.27
    
    
    
    0.56Dividends
    
    
    0.13
    
    
    
    0.13Weighted average shares outstanding:Basic
    
    
    13,062,881
    
    
    
    12,931,169Diluted
    
    
    13,141,840
    
    
    
    12,931,169
   3




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 For the Three Months Ended March 31, 2009
 (Amounts in thousands, except share and per share data)
 Warrants
    
    
    
    
    
    
    
    
    
    
    AccumulatedFor
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred
    
    
    Common Stock
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    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
    
    
    348
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (348
    )
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (884
    )
    
    
    
    
    
    
    (884
    )Common stock transactions:Issuance of restricted common shares
    
    
    
    
    
    
    63,994
    
    
    
    128
    
    
    
    
    
    
    
    (128
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense:Stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    96Restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    73Dividends paid ($.13 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,710
    )
    
    
    
    
    
    
    (1,710
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,780
    
    
    
    
    
    
    
    4,780Change in unrealized gains,
net of reclassification
and taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    888
    
    
    
    888Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,668Balance, March 31, 2009
    
    $
    65,694
    
    
    
    13,176,681
    
    
    $
    26,353
    
    
    $
    6,934
    
    
    $
    187,783
    
    
    $
    97,485
    
    
    $
    225
    
    
    $
    384,474
   4




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2009 and 2008
(Amounts in thousands, except share and per share data)
 March 31,
    
    
    March 31,2009
    
    
    2008(Unaudited)Cash flows from operating activitiesNet income
    
    $
    4,780
    
    
    $
    7,178Adjustments to reconcile net income to net cash provided by
operating activitiesProvision for loan losses
    
    
    985
    
    
    
    888Depreciation and amortization
    
    
    1,893
    
    
    
    1,742Security amortization and accretion, net
    
    
    16
    
    
    
    (304
    )FHLB stock dividends
    
    
    
    
    
    
    (148
    )Net gain on sale of mortgage loans
    
    
    (36
    )
    
    
    (178
    )Originations of mortgage loans held for sale
    
    
    (6,076
    )
    
    
    (15,351
    )Proceeds from sales of mortgage loans
    
    
    5,959
    
    
    
    15,510Increase in cash surrender value of life insurance
    
    
    (305
    )
    
    
    (263
    )Net losses (gains) from sales of fixed assets
    
    
    (3
    )
    
    
    383Stock-based compensation expense
    
    
    169
    
    
    
    185Net loss on other real estate and repossessed assets
    
    
    81
    
    
    
    14Deferred tax expense
    
    
    (288
    )
    
    
    (1,085
    )Net changes:Other assets
    
    
    7,147
    
    
    
    6,838Accrued interest payable and other liabilities
    
    
    (2,430
    )
    
    
    (7,326
    )Net cash provided by operating activities
    
    
    11,892
    
    
    
    8,083Cash flows from investing activitiesPurchase of securities available for sale
    
    
    (29,813
    )
    
    
    (18,853
    )Proceeds from maturities of securities available for sale
    
    
    41,550
    
    
    
    26,515Proceeds from maturities of securities held to maturity
    
    
    10
    
    
    
    185Purchase of FHLB stock
    
    
    
    
    
    
    (417
    )Net change in loans
    
    
    (1,686
    )
    
    
    13,963Proceeds from sale of other real estate
    
    
    12,126
    
    
    
    1,037Improvements to other real estate
    
    
    
    
    
    
    (82
    )Proceeds from sale of fixed assets
    
    
    3
    
    
    
    50Premises and equipment expenditures
    
    
    (2,370
    )
    
    
    (1,510
    )Net cash provided by investing activities
    
    
    19,820
    
    
    
    20,888Cash flows from financing activitiesNet change in core deposits
    
    
    49,374
    
    
    
    84,659Net change in brokered deposits
    
    
    (195,001
    )
    
    
    (12,070
    )Net change in repurchase agreements
    
    
    (4,284
    )
    
    
    (61,729
    )Proceeds from FHLB advances and notes payable
    
    
    
    
    
    
    20,000Repayments of FHLB advances and notes payable
    
    
    (96
    )
    
    
    (66,348
    )Preferred stock dividends paid
    
    
    (522
    )
    
    
    Common stock dividends paid
    
    
    (1,710
    )
    
    
    (1,690
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    7Net cash used by financing activities
    
    
    (152,239
    )
    
    
    (37,171
    )Net change in cash and cash equivalents
    
    
    (120,527
    )
    
    
    (8,200
    )Cash and cash equivalents, beginning of period
    
    
    198,358
    
    
    
    65,717Cash and cash equivalents, end of period
    
    $
    77,831
    
    
    $
    57,517Supplemental disclosures  cash and noncashInterest paid
    
    $
    18,313
    
    
    $
    22,314Income taxes paid
    
    
    
    
    
    
    683Loans converted to other real estate
    
    
    16,158
    
    
    
    5,483Unrealized gain on available for sale securities, net of tax
    
    
    888
    
    
    
    2,008
   5




---



##### Table of Contents



GREEN BANKSHARES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2009
 Unaudited
 (Amounts in thousands, except share and per share data)
 NOTE 1  PRINCIPLES OF CONSOLIDATION
  NOTE 2  LOANS
  March 31,
    
    
    December 31,2009
    
    
    2008Commercial real estate
    
    $
    1,460,343
    
    
    $
    1,430,425Residential real estate
    
    
    396,000
    
    
    
    397,922Commercial
    
    
    311,696
    
    
    
    315,099Consumer
    
    
    87,720
    
    
    
    89,733Other
    
    
    3,598
    
    
    
    4,656Unearned income
    
    
    (14,509
    )
    
    
    (14,245
    )Loans, net of unearned income
    
    $
    2,244,848
    
    
    $
    2,223,390Allowance for loan losses
    
    $
    (49,054
    )
    
    $
    (48,811
    )
   6




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 2  LOANS
  March 31,
    
    
    December 31,2009
    
    
    2008Balance at beginning of year
    
    $
    48,811
    
    
    $
    34,111Add (deduct):Provision for loan losses
    
    
    985
    
    
    
    52,810Loans charged off
    
    
    (3,736
    )
    
    
    (41,269
    )Recoveries of loans charged off
    
    
    2,994
    
    
    
    3,159Ending balance
    
    $
    49,054
    
    
    $
    48,811
 March 31,
    
    
    December 31,2009
    
    
    2008Impaired loans were as follows:Loans with no allowance allocated
    
    $
    98,090
    
    
    $
    29,602Loans with allowance allocated
    
    
    63,528
    
    
    
    17,613Amount of allowance allocated
    
    
    9,754
    
    
    
    2,651Nonperforming loans were as follows:Loans past due 90 days still on accrual
    
    $
    4,058
    
    
    $
    509Nonaccrual loans1
    
    
    104,563
    
    
    
    30,926Total
    
    $
    108,621
    
    
    $
    31,435
 1
    
    $36,368 of the increase in nonaccrual loans relates to loans, that on December 31,
2008, were classified as OREO and were in the process of foreclosure. The creditors subsequently
filed bankruptcy. The Company has returned these loans back into nonaccrual loans pending the
outcome of the legal proceedings.
   7




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 3  EARNINGS PER SHARE OF COMMON STOCK
   Three Months Ended March 31,2009
    
    
    2008Basic Earnings Per ShareNet income
    
    $
    4,780
    
    
    $
    7,178Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,232
    
    
    
    Net income available to common shareholders
    
    $
    3,548
    
    
    $
    7,178Weighted average common shares outstanding
    
    
    13,062,881
    
    
    
    12,931,169Basic earnings per share
    
    $
    0.27
    
    
    $
    0.56Diluted Earnings Per ShareNet income
    
    $
    4,780
    
    
    $
    7,178Less: preferred stock dividends and accretion of discount on
warrants
    
    
    1,232
    
    
    
    Net income available to common shareholders
    
    $
    3,548
    
    
    $
    7,178Weighted average common shares outstanding
    
    
    13,062,881
    
    
    
    12,931,169Add: Dilutive effects of assumed conversions of restricted stock
and exercises of stock options and warrants
    
    
    78,959
    
    
    
    Weighted average common and dilutive potential
common shares outstanding
    
    
    13,141,840
    
    
    
    12,931,169Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.56
   8




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  SEGMENT INFORMATION
   Three months ended March 31, 2009
    
    Bank
    
    
    Other 
Segments
    
    
    Holding Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    18,210
    
    
    $
    2,066
    
    
    $
    (847
    )
    
    $
    
    
    
    $
    19,429Provision for loan losses
    
    
    341
    
    
    
    644
    
    
    
    
    
    
    
    
    
    
    
    985Non-interest income
    
    
    6,597
    
    
    
    449
    
    
    
    125
    
    
    
    (228
    )
    
    
    6,943Non-interest expense
    
    
    16,242
    
    
    
    1,239
    
    
    
    578
    
    
    
    (228
    )
    
    
    17,831Income tax expense (benefit)
    
    
    3,016
    
    
    
    247
    
    
    
    (487
    )
    
    
    
    
    
    
    2,776Segment profit (loss)
    
    $
    5,208
    
    
    $
    385
    
    
    $
    (813
    )
    
    $
    
    
    
    $
    4,780Segment assets at March 31, 2009
    
    $
    2,746,937
    
    
    $
    40,637
    
    
    $
    8,265
    
    
    $
    
    
    
    $
    2,795,839
 Three months ended March 31, 2008
    
    Bank
    
    
    Other 
Segments
    
    
    Holding 
Company
    
    
    Eliminations
    
    
    TotalsNet interest income (expense)
    
    $
    24,070
    
    
    $
    1,834
    
    
    $
    (1,432
    )
    
    $
    
    
    
    $
    24,472Provision for loan losses
    
    
    414
    
    
    
    474
    
    
    
    
    
    
    
    
    
    
    
    888Non-interest income
    
    
    6,874
    
    
    
    498
    
    
    
    147
    
    
    
    (213
    )
    
    
    7,306Non-interest expense
    
    
    18,006
    
    
    
    1,293
    
    
    
    475
    
    
    
    (213
    )
    
    
    19,561Income tax expense (benefit)
    
    
    4,631
    
    
    
    221
    
    
    
    (701
    )
    
    
    
    
    
    
    4,151Segment profit (loss)
    
    $
    7,893
    
    
    $
    344
    
    
    $
    (1,059
    )
    
    $
    
    
    
    $
    7,178Segment assets at March 31, 2008
    
    $
    2,860,701
    
    
    $
    39,165
    
    
    $
    12,749
    
    
    $
    
    
    
    $
    2,912,615
   9




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 4  SEGMENT INFORMATION
 Asset Quality Ratios
 As of and for the period ended March 31, 2009
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    4.83
    %
    
    
    2.05
    %
    
    
    4.84
    %Nonperforming assets as a percentage of total assets
    
    
    4.31
    %
    
    
    1.98
    %
    
    
    4.34
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    2.05
    %
    
    
    8.09
    %
    
    
    2.19
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    42.41
    %
    
    
    393.66
    %
    
    
    45.16
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.01
    %
    
    
    1.29
    %
    
    
    0.03
    %
 As of and for the period ended March 31, 2008
    
    Bank
    
    
    Other
    
    
    TotalNonperforming loans as percentage of total loans, net of unearned income
    
    
    1.27
    %
    
    
    1.37
    %
    
    
    1.29
    %Nonperforming assets as a percentage of total assets
    
    
    1.32
    %
    
    
    1.83
    %
    
    
    1.35
    %Allowance for loan losses as a percentage of total loans, net of
unearned income
    
    
    1.32
    %
    
    
    8.00
    %
    
    
    1.45
    %Allowance for loan losses as a percentage of nonperforming loans
    
    
    104.16
    %
    
    
    582.16
    %
    
    
    112.71
    %YTD net charge-offs to average total loans, net of unearned income
    
    
    0.03
    %
    
    
    1.01
    %
    
    
    0.05
    %
 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
    
    
    TotalActual for the three month period ending March 31, 2009
    
    $
    214
    
    
    $
    528
    
    
    $
    742Actual for the three month period ending March 31, 2008
    
    $
    682
    
    
    $
    390
    
    
    $
    1,072Actual for the year ended December 31, 2008
    
    $
    35,564
    
    
    $
    2,546
    
    
    $
    38,110
   10




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  FAIR VALUE DISCLOSURES
  Level 1
  Level 2
  Level 3
   Investment Securities Available-for-Sale
  Loans Held for Sale
    11




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  FAIR VALUE DISCLOSURES
 Impaired Loans
 
 Other Real Estate
  Loan Servicing Rights
  Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  March 31, 2009Total CarryingAmount inStatement of
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Financial
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    ValueSecurities available for sale
    
    $
    
    
    
    $
    193,271
    
    
    $
    
    
    
    $
    193,271
    
    
    $
    193,271
   12




---



##### Table of Contents



GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
Unaudited
(Amounts in thousands, except share and per share data)
 NOTE 5  FAIR VALUE DISCLOSURES
 Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
  March 31, 2009Total CarryingAmount inStatement of
    
    
    Assets/LiabilitiesFair Value Measurement Using
    
    
    Financial
    
    
    Measured at FairDescription
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Position
    
    
    ValueOther real estate
    
    $
    
    
    
    $
    
    
    
    $
    9,815
    
    
    $
    9,815
    
    
    $
    9,815Impaired loans
    
    
    
    
    
    
    
    
    
    
    53,774
    
    
    
    53,774
    
    
    
    53,774Total assets at fair value
    
    $
    
    
    
    $
    
    
    
    $
    63,589
    
    
    $
    63,589
    
    
    $
    63,589
   13




---



##### 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 2008 10-K in Part I, Item 1A thereof, which is
incorporated herein by this reference and (1) unanticipated deterioration in the financial
condition of borrowers resulting in significant increases in loan losses and provisions for those
losses; (2) continued deterioration in the residential real estate market; (3) lack of sustained
growth in the economy in the markets that the Bank serves; (4) increased competition with other
financial institutions in the markets that the Bank serves; (5) changes in the legislative and
regulatory environment; (6) the Companys failure to successfully implement its growth strategy;
and (7) 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 16 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 2008 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.
   14




---



##### Table of Contents



Growth and Business Strategy
      Overview
   15




---



##### Table of Contents



Critical Accounting Policies and Estimates
        16




---



##### Table of Contents



Changes in Results of Operations
 Net Income.
 Net Interest Income.
    17




---



##### Table of Contents



Beginning
    
    
    Increase/
    
    
    EndingFOMC Meeting Date
    
    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
    %
   18




---



##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Loans(1) (2)
    
    $
    2,175,543
    
    
    $
    32,655
    
    
    
    6.09
    %
    
    $
    2,324,362
    
    
    $
    42,766
    
    
    
    7.40
    %Investment securities (2)
    
    
    216,757
    
    
    
    2,862
    
    
    
    5.35
    %
    
    
    245,863
    
    
    
    3,536
    
    
    
    5.78
    %Other short-term investments
    
    
    70,459
    
    
    
    45
    
    
    
    0.26
    %
    
    
    458
    
    
    
    3
    
    
    
    2.63
    %Total interest-earning assets
    
    $
    2,462,759
    
    
    $
    35,562
    
    
    
    5.86
    %
    
    $
    2,570,683
    
    
    $
    46,305
    
    
    
    7.24
    %Non-interest earning assets
    
    
    384,013
    
    
    
    
    
    
    
    
    
    
    
    357,408Total assets
    
    $
    2,846,772
    
    
    
    
    
    
    
    
    
    
    $
    2,928,091Interest-bearing liabilities:Deposits:Interest checking, savings and money
market
    
    $
    623,708
    
    
    $
    1,852
    
    
    
    1.20
    %
    
    $
    697,444
    
    
    $
    3,325
    
    
    
    1.92
    %Time deposits
    
    
    1,296,277
    
    
    
    10,801
    
    
    
    3.38
    %
    
    
    1,137,188
    
    
    
    12,610
    
    
    
    4.46
    %Total interest-bearing deposits
    
    $
    1,919,985
    
    
    $
    12,653
    
    
    
    2.67
    %
    
    $
    1,834,632
    
    
    $
    15,935
    
    
    
    3.49
    %Securities sold under repurchase
agreements and short-term borrowings
    
    
    33,076
    
    
    
    9
    
    
    
    0.11
    %
    
    
    153,059
    
    
    
    1,092
    
    
    
    2.87
    %Notes payable
    
    
    229,282
    
    
    
    2,443
    
    
    
    4.32
    %
    
    
    310,868
    
    
    
    3,178
    
    
    
    4.11
    %Subordinated debentures
    
    
    88,662
    
    
    
    846
    
    
    
    3.87
    %
    
    
    88,662
    
    
    
    1,432
    
    
    
    6.50
    %Total interest-bearing liabilities
    
    $
    2,271,005
    
    
    $
    15,951
    
    
    
    2.85
    %
    
    $
    2,387,221
    
    
    $
    21,637
    
    
    
    3.65
    %Non-interest bearing liabilities:Demand deposits
    
    
    168,109
    
    
    
    
    
    
    
    
    
    
    
    186,454Other liabilities
    
    
    22,734
    
    
    
    
    
    
    
    
    
    
    
    25,640Total non-interest bearing liabilities
    
    
    190,843
    
    
    
    
    
    
    
    
    
    
    
    212,094Total liabilities
    
    
    2,461,848
    
    
    
    
    
    
    
    
    
    
    
    2,599,315Shareholders equity
    
    
    384,924
    
    
    
    
    
    
    
    
    
    
    
    328,776Total liabilities and shareholders
equity
    
    $
    2,846,772
    
    
    
    
    
    
    
    
    
    
    $
    2,928,091Net interest income
    
    
    
    
    
    $
    19,611
    
    
    
    
    
    
    
    
    
    
    $
    24,668Interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.01
    %
    
    
    
    
    
    
    
    
    
    
    3.60
    %Net yield on interest-earning assets
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    3.86
    %
 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.  19




---



##### Table of Contents



Provision for Loan Losses.
   Non-interest Income.
  Non-interest Expense.
   20




---



##### Table of Contents



Income Taxes.
 Changes in Financial Condition
        21




---



##### Table of Contents



Liquidity and Capital Resources
 Liquidity.
    Capital Resources.
    22




---



##### Table of Contents



Required
    
    
    RequiredMinimum
    
    
    to beRatio
    
    
    Well Capitalized
    
    
    Bank
    
    
    CompanyTier 1 risk-based
capital
    
    
    4.00
    %
    
    
    6.00
    %
    
    
    13.71
    %
    
    
    13.90
    %Total risk-based capital
    
    
    8.00
    %
    
    
    10.00
    %
    
    
    14.97
    %
    
    
    15.16
    %Leverage Ratio
    
    
    4.00
    %
    
    
    5.00
    %
    
    
    11.63
    %
    
    
    11.80
    %
  Off-Balance Sheet Arrangements
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCommitments to make loans  fixed
    
    $
    5,866
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,866Commitments to make loans 
variable
    
    
    32,833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,833Unused lines of credit
    
    
    167,066
    
    
    
    51,846
    
    
    
    11,248
    
    
    
    82,088
    
    
    
    312,248Letters of credit
    
    
    27,363
    
    
    
    774
    
    
    
    7,353
    
    
    
    6,894
    
    
    
    42,384Total
    
    $
    233,128
    
    
    $
    52,620
    
    
    $
    18,601
    
    
    $
    88,982
    
    
    $
    393,331
  23




---



##### Table of Contents



Disclosure of Contractual Obligations
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Years
    
    
    TotalCertificates of deposits
    
    $
    1,044,384
    
    
    $
    160,719
    
    
    $
    3,672
    
    
    $
    3,667
    
    
    $
    1,212,442FHLB advances and notes payable
    
    
    54,933
    
    
    
    27,854
    
    
    
    75,925
    
    
    
    70,540
    
    
    
    229,252Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,662
    
    
    
    88,662Operating lease obligations
    
    
    1,288
    
    
    
    2,055
    
    
    
    1,515
    
    
    
    1,404
    
    
    
    6,262Deferred compensation
    
    
    1,823
    
    
    
    
    
    
    
    
    
    
    
    2,097
    
    
    
    3,920Purchase obligations
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105Total
    
    $
    1,102,533
    
    
    $
    190,628
    
    
    $
    81,112
    
    
    $
    166,370
    
    
    $
    1,540,643
  Effect of New Accounting Standards
     24




---



##### 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
   25




---



##### Table of Contents



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
  Item 5. Other Information
  Item 6. Exhibits
   26




---



##### Table of Contents



SIGNATURES
  Green Bankshares, Inc.RegistrantDate: May 8, 2009
    By
    /s/ James E. AdamsJames E. AdamsExecutive Vice President, Chief Financial
Officer and Secretary  27




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    Chief Executive Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    
    Chief Financial Officer Certification Pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    
    Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002