UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2011


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 number0-14289~~0-14289~~

GREEN BANKSHARES, INC.

(Exact name of registrant as specified in its charter)


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)

Registrant’s telephone number, including area code: (~~(423)~~423) 639-5111

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESþ NOo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YESo NOo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~


Large accelerated filero	Accelerated filerþ	Non-accelerated filero	~~Smaller reporting company~~o
		(Do not check if a smaller reporting company)	Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
YESo NOþ

As of ~~May 13,~~August 5, 2011, the number of shares outstanding of the issuer’s common stock was: ~~13,186,001.~~13,257,606.

GREEN BANKSHARES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

~~March 31,~~June 30, 2011 and December 31, 2010

(Amounts in thousands, except share and per share data)

(Unaudited)
March 31, December 31,
2011 2010*
ASSETS

Cash and due from banks $ 323,485 $ 289,358
Federal funds sold 7,931 4,856

Cash and cash equivalents 331,416 294,214
Interest earning deposits in other banks — —
Securities available for sale 226,732 202,002
Securities held to maturity (with a market value of $115 and $467) 115 465
Loans held for sale 960 1,299
Loans, net of unearned interest 1,680,249 1,745,378
Allowance for loan losses (65,109 ) (66,830 )
Other real estate owned and repossessed assets 60,033 60,095
Premises and equipment, net 77,814 78,794
FHLB and other stock, at cost 12,734 12,734
Cash surrender value of life insurance 31,758 31,479
Core deposit and other intangibles 6,125 6,751
Deferred tax asset ( net of valuation allowance of $47,563 and $43,455) 6,339 2,177
Other assets 23,528 37,482

Total assets $ 2,392,694 $ 2,406,040

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities
Non-interest bearing deposits $ 165,927 $ 152,752
Interest bearing deposits 1,808,309 1,822,703
Brokered deposits 1,399 1,399

Total deposits 1,975,635 1,976,854

Repurchase agreements 18,712 19,413
FHLB advances and notes payable 158,588 158,653
Subordinated debentures 88,662 88,662
Accrued interest payable and other liabilities 18,267 18,561

Total liabilities $ 2,259,864 $ 2,262,143

Shareholders’ equity
Preferred stock: no par, 1,000,000 shares authorized, 72,278 shares outstanding $ 68,468 $ 68,121
Common stock: $2 par, 20,000,000 shares authorized, 13,182,797 and 13,188,896 shares outstanding 26,366 26,378
Common stock warrants 6,934 6,934
Additional paid-in capital 189,022 188,901
Accumulated Deficit (158,997 ) (147,436 )
Accumulated other comprehensive income 1,037 999

Total shareholders’ equity 132,830 143,897

Total liabilities and shareholders’ equity $ 2,392,694 $ 2,406,040


	(Unaudited)
	June 30,			December 31,
	2011			2010*
ASSETS
Cash and due from banks	$	339,242		$	289,358
Federal funds sold		5,023			4,856

Cash and cash equivalents		344,265			294,214
Interest earning deposits in other banks		—			—
Securities available for sale		217,556			202,002
Securities held to maturity (with a market value of $467)		—			465
Loans held for sale		617			1,299
Loans, net of unearned interest		1,560,503			1,745,378
Allowance for loan losses		(62,728	)		(66,830	)
Other real estate owned and repossessed assets		79,690			60,095
Premises and equipment, net		76,886			78,794
FHLB and other stock, at cost		12,734			12,734
Cash surrender value of life insurance		32,040			31,479
Core deposit and other intangibles		5,502			6,751
Deferred tax asset (net of valuation allowance of $52,268 and $43,455)		5,645			2,177
Other assets		21,105			37,482


Total assets	$	2,293,815		$	2,406,040


LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Non-interest bearing deposits	$	171,369		$	152,752
Interest bearing deposits		1,710,620			1,822,703
Brokered deposits		1,399			1,399

Total deposits		1,883,388			1,976,854

Repurchase agreements		18,713			19,413
FHLB advances and notes payable		157,859			158,653
Subordinated debentures		88,662			88,662
Accrued interest payable and other liabilities		23,147			18,561

Total liabilities	$	2,171,769		$	2,262,143


Shareholders’ equity
Preferred stock: no par, 1,000,000 shares authorized, 72,278 shares outstanding	$	68,815		$	68,121
Common stock: $2 par, 20,000,000 shares authorized, 13,257,606 and 13,188,896 shares outstanding		26,515			26,378
Common stock warrants		6,934			6,934
Additional paid-in capital		189,051			188,901
Accumulated Deficit		(171,381	)		(147,436	)
Accumulated other comprehensive income		2,112			999

Total shareholders’ equity		122,046			143,897


Total liabilities and shareholders’ equity	$	2,293,815		$	2,406,040


*		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, 2010.

See notes to condensed consolidated financial statements.

GREEN BANKSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Three and Six Months Ended ~~March 31,~~June 30, 2011 and 2010

(Amounts in thousands, except share and per share data)


	Three Months Ended					Three Months Ended						Six Months Ended
	March 31,					June 30,						June 30,
	2011			2010		2011			2010			2011			2010
	(Unaudited)					(Unaudited)						(Unaudited)
Interest income
Interest and fees on loans	$	24,600		$	30,060	$	23,804		$	29,374		$	48,404		$	59,434
Taxable securities		1,401			1,288		1,686			1,391			3,088			2,679
Nontaxable securities		305			312		281			306			586			618
FHLB and other stock		138			138		134			134			272			272
Federal funds sold and other		181			94		170			99			350			193

Total interest income		26,625			31,892		26,075			31,304			52,700			63,196


Interest expense
Deposits		5,330			8,061		4,561			7,626			9,892			15,687
Federal funds purchased and repurchase agreements		4			6		4			5			8			11
FHLB advances and notes payable		1,543			1,694		1,570			1,712			3,113			3,406
Subordinated debentures		481			472		488			488			969			960

Total interest expense		7,358			10,233		6,623			9,831			13,982			20,064


Net interest income		19,267			21,659		19,452			21,473			38,718			43,132

Provision for loan losses		13,897			3,889		14,333			4,749			28,229			8,638


Net interest income after provision for loan losses		5,370			17,770		5,119			16,724			10,489			34,494


Non-interest income
Service charges on deposit accounts		5,830			5,940		6,377			6,692			12,208			12,632
Other charges and fees		430			356		369			383			799			739
Trust and investment services income		515			582		497			757			1,012			1,339
Mortgage banking income		87			118		112			123			199			241
Other income		765			690		881			909			1,646			1,599
Securities gains (losses), net
Other-than-temporary impairment							—			(553	)		—			(553	)
Less non-credit portion recognized in other comprehensive income							—			460			—			460

Total non-interest income		7,627			7,686		8,236			8,771			15,864			16,457


Non-interest expense
Employee compensation		8,131			7,665		7,324			7,972			15,455			15,637
Employee benefits		977			977		879			816			1,856			1,793
Occupancy expense		1,794			1,699		1,710			1,684			3,504			3,383
Equipment expense		877			708		638			668			1,516			1,376
Computer hardware/software expense		919			824		936			886			1,855			1,710
Professional services		788			607		1,122			576			1,910			1,183
Advertising		719			598		367			806			1,085			1,404
OREO maintenance expense		1,155			445		1,194			554			2,349			999
Collection and repossession expense		547			1,287		772			534			1,319			1,821
Loss on OREO and repossessed assets		2,101			509		4,328			926			6,429			1,435
FDIC Insurance		1,086			851		1,284			1,209			2,370			2,060
Core deposit and other intangibles amortization		626			651		623			640			1,249			1,291

Other expenses		3,307			3,725		3,593			4,003			6,901			7,728

Total non-interest expenses		23,027			20,546		24,770			21,274			47,798			41,820


Income (loss) before income taxes		(10,030	)		4,910		(11,415	)		4,221			(21,445	)		9,131

Provision for income/(loss) taxes		281			1,714
Provision (benefit) for income taxes							(281	)		1,410			—			3,124


Net income/(loss)	$	(10,311	)	$	3,196
Net income (loss)						$	(11,134	)	$	2,811		$	(21,445	)	$	6,007

Preferred stock dividends and accretion of discount		1,250			1,250		1,250			1,250			2,500			2,500


Net income/(loss) available to common shareholders	$	(11,561	)	$	1,946
Net income (loss) available to common shareholders						$	(12,384	)	$	1,561		$	(23,945	)	$	3,507


Per share of common stock:
Basic earnings	$	(0.88	)	$	0.15
Basic earnings (loss)						$	(0.94	)	$	0.12		$	(1.83	)	$	0.27

Diluted earnings		(0.88	)		0.15

Dividends		—			—
Diluted earnings (loss)							(0.94	)		0.12			(1.83	)		0.27


Weighted average shares outstanding:
Basic		13,108,598			13,082,347		13,126,923			13,097,611			13,117,811			13,090,021

Diluted		13,108,598			13,172,727
Diluted¹							13,126,923			13,158,131			13,117,811			13,148,226

GREEN BANKSHARES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2011

(Unaudited)

(Amounts in thousands, except share and per share data)


									Warrants								Accumulated													Warrants								Accumulated
									For		Additional						Other		Total											For		Additional						Other		Total
	Preferred		Common Stock						Common		Paid-in			Accumulated			Comprehensive		Shareholders’			Preferred		Common Stock						Common		Paid-in			Accumulated			Comprehensive		Shareholders’
	Stock		Shares			Amount			Stock		Capital			(Deficit)			Income		Equity			Stock		Shares			Amount			Stock		Capital			(Deficit)			Income		Equity
Balance, December 31, 2010	$	68,121		13,188,896		$	26,378		$	6,934	$	188,901		$	(147,436	)	$	999	$	143,897		$	68,121		13,188,896		$	26,378		$	6,934	$	188,901		$	(147,436	)	$	999	$	143,897

Preferred stock transactions:
Accretion of preferred stock discount		347		—			—			—		—			(347	)		—		—			694		—			—			—		—			(694	)		—		—
Preferred stock dividends accrued		—		—			—			—		—			(903	)		—		(903	)		—		—			—			—		—			(1,806	)		—		(1,806	)
Common stock transactions:
Issuance of restricted common shares																							—		77,356			154			—		29								183
Forfeiture of restricted common shares		—		(6,099	)		(12	)		—		(52	)		—			—		(64	)		—		(8,646	)		(17	)		—		(87	)		—			—		(104	)
Compensation expense:
Stock options		—		—			—			—		50			—			—		50			—		—			—			—		50			—			—		50
Restricted stock		—		—			—			—		123			—			—		123			—		—			—			—		158			—			—		158
Comprehensive income/(loss):
Net (loss)		—		—			—			—		—			(10,311	)		—		(10,311	)		—		—			—			—		—			(21,445	)		—		(21,445	)
Change in unrealized gains, net of reclassification and taxes		—		—			—			—		—			—			38		38			—		—			—			—		—			—			1,113		1,113

Total comprehensive income/(loss)																				(10,273	)																				(20,331	)


Balance, March 31, 2011	$	68,468		13,182,797		$	26,366		$	6,934	$	189,022		$	(158,997	)	$	1,037	$	132,830
Balance, June 30, 2011																						$	68,815		13,257,606		$	26,515		$	6,934	$	189,051		$	(171,381	)	$	2,112	$	122,046

GREEN BANKSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2011 and 2010

(Amounts in thousands, except share and per share data)


							June 30,			June 30,
	March 31,			March 31,			2011			2010
	2011			2010			(Unaudited)
	(Unaudited)
Cash flows from operating activities
Net income (loss)	$	(10,311	)	$	3,196		$	(21,445	)	$	6,007
Adjustments to reconcile net income/(loss) to net cash provided by operating activities
Adjustments to reconcile net income / (loss) to net cash provided by operating Activities
Provision for loan losses		13,897			3,889			28,229			8,638
Depreciation and amortization		1,736			1,828			3,442			3,619
Security amortization and accretion, net		129			59			199			235
Write down of investments for impairment								—			93
Net gain on sale of mortgage loans		(78	)		(110	)		(185	)		(222	)
Originations of mortgage loans held for sale		(7,421	)		(8,741	)		(14,560	)		(18,759	)
Proceeds from sales of mortgage loans		7,838			9,794			15,427			19,685
Increase in cash surrender value of life insurance		(279	)		(265	)		(561	)		(595	)
Net losses from sales of fixed assets		203			3			223			5
Stock-based compensation expense		109			156			287			316
Net loss on other real estate and repossessed assets		2,099			509			6,429			1,435
Deferred tax benefit		—			(303	)		—			(516	)
Net changes:
Other assets		9,769			4,970			12,193			6,631
Accrued interest payable and other liabilities		(1,196	)		(5,895	)		2,779			(3,561	)

Net cash provided by operating activities		16,495			9,090			32,457			23,011

Cash flows from investing activities
Purchase of securities available for sale		(35,782	)		(51,525	)		(59,790	)		(85,684	)
Proceeds from maturities of securities available for sale		10,985			27,072			45,868			70,025
Proceeds from maturities of securities held to maturity		350			10			465			10
Net change in loans		43,266			28,763			111,627			77,775
Proceeds from sale of other real estate		4,322			2,368			15,154			8,357
Improvements to other real estate		(113	)		(332	)		(261	)		(450	)
Proceeds from sale of fixed assets		7			—			7			—
Premises and equipment expenditures		(342	)		(566	)		(516	)		(951	)

Net cash provided by investing activities		22,693			5,790			112,554			69,082

Cash flows from financing activities
Net change in core deposits		(1,219	)		(41,046	)
Net change in deposits								(93,466	)		(87,072	)
Net change in brokered deposits		—			(5,185	)		—			(5,185	)
Net change in repurchase agreements		(702	)		(619	)		(700	)		(209	)
Repayments of FHLB advances and notes payable		(65	)		(80	)		(794	)		(161	)
Preferred stock dividends paid		—			(903	)		—			(1,805	)
Common stock dividends paid		—			—


Net cash (used) in financing activities		(1,986	)		(47,833	)		(94,960	)		(94,432	)


Net change in cash and cash equivalents		37,202			(32,953	)		50,051			(2,339	)

Cash and cash equivalents, beginning of period		294,214			210,494			294,214			210,494


Cash and cash equivalents, end of period	$	331,416		$	177,541		$	344,265		$	208,155


Supplemental disclosures — cash and noncash
Interest paid	$	7,044		$	10,523		$	13,313		$	20,639
Loans converted to other real estate		6,616			18,540			41,261			30,879
Unrealized gain on available for sale securities, net of tax		38			970			1,113			1,863
Loans Originated to finance/sell other real estate		1,020			1,417
Loans Originated to finance / sell other real estate								1,568			—
Preferred Dividends Declared								1,806			—

~~GREEN BANKSHARES, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~March 31, 2011~~

~~Unaudited~~

~~(Amounts in thousands, except share and per share data)~~

NOTE 1 — PRINCIPLES OF CONSOLIDATION

The accompanying unaudited condensed consolidated financial statements of Green Bankshares, Inc. (the “Company”) and its wholly owned subsidiary, GreenBank (the “Bank”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended ~~March 31,~~June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Certain amounts from prior period financial statements have been reclassified to conform to the current year’s presentation.

NOTE 2 — SECURITIES

Securities are summarized as follows:


			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Available for Sale
March 31, 2011
June 30, 2011
U.S. government agencies	$	93,966	$	138	$	(1,031	)	$	93,073	$	68,950	$	210	$	(282	)	$	68,878
States and political subdivisions		30,225		845		(271	)		30,799		28,893		843		(392	)		29,344
Collateralized mortgage obligations		78,300		1,861		(395	)		79,766
CMO Agency											88,678		2,442		(166	)		90,954
CMO Non-Agency											3,354		32		(75	)		3,311
Mortgage-backed securities		20,685		749		(30	)		21,404		22,362		1,032		(6	)		23,388
Trust preferred securities		1,850		—		(160	)		1,690		1,844		—		(163	)		1,681


	$	225,026	$	3,593	$	(1,887	)	$	226,732	$	214,081	$	4,559	$	(1,084	)	$	217,556


December 31, 2010
U.S. government agencies	$	84,106	$	115	$	(922	)	$	83,299	$	84,106	$	115	$	(922	)	$	83,299
States and political subdivisions		31,192		705		(396	)		31,501		31,192		705		(396	)		31,501
Collateralized mortgage obligations		66,043		1,901		(369	)		67,575
CMO Agency											62,589		1,858		(265	)		64,182
CMO Non-Agency											3,454		43		(104	)		3,393
Mortgage-backed securities		17,168		815		(19	)		17,964		17,168		815		(19	)		17,964
Trust preferred securities		1,850		—		(187	)		1,663		1,850		—		(187	)		1,663


	$	200,359	$	3,536	$	(1,893	)	$	202,002	$	200,359	$	3,536	$	(1,893	)	$	202,002


Held to Maturity
March 31, 2011
States and political subdivisions	$	115	$	—	$	—		$	115


	$	115	$	—	$	—		$	115


Held to maturity
December 31, 2010
States and political subdivisions	$	215	$	1	$	—		$	216	$	215	$	1	$	—		$	216
Other securities		250		1		—			251		250		1		—			251


	$	465	$	2	$	—		$	467	$	465	$	2	$	—		$	467

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 2 — SECURITIES(Continued)

The Company reviews its investment portfolio on a quarterly basis judging each investment for other-than-temporary impairment (“OTTI”). Management does not have the intent to sell any of the temporarily impaired investments and believes it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The OTTI analysis focuses on the duration and amount a security is below book value and assesses a calculation for both a credit loss and a ~~non credit~~non-credit loss for each measured security considering the security’s type, performance, underlying collateral, and any current or potential debt rating changes. The OTTI calculation for credit loss is reflected in the income statement while the ~~non credit~~non-credit loss is reflected in other comprehensive income (loss).

The Company holds a single issue trust preferred security issued by a privately held bank holding company. The bank holding company deferred its interest payments beginning in the second quarter of 2009, and we have placed the security on non-accrual. The Federal Reserve Bank of St. Louis entered into an agreement with the bank holding company on October 22, 2009 which was made public on October 30, 2009. Among other provisions of the regulatory agreement, the bank holding company must strengthen its management of operations, strengthen its credit risk management practices, and submit a capital plan. As of ~~March 31,~~June 30, 2011 no other communications between the bank holding company and the Federal Reserve Bank of St. Louis have been made public. Our estimated fair value implies ~~a modest~~an unrealized loss of $37, related primarily to illiquidity. The Company did not recognize other-than-temporary impairment on the security ~~during~~for the ~~quarter~~three and six months ended ~~March 31,~~June 30, 2011. Cumulative other-than-temporary impairment recognized for this security is $854.

The Company holds a private label class A21 collateralized mortgage obligation that was analyzed for the quarter ended ~~March 31,~~June 30, 2011 with multiple stress scenarios using conservative assumptions for underlying collateral defaults, loss severity, and prepayments. The security’s estimated fair value implies an unrealized loss of ~~$12,~~$74, an improvement of ~~$91~~$30 compared to December 31, 2010. The Company did not recognize a write-down through non-interest income representing other-than-temporary impairment on the security for the ~~quarter~~three and six months ended ~~March 31,~~June 30, 2011. Cumulative other-than-temporary impairment recognized for this security is $197.

(Continued)

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 3 — LOANS (Continued)

Activity in the allowance for loan losses and recorded investment in loans by segment:

Commercial Residential
Real Estate Real Estate Commercial Consumer Other Total
2011

Allowance for loan losses:

Beginning balance $ 54,203 $ 4,431 $ 5,080 $ 3,108 $ 8 $ 66,830
Add (deduct):
Charge-offs (14,919 ) (312 ) (728 ) (445 ) — (16,404 )
Recoveries 196 29 378 183 — 786
Provision 13,886 234 915 (1,138 ) — 13,897

Ending balance $ 53,366 $ 4,382 $ 5,645 $ 1,708 $ 8 $ 65,109

As of December 31, 2010

Allowance for loan losses

Allocation for loans individually evaluated for impairment $ 22,939 $ 1,027 $ 722 $ 146 $ — $ 24,834

Allocation for loans collectively evaluated for impairment 31,264 3,404 4,358 2,962 8 41,996

Ending Balance $ 54,203 $ 4,431 $ 5,080 $ 3,108 $ 8 $ 66,830

As of March 31, 2011

Allowance for loan losses:

Allocation for loans individually evaluated for impairment $ 19,662 $ 1,120 $ 1,732 $ 154 $ — $ 22,668

Allocation for loans collectively evaluated for impairment 33,704 3,262 3,913 1,554 8 42,441

Ending Balance $ 53,366 $ 4,382 $ 5,645 $ 1,708 $ 8 $ 65,109

As of December 31, 2010

Loans:

Ending balance:
individually evaluated for impairment $ 170,175 $ 8,697 $ 6,149 $ 970 $ — $ 185,991

Ending balance:
collectively evaluated for impairment $ 910,630 $ 363,506 $ 216,778 $ 66,470 $ 1,913 $ 1,559,387

As of March 31, 2011

Loans:

Ending balance:
individually evaluated for impairment $ 181,082 $ 9,657 $ 7,512 $ 1,286 $ — $ 199,537

Ending balance:
collectively evaluated for impairment $ 847,821 $ 363,266 $ 200,984 $ 66,458 $ 3,139 $ 1,481,668

3 Months Ended Allowance Rollforward:


	Commercial			Residential
	Real Estate			Real Estate			Commercial			Consumer			Other		Total
June 30, 2011
Allowance for loan losses:
Beginning balance	$	53,366		$	4,382		$	5,645		$	1,708		$	8	$	65,109
Add (deduct):
Charge-offs		(14,854	)		(506	)		(1,341	)		(524	)		—		(17,225	)
Recoveries		216			24			118			153			—		511
Provision		10,744			997			1,011			1,491			—		14,333

Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728

6 Months Ended Allowance Rollforward:


	Commercial			Residential
	Real Estate			Real Estate			Commercial			Consumer			Other		Total
June 30, 2011
Allowance for loan losses:
Beginning balance	$	54,203		$	4,431		$	5,080		$	3,108		$	8	$	66,830
Add (deduct):
Charge-offs		(29,775	)		(819	)		(2,069	)		(969	)		—		(33,632	)
Recoveries		413			53			496			339			—		1,301
Provision		24,631			1,232			2,016			350			—		28,229

Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728


As of June 30, 2011
Allowance for loan losses:
Allocation for loans individually evaluated for impairment	$	19,296		$	229		$	1,071		$	88		$	—	$	20,684

Allocation for loans collectively evaluated for impairment		30,176			4,668			4,452			2,740			8		42,044

Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728


As of December 31, 2010

Allowance for loan losses:

Allocation for loans individually evaluated for impairment	$	22,939		$	1,027		$	722		$	146		$	—	$	24,834

Allocation for loans collectively evaluated for impairment		31,264			3,404			4,358			2,962			8		41,996

Ending balance	$	54,203		$	4,431		$	5,080		$	3,108		$	8	$	66,830


As of June 30, 2011
Loans:

Ending balance: individually evaluated for impairment	$	139,240		$	9,044		$	8,036		$	988		$	—	$	157,308

Ending balance: collectively evaluated for impairment	$	793,715		$	356,800		$	185,122		$	64,500		$	3,058	$	1,403,195


As of December 31, 2010
Loans:
Ending balance: individually evaluated for impairment	$	170,175		$	8,697		$	6,149		$	970		$	—	$	185,991

Ending balance: collectively evaluated for impairment	$	910,630		$	363,506		$	216,778		$	66,470		$	1,913	$	1,559,387

(Continued)

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 3 — LOANS (Continued)

~~Impaired loans were as follows:~~

March 31, December 31,
2011 2010
Loans with no allowance allocated $ 95,432 $ 81,981
Loans with allowance allocated $ 104,105 $ 104,010
Amount of allowance allocated 22,668 24,834
Average impaired loan balance during the year 207,166 212,167
Interest income not recognized during impairment 500 1,105

Impaired loans of $199,537, and $185,991, respectively, at March 31, 2011 and December 31, 2010 are shown net of amounts previously charged off of $36,813, and $36,574, respectively. Interest income actually recognized on these loans at March 31, 2011 and December 31, 2010 was $578, and $4,843, respectively.

Impaired loans by class are presented below as of ~~March 31,~~June 30, 2011:


																					3 Months Ended				6 Months Ended
											Unpaid		Recorded		Recorded		Total				Average		Interest		Average		Interest
			Unpaid				Average		Interest		Principal		investment with		investment		Recorded		Related		Recorded		Income		Recorded		Income
	Recorded		Principal		Related		Recorded		Income		Balance		no allowance		with allowance		Investment		Allowance		Investment		Recognized		Investment		Recognized
	Investment		Balance		Allowance		Investment		Recognized
Commercial Real Estate:
Speculative 1-4 Family	$	75,482	$	111,392	$	11,085	$	79,742	$	231	$	92,992	$	33,514	$	32,970		66,484	$	13,942	$	67,203	$	178	$	79,743	$	231
Construction		46,456		65,525		4,379		49,747		71		45,137		22,341		7,725		30,066		2,700		31,769		75		49,747		71
Owner Occupied		14,782		15,365		543		15,143		18		14,385		15,162		353		15,515		100		15,966		57		15,144		18
Non-owner Occupied		43,663		46,035		3,655		44,177		182		22,839		18,559		7,497		26,056		2,554		26,883		169		44,177		182
Other		699		738		—		706		—		1,159		1,119		—		1,119		—		1,160		—		706		—
Residential Real Estate:
HELOC		3,199		3,295		—		3,206		15		3,173		3,369		—		3,369		—		3,381		23		3,206		15
Mortgage-Prime		6,260		6,801		1,069		6,373		41		5,097		4,399		656		5,055		156		5,237		37		6,334		41
Mortgage-Subprime		650		649		51		650		—		484		—		484		484		73		474		—		562		—
Other		102		122		—		103		—		156		136		—		136		—		137		1		142		1
Commercial		7,512		8,702		1,732		7,825		17
Commercial:												8,945		3,380		4,656		8,036		1,071		8,056		36		7,825		17
Other		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Consumer:
Prime		222		234		—		235		3		235		225		—		225		—		234		2		235		3
Subprime		86		86		90		86		—		262		—		262		262		38		252		—		169		—
Auto-Subprime		424		424		64		424		—		501		—		501		501		50		490		—		457		—
Other		—		—		—		—		—
Other:												—		—		—		—		—		—		—		—		—

Total	$	199,537		259,368		22,668		208,417		578		195,365	$	102,204	$	55,104		157,308		20,684		161,242		578		208,447		579

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 3 — LOANS (Continued)

Impaired loans by class are presented below as of December 31, 2010:


													Unpaid				Average		Interest
			Unpaid				Average		Interest		Recorded		Principal		Related		Recorded		Income
	Recorded		Principal		Related		Recorded		Income		Investment		Balance		Allowance		Investment		Recognized
	Investment		Balance		Allowance		Investment		Recognized
Commercial Real Estate:
Speculative 1-4 Family	$	72,138	$	98,141	$	11,830	$	85,487	$	2,292	$	72,138	$	98,141	$	11,830	$	85,487	$	2,292
Construction		56,758		69,355		8,366		63,710		2,565		56,758		69,355		8,366		63,710		2,565
Owner Occupied		13,590		14,513		851		14,119		644		13,590		14,513		851		14,119		644
Non-owner Occupied		25,824		27,561		1,823		28,786		1,375		25,824		27,561		1,823		28,786		1,375
Other		1,865		2,090		69		2,278		66		1,865		2,090		69		2,278		66
Residential Real Estate:
HELOC		2,807		2,894		346		2,603		88		2,807		2,894		346		2,603		88
Mortgage-Prime		4,539		4,722		590		4,661		209		4,539		4,722		590		4,661		209
Mortgage-Subprime		370		370		57		370		—		370		370		57		370		—
Other		981		1,285		34		2,419		47		981		1,285		34		2,419		47
Commercial		6,149		7,510		722		6,729		171
Commercial:												6,149		7,510		722		6,729		171
Consumer:
Prime		217		228		32		252		13		217		228		32		252		13
Subprime		228		228		35		228		—		228		228		35		228		—
Auto-Subprime		525		525		79		525		—		525		525		79		525		—
Other		—		—		—		—		—
Other:												—		—		—		—		—

Total		185,991		229,422		24,834		212,167		7,470		185,991		229,422		24,834		212,167		7,470

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 3 — LOANS (Continued)

Desirable credit risk rating: Assets of this grade also exceed substantially all of the Bank’s underwriting criteria; however, they may lack the consistent long-term performance of a Prime rated credit. The credit risk to the Bank is considered minimal on these assets. Paying capacity of the borrower is still very strong with favorable trends and the value of the collateral is considered more than adequate to protect the Bank. Unsecured loans to borrowers with above-average earnings, liquidity and capital may be assigned this grade.

Satisfactory I credit risk rating or pass credit rating: Assets of this grade conform to all of the Bank’s underwriting criteria and evidence a below-average level of credit risk. Borrower’s paying capacity is strong, with stable trends. If the borrower is a company, its earnings, liquidity and capitalization compare favorably to typical companies in its industry. The credit is well structured and serviced. Secondary sources of repayment are considered to be good. Payment history is good, and borrower consistently complies with all major covenants.

Satisfactory II credit risk rating: Assets of this grade conform to substantially all of the Bank’s underwriting criteria and evidence an average level of credit risk. However, such assets display more susceptibility to economic, technological or political changes since they lack the above-average financial strength of credits rated Satisfactory Tier I. Borrower’s repayment capacity is considered to be adequate. Credit is appropriately structured and serviced; payment history is satisfactory.

Acceptable with care credit risk rating: Assets of this grade conform to most of the Bank’s underwriting criteria and evidence an acceptable, though higher than average, level of credit risk. However, these loans have certain risk characteristics that could adversely affect the borrower’s ability to repay, given material adverse trends. Therefore, loans in this category require an above-average level of servicing or show more reliance on collateral and guaranties to preclude a loss to the Bank, should material adverse trends develop. If the borrower is a company, its earnings, liquidity and capitalization are slightly below average, when compared to its peers.

Management watch credit risk rating: Assets included in this category are currently protected but are potentially weak. These assets constitute an undue and unwarranted credit risk but do not presently expose the Bank to a sufficient degree of risk to warrant adverse classification. However, Management Watch assets do possess credit deficiencies deserving management’s close attention. If not corrected, such weaknesses or deficiencies may expose the Bank to an increased risk of loss in the future. Management Watch loans represent assets where the Bank’s ability to substantially affect the outcome has diminished to some degree, and thus it must closely monitor the situation to determine if and when a downgrade is warranted.

Substandard credit risk rating: Substandard assets are inadequately protected by the current net worth and financial capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as Substandard.

Loss credit rating: These assets are considered uncollectible and of such little value that their continuance as assets is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off a basically worthless asset even though partial recovery may be affected in the future. Losses should be taken in the period in which they are identified as uncollectible.

(Continued)

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 3 — LOANS (Continued)

Age analysis of past due loans by class are presented below as of ~~March 31,~~June 30, 2011:


													Recorded															Recorded
													Investment															Investment
					Greater								> 90 Days							Greater								> 90 Days
	30-59 Days		60-89 Days		Than 90		Total Past						and		30-59 Days		60-89 Days			Than 90		Total Past						and
	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing		Past Due		Past Due			Days		Due		Current		Total Loans		Accruing

Commercial real estate:
Speculative 1-4 Family	$	9,179	$	3,222	$	41,377	$	53,778	$	128,041	$	181,819	$	5,518	$	6,221	$	331		$	38,835	$	45,387	$	125,415	$	170,802	$	—
Construction				248		18,622		18,870		116,437		135,307		—		19		18,225			3,332		21,576		89,430		111,006		—
Owner Occupied		4,499		126		11,610		16,235		212,545		228,780		—		1,262		1,865			9,374		12,501		197,109		209,610		—
Non-owner Occupied		6,170		3,848		17,675		27,693		435,689		463,382		—		4,293		3,411			6,495		14,199		409,500		423,699		—
Other		835		619		192		1,646		17,969		19,615		—		232		507			114		853		16,985		17,838		160
Residential real estate:
HELOC		1,077		155		1,024		2,256		194,539		196,795		—		1,264		221			612		2,097		194,630		196,727		—
Mortgage-Prime		6,196		1,381		2,711		10,288		150,088		160,376		—		2,773		930			2,270		5,973		148,036		154,009		—
Mortgage-Subprime		51		6		72		129		11,589		11,718		—		75		—			—		75		11,607		11,682		—
Other		85		3		81		169		3,865		4,034		—		148		46			115		309		3,117		3,426		—
Commercial		608		267		5,795		6,670		201,826		208,496		72		4,330		42			3,401		7,773		185,385		193,158		248
Consumer:
Prime		201		58		51		310		33,875		34,185		2		153		39			31		223		32,196		32,419		—
Subprime		140		104		53		297		12,742		13,039		—		164		62			10		236		13,287		13,523		—
Auto-Subprime		565		110		125		800		18,764		19,564		—		572		139			134		845		18,701		19,546
Other		—		—		—		—		3,139		3,139		—		—		—			—		—		3,058		3,058		—
																			��
Total		29,606		10,147		99,388		139,141		1,541,108		1,680,249		5,592		21,506		25,818			64,723		112,047		1,448,456		1,560,503		408

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 3 — LOANS (Continued)

Age analysis of past due loans by class are presented below for December 31, 2010:


													Recorded														Recorded
													Investment														Investment
			60-89		Greater								> 90 Days						Greater								> 90 Days
	30-59 Days		Days Past		Than 90		Total Past						and		30-59 Days		60-89 Days		Than 90		Total Past						and
	Past Due		Due		Days		Due		Current		Total Loans		Accruing		Past Due		Past Due		Days		Due		Current		Total Loans		Accruing

Commercial real estate:
Speculative 1-4 Family	$	22,267	$	1,777	$	30,802	$	54,846	$	151,130	$	205,976	$	1,758	$	22,267	$	1,777	$	30,802	$	54,846	$	151,130	$	205,976	$	1,758
Construction		14,541		—		26,915		41,456		119,074		160,530		—		14,541		—		26,915		41,456		119,074		160,530		—
Owner Occupied		8,114		1,633		4,137		13,884		211,875		225,759		—		8,114		1,633		4,137		13,884		211,875		225,759		—
Non-owner Occupied		4,014		5,961		8,814		18,789		392,127		410,916		170		4,014		5,961		8,814		18,789		392,127		410,916		170
Other		116		865		1,491		2,472		75,152		77,624		18		116		865		1,491		2,472		75,152		77,624		18
Residential real estate:
HELOC		747		358		644		1,749		190,161		191,910		—		747		358		644		1,749		190,161		191,910		—
Mortgage-Prime		1,359		915		1,779		4,053		133,226		137,279		8		1,359		915		1,779		4,053		133,226		137,279		8
Mortgage-Subprime		100		51		98		249		11,493		11,742		—		100		51		98		249		11,493		11,742		—
Other		403		176		566		1,145		30,217		31,362		19		403		176		566		1,145		30,217		31,362		19
Commercial		2,422		593		3,922		6,937		215,990		222,927		92		2,422		593		3,922		6,937		215,990		222,927		92
Consumer:
Prime		315		86		108		509		34,737		35,246		29		315		86		108		509		34,737		35,246		29
Subprime		155		64		6		225		12,907		13,132		—		155		64		6		225		12,907		13,132		—
Auto-Subprime		476		166		101		743		18,319		19,062		18		476		166		101		743		18,319		19,062		18
Other		73		—		—		73		1,840		1,913		—		73		—		—		73		1,840		1,913		—

Total		55,102		12,645		79,383		147,130		1,598,248		1,745,378		2,112		55,102		12,645		79,383		147,130		1,598,248		1,745,378		2,112

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 4 — EARNINGS PER SHARE OF COMMON STOCK

Basic earnings (loss) per share (“EPS”) of common stock is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share of common stock is computed by dividing net income available to common shareholders by the weighted average number of common shares and potential common shares outstanding during the period. Stock options, warrants and restricted common shares are regarded as potential common shares. Potential common shares are computed using the treasury stock method. For the three and six months ended ~~March 31,~~June 30, 2011, ~~979,974~~978,659 options and warrants are excluded from the effect of dilutive securities because they are anti-dilutive; 1,017,645 options are similarly excluded from the effect of dilutive securities for the three and six months ended ~~March 31,~~June 30, 2010.

The following is a reconciliation of the numerators and denominators used in the basic and diluted earnings per share computations for the three and six months ended ~~March 31,~~June 30, 2011 and 2010:


	Three Months Ended					Three Months Ended
	March 31,					June 30,
	2011			2010		2011			2010
Basic Earnings Per Share
Basic Earnings (loss) Per Share

Net income (loss)	$	(10,311	)	$	3,196	$	(11,134	)	$	2,811
Less: preferred stock dividends and accretion of discount on warrants		1,250			1,250		1,250			1,250

Net income (loss) available to common shareholders	$	(11,561	)	$	1,946	$	(12,384	)	$	1,561


Weighted average common shares outstanding		13,108,598			13,082,347		13,126,923			13,097,611


Basic earnings (loss) per share available to common shareholders	$	(0.88	)	$	0.15	$	(0.94	)	$	0.12


Diluted Earnings Per Share
Diluted Earnings (loss) Per Share

Net income (loss)	$	(10,311	)	$	3,196	$	(11,134	)	$	2,811
Less: preferred stock dividends and accretion of discount on warrants		1,250			1,250		1,250			1,250

Net income (loss) available to common shareholders	$	(11,561	)	$	1,946	$	(12,384	)	$	1,561


Weighted average common shares outstanding		13,108,598			13,082,347		13,126,923			13,097,611

Add: Dilutive effects of assumed conversions of restricted stock and exercises of stock options and warrants		—			90,380		—			60,520


Weighted average common and dilutive potential common shares outstanding		13,108,598			13,172,727		13,126,923			13,158,131


Diluted earnings (loss) per share available to common shareholders	$	(0.88	)	$	0.15	$	(0.94	)	$	0.12

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~NOTE 4 — EARNINGS PER SHARE OF COMMON STOCK(Continued)


	Six Months Ended
	June 30,
	2011			2010
Basic Earnings (Loss) Per Common Share

Net income (loss)	$	(21,445	)	$	6,007
Less: preferred stock dividends and accretion of discount on warrants		2,500			2,500

Net income (loss) available to common shareholders	$	(23,945	)	$	3,507


Weighted average common shares outstanding		13,117,811			13,090,021


Basic earnings (loss) per share available to common shareholders	$	(1.83	)	$	.27


Diluted Earnings (Loss) Per Common Share

Net income (loss)	$	(21,445	)	$	6,007
Less: preferred stock dividends and accretion of discount on warrants		2,500			2,500

Net income (loss) available to common shareholders	$	(23,945	)	$	3,507


Weighted average common shares outstanding		13,117,811			13,090,021

Add: Dilutive effects of assumed conversions of restricted stock and exercises of stock options and warrants¹		—			58,025


Weighted average common and dilutive potential common shares outstanding		13,117,811			13,148,226


Diluted earnings (loss) per share available to common shareholders	$	(1.83	)	$	.27


¹		Diluted weighted average shares outstanding exclude 92,524 and 85,697 restricted average shares for the three and six month periods ended June 30, 2011 respectively because their impact would be anti-dilutive.

(Continued)

NOTE 5 — SEGMENT INFORMATION

The Company’s operating segments include banking, mortgage banking, consumer finance, automobile lending and title insurance. The reportable segments are determined by the products and services offered, and internal reporting. Loans, investments and deposits provide the revenues in the banking operation; loans and fees provide the revenues in consumer finance and mortgage banking and insurance commissions provide revenues for the title insurance company. Consumer finance, automobile lending and title insurance do not meet the quantitative threshold on an individual basis, and are therefore shown below in “Other Segments”. Mortgage banking operations are included in “Bank”. All operations are domestic.

Segment performance is evaluated using net interest income and non-interest income. Income taxes are allocated based on income before income taxes, and indirect expenses (includes management fees) are allocated based on time spent for each segment. Transactions among segments are made at fair value. Information reported internally for performance assessment follows.


				Other		Holding
Three months ended March 31, 2011	Bank			Segments		Company			Eliminations			Totals
Three months ended June 30, 2011															Bank			Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	17,611		$	2,148	$	(492	)	$	—		$	19,267		$	17,777		$	2,186	$	(511	)	$	—		$	19,452
Provision for loan losses		13,627			270		—			—			13,897			14,119			214		—			—			14,333
Noninterest income		7,379			476		14			(242	)		7,627			8,019			381		64			(228	)		8,236
Noninterest expense		22,115			1,243		(89	)		(242	)		23,027			23,110			1,184		704			(228	)		24,770
Income tax expense (benefit)		(46	)		436		(109	)		—			281			(285	)		464		(460	)		—			(281	)

Segment profit (loss)		(10,706	)	$	675	$	(280	)	$	—		$	(10,311	)	$	(11,148	)	$	705	$	(691	)	$	—		$	(11,134	)


Segment assets at March 31, 2011	$	2,342,891		$	43,322	$	6,481		$	—		$	2,392,694
Segment assets at June 30, 2011															$	2,242,705		$	43,448	$	7,662		$	—		$	2,293,815

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

~~NOTE 5 — SEGMENT INFORMATION~~~~(Continued)~~

~~Asset Quality Ratios~~

As of and for the period ended March 31, 2011 Bank Other Total
Nonperforming loans as percentage of total loans, net of unearned income 9.84 % 1.65 % 9.78 %
Nonperforming assets as a percentage of total assets 9.34 % 2.07 % 9.38 %
Allowance for loan losses as a percentage of total loans, net of unearned income 3.72 % 7.25 % 3.87 %
Allowance for loan losses as a percentage of nonperforming loans 37.81 % 439.21 % 39.60 %
YTD net charge-offs to average total loans, net of unearned income 0.90 % 0.61 % 0.91 %

As of and for the period ended March 31, 2010 Bank Other Total
Nonperforming loans as percentage of total loans, net of unearned income 3.19 % 1.23 % 3.19 %
Nonperforming assets as a percentage of total assets 5.25 % 1.37 % 5.27 %
Allowance for loan losses as a percentage of total loans, net of unearned income 2.36 % 8.13 % 2.52 %
Allowance for loan losses as a percentage of nonperforming loans 73.98 % 661.74 % 78.85 %
YTD net charge-offs to average total loans, net of unearned income 0.17 % 1.25 % 0.19 %

As of and for the year ended December 31, 2010 Bank Other Total
Nonperforming loans as percentage of total loans, net of unearned income 8.40 % 1.30 % 8.35 %
Nonperforming assets as a percentage of total assets 8.52 % 1.34 % 8.56 %
Allowance for loan losses as a percentage of total loans, net of unearned income 3.68 % 7.33 % 3.83 %
Allowance for loan losses as a percentage of nonperforming loans 43.80 % 562.24 % 45.83 %
Net charge-offs to average total loans, net of unearned income 2.76 % 4.20 % 2.84 %

~~Net charge-offs~~

Bank Other Total
For the three month period ended March 31, 2011 $ 15,347 $ 270 $ 15,617
For the three month period ended March 31, 2010 $ 3,345 $ 537 $ 3,882
For the year ended December 31, 2010 $ 52,615 $ 1,823 $ 54,438

Asset Quality Ratios


As of and for the period ended June 30, 2011	Bank			Other			Total

Nonperforming loans as percentage of total loans, net of unearned income		8.51	%		1.58	%		8.46	%
Nonperforming assets as a percentage of total assets		9.17	%		2.03	%		9.23	%
Allowance for loan losses as a percentage of total loans, net of unearned income		3.87	%		6.86	%		4.02	%
Allowance for loan losses as a percentage of nonperforming loans		45.44	%		532.56	%		47.52	%
YTD net charge-offs to average total loans, net of unearned income		1.91	%		1.42	%		1.93	%


As of and for the period ended June 30, 2010	Bank			Other			Total

Nonperforming loans as percentage of total loans, net of unearned income		3.37	%		1.28	%		3.37	%
Nonperforming assets as a percentage of total assets		5.59	%		1.38	%		5.61	%
Allowance for loan losses as a percentage of total loans, net of unearned income		2.44	%		7.89	%		2.60	%
Allowance for loan losses as a percentage of nonperforming loans		72.35	%		616.49	%		77.02	%
YTD net charge-offs to average total loans, net of unearned income		0.40	%		2.09	%		0.44	%


As of and for the year ended December 31, 2010	Bank			Other			Total

Nonperforming loans as percentage of total loans, net of unearned income		8.40	%		1.30	%		8.35	%
Nonperforming assets as a percentage of total assets		8.52	%		1.34	%		8.56	%
Allowance for loan losses as a percentage of total loans, net of unearned income		3.68	%		7.33	%		3.83	%
Allowance for loan losses as a percentage of nonperforming loans		43.80	%		562.24	%		45.83	%
Net charge-offs to average total loans, net of unearned income		2.76	%		4.20	%		2.84	%


Net charge-offs	Bank		Other		Total

For the six month period ended June 30, 2011	$	31,700	$	631	$	32,331
For the six month period ended June 30, 2010	$	7,847	$	903	$	8,750
For the year ended December 31, 2010	$	52,615	$	1,823	$	54,438

(Continued)

NOTE 6 — FAIR VALUE DISCLOSURES

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Accounting principles generally accepted in the United States of America (“GAAP”), also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain U.S. Treasury, other U.S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency mortgage-backed debt securities, corporate debt securities, derivative contracts and residential mortgage loans held-for-sale.

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly structured or long-term derivative contracts.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available-for-Sale

Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices of like or similar securities, if available and these securities are classified as Level 1 or Level 2. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions and are classified as Level 3.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans held for sale subjected to nonrecurring fair value adjustments as Level 2.

(Continued)

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 6 — FAIR VALUE DISCLOSURES (continued)

Impaired Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with GAAP. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At ~~March 31,~~June 30, 2011, substantially all of the total impaired loans were evaluated based on either the fair value of the collateral or its liquidation value. In accordance with GAAP, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.

Other Real Estate

Other real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. Gains or losses on sale and any subsequent adjustments to the value are recorded as a component of foreclosed real estate expense. Other real estate is included in Level 3 of the valuation hierarchy.

(Continued)

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 6 — FAIR VALUE DISCLOSURES (continued)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Below is a table that presents information about certain assets and liabilities measured at fair value:


							Total Carrying		Assets/Liabilities								Total Carrying		Assets/Liabilities
	Fair Value Measurement Using						Amount in		Measured at Fair		Fair Value Measurement Using						Amount in		Measured at Fair
Description	Level 1		Level 2		Level 3		Balance Sheet		Value		Level 1		Level 2		Level 3		Balance Sheet		Value
March 31, 2011
June 30, 2011
Securities available for sale
U.S. government agencies	$	—	$	93,073	$	—	$	93,073	$	93,073	$	—	$	68,878	$	—	$	68,878	$	68,878
States and political subdivisions		—		30,799		—		30,799		30,799		—		29,344		—		29,344		29,344
Collateralized mortgage obligations		—		79,766		—		79,766		79,766
CMO Agency												—		90,954		—		90,954		90,954
CMO Non-Agency												—		3,311		—		3,311		3,311
Mortgage-backed securities		—		21,404		—		21,404		21,404		—		23,388		—		23,388		23,388
Trust preferred securities		—		1,052		638		1,690		1,690		—		1,043		638		1,681		1,681

December 31, 2010
Securities available for sale
U.S. government agencies	$	—	$	83,299	$	—	$	83,299	$	83,299	$	—	$	83,299	$	—	$	83,299	$	83,299
States and political subdivisions		—		31,501		—		31,501		31,501		—		31,501		—		31,501		31,501
Collateralized mortgage obligations		—		67,575		—		67,575		67,575
CMO Agency												—		64,182		—		64,182		64,182
CMO Non-Agency												—		3,393		—		3,393		3,393
Mortgage-backed securities		—		17,964		—		17,964		17,964		—		17,964		—		17,964		17,964
Trust preferred securities		—		1,025		638		1,663		1,663		—		1,025		638		1,663		1,663

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 6 — FAIR VALUE DISCLOSURES(Continued)

The carrying value and estimated fair value of the Company’s financial instruments are as follows at ~~March 31,~~June 30, 2011 and December 31, 2010.


		March 31,				December 31,				June 30,				December 31,
		2011				2010				2011				2010
		Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
		Value		Value		Value		Value		Value		Value		Value		Value
Financial assets:
Cash and cash equivalents		$	331,416	$	331,416	$	294,214	$	294,214	$	344,265	$	344,265	$	294,214	$	294,214
Securities available for sale			226,732		226,732		202,002		202,002		217,556		217,556		202,002		202,002
Securities held to maturity			115		115		465		467		—		—		465		467
Loans held for sale			960		970		1,299		1,317		617		624		1,299		1,317
Loans, net			1,615,140		1,600,794		1,678,548		1,664,126		1,497,775		1,481,977		1,678,548		1,664,126
FHLB and other stock			12,734		12,734		12,734		12,734		12,734		12,734		12,734		12,734
Cash surrender value of life insurance			31,758		31,758		31,479		31,479		32,040		32,040		31,479		31,479
Accrued interest receivable			7,332		7,332		7,845		7,845		6,830		6,830		7,845		7,845

Financial liabilities:
Deposit accounts		$	1,975,635	$	1,988,676	$	1,976,854	$	1,987,105	$	1,883,388	$	1,905,599	$	1,976,854	$	1,987,105
Federal funds purchased and repurchase agreements			18,712		18,712		19,413		19,413
FHLB advances and notes payable			158,588		166,703		158,653		166,762
Federal funds purchased and repurchase Agreements											18,713		18,713		19,413		19,413
FHLB Advances and notes payable											157,859		167,017		158,653		166,762
Subordinated debentures	��		88,662		62,985		88,662		64,817		88,662		60,552		88,662		64,817
Accrued interest payable			2,454		2,454		2,140		2,140		2,808		2,808		2,140		2,140

~~GREEN BANKSHARES, INC.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~March 31, 2011~~
~~Unaudited~~
~~(Amounts in thousands, except share and per share data)~~

NOTE 7 — ~~SUBSEQUENT EVENTS~~CAPITAL

~~Regulatory Matters~~The Company gave notice on November 9, 2010 to the U.S. Treasury Department that the Company was suspending the payment of regular quarterly cash dividends on the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A issued to the U.S. Treasury Department. The dividends, which are cumulative, will continue to be accrued for payment in the future and will be reported for the duration of the deferral period as a preferred dividend requirement that is deducted from net income for financial statement purposes. Additionally the Company, following consultation with the Federal Reserve Bank of Atlanta (“FRB”) has exercised its rights beginning in the fourth quarter of 2010 to defer regularly scheduled interest payments on all of its issues of junior subordinated debentures having an outstanding principal amount of $88.7 million, relating to outstanding trust preferred securities (“TRUPs”). Under the terms of the trust documents associated with these debentures, the Company may defer payments of interest for up to 20 consecutive quarterly periods without default or penalty. The regular scheduled interest payments will continue to be accrued for payment in the future and reported as an expense for financial statement purposes. Together, the deferral of interest payments on TRUPs and suspension of dividend payments to the U.S. Treasury Department will preserve approximately $5.1 million per year in Bank level capital; however, capital at the Company level is still reduced. The deferral also saves the same amount in liquidity at the Company level. The approximate amount of accrued but unpaid interest on subordinated debt and preferred stock dividend was $4,669 as of June 30, 2011.

On May 2, 2011, the Bank received notice from the Federal Deposit Insurance Corporation (“FDIC”) and the Tennessee Department of Financial Institutions (“TDFI”) that, as a result of those agencies’ findings in their most recently completed joint safety and soundness examination, the agencies would be seeking a formal enforcement action against the Bank aimed at strengthening the Bank’s operations and its financial condition, and that accordingly, the FDIC was pursuing the issuance of a consent order against the Bank and the TDFI was pursuing the issuance of a written agreement against the Bank. The ~~Bank is seeking to negotiate the terms of these formal enforcement actions with the FDIC and the TDFI, and while~~Company believes that the final terms of the ~~consent~~ order and written agreement ~~are not currently known, the Company believes that they~~ will contain requirements similar to those that the Bank has already informally committed to comply with, including requirements to maintain the Bank’s capital ratios above those levels required to be considered “well-capitalized” under federal banking regulations. If

The Company’s and the Bank’s regulatory capital ratios as of June 30, 2011, and the minimum ratios required to be met under the federal statutory and regulatory guidelines as well as the minimum ratios the Bank has informally ommitted to its regulators that it will maintain are set forth below:


	Required			Required			Required by Bank’s
	Minimum			to be			Informal Commitment
	Ratio			Well Capitalized			to Regulators			Bank			Company
Tier 1 risk-based capital		4.00	%		6.00	%		12.00	%		11.97	%		9.03	%
Total risk-based capital		8.00	%		10.00	%		14.00	%		13.25	%		13.09	%
Leverage Ratio		4.00	%		5.00	%		10.00	%		8.47	%		6.39	%

NOTE 8 — CONTINGENCIES

The Company and its subsidiaries are subject to claims and suits arising in the ordinary course of business. In the opinion of management, the ultimate resolution of these pending claims and legal proceedings will not have a material adverse effect on the Company’s ~~transaction with North American is consummated, including the merger~~results of ~~the Bank with and into a bank subsidiary~~operations. No amounts for settlements are accrued as of ~~North American’s, it is possible that these formal enforcement actions will not be issued.~~June 30, 2011. The details of certain legal proceedings are outlined under Part II, Item 1 “Legal Proceedings” in this Form 10-Q.

~~Investment Agreement with North American Financial Holdings, Inc.~~NOTE 9 —INVESTMENT AGREEMENT WITH NORTH AMERICAN FINANCIAL HOLDINGS, INC.

On May 5, 2011, the Company and the Bank entered into an Investment Agreement with North American Financial Holdings, Inc. (“North American”) pursuant to which North American has agreed to acquire approximately 120 million shares of the Company’s common stock at a per share purchase price of $1.81, for a total investment of approximately $217 million. The transaction, which is subject to shareholder and regulatory approval, as well as the satisfaction of other customary closing conditions, is expected to be consummated in the third quarter of 2011. In connection with the investment, the Company expects that North American will enter into a binding agreement with the U. S. Department of Treasury to purchase all of the outstanding shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and related warrants to purchase shares of the Company’s Common Stock.

(Continued)

In connection with the investment by North American, the Company’s shareholders as of a record date to be fixed near the closing of that transaction will receive a contingent value right, entitling them to cash proceeds of up to $0.75 per share of common stock based on the credit performance of the Bank’s legacy loan portfolio over the five-year period following closing.

If an Acquisition Proposal (as defined in the Investment Agreement) is made to the Company or its subsidiaries and thereafter the Investment Agreement is terminated because (i) the required approvals of the Company’s shareholders are not obtained; (ii) the Company breaches its obligations under the non-solicitation/exclusivity provisions; or (iii) the Company breaches a covenant of the Investment Agreement (and fails to cure such breach in the time allowed in the Investment Agreement) that causes the failure of a closing condition to be satisfied, then the Company will owe North American a $750,000 expense reimbursement immediately and, if an alternative transaction is entered into within twelve (12) months of the termination of the deal, an $8,000,000 termination fee at the time the agreement for the new transaction is entered into. If an Acquisition Proposal is made, and thereafter the Investment Agreement is terminated by North American because the Board of Directors has withdrawn its recommendation that the shareholders approve the transactions or recommended a competing transaction, a $750,000 expense reimbursement would be payable immediately and $4,000,000 of the termination fee would be payable immediately, with the remaining $4,000,000 payable if the Company enters into an agreement for an alternative transaction within 12 months of the termination of the deal.

In addition, on May 5, 2011, the Company also entered into a Stock Option Agreement (the “Option Agreement”) with North American, pursuant to which the Company granted an option (the “Option”) to purchase up to 2,628,183 shares of Common Stock (not to exceed 19.9% of the issued and outstanding shares of the Company) at a price equal to the closing price on the first trading day following the date of the Investment Agreement (the “Option Price”). Pursuant to the Option Agreement, the Option will be exercisable under certain circumstances in connection with certain third party acquisitions or acquisition proposals that occur prior to an “Exercise Termination Event.”

An “Exercise Termination Event” means any of the following:

completion of the North American’s initial investment in the Company;

termination of the Investment Agreement in accordance with its terms, before certain third party acquisitions or acquisition proposals, except a termination of the Investment Agreement by North American based on a breach by the Company of a representation, warranty, covenant or other agreement contained in the Investment Agreement (unless the breach is non-volitional) or a termination based on the Company breaching its obligations under the non-solicitation/exclusivity provisions of the Investment Agreement or based on the Board of Directors having withdrawn its recommendation that the Company’s shareholders approve the transactions or recommended a competing transaction; or

the passage of 18 months, subject to certain limited extensions described in the Option Agreement, after termination of the Investment Agreement, if the termination follows the occurrence of certain third party acquisitions or acquisition proposals or is a termination of the Investment Agreement by North American based on a breach by the Company of a representation, warranty, covenant or other agreement contained in the Investment Agreement (unless the breach is non-volitional) or a termination based on the Company breaching its obligations under the non-solicitation/exclusivity provisions of the Investment Agreement or based on the Board of Directors having withdrawn its recommendation that the Company’s shareholders approve the transactions or recommended a competing transaction.

In addition, upon the occurrence of certain events relating to third party acquisitions, North American may require the Company to repurchase the Option at a price equal to either (i) the number of shares for which the Option may be exercised multiplied by the amount by which the “Market/Offer Price” (as that term is defined in the Option Agreement), exceeds the Option Price or (ii) $2,500,000, adjusted in the case of clause (ii) for the aggregate purchase price previously paid by North American with respect to any option shares and gains on sales of stock purchased under the Option. In no event may North American’s total profit with respect to the Option exceed $8,000,000.

Subsequent to the announcement of North American’s planned investment, afour class action ~~lawsuit was~~lawsuits were filed against the Company, the Company’s directors and North American by ~~one~~certain of ~~the Company’s~~its shareholders. For additional detail regarding ~~this lawsuit,~~these lawsuits (including the settlement in principle that the parties have reached), see Part II, Item 1 “Legal Proceedings” below.

(Continued)

~~ITEM 2.~~


ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. This discussion should be read in conjunction with the (i) condensed consolidated financial statements and notes thereto in this Form 10-Q and (ii) the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 10-K”). Except for specific historical information, many of the matters discussed in this Form 10-Q may express or imply projections of revenues or expenditures, plans and objectives for future operations, growth or initiatives, expected future economic performance, or the expected outcome or impact of pending or threatened litigation. These and similar statements regarding events or results which the Company expects will or may occur in the future, are forward-looking statements that involve risks, uncertainties and other factors which may cause actual results and performance of the Company to differ materially from those expressed or implied by those statements. All forward-looking information is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these risks, uncertainties and other factors.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 2010 10-K as Part I, Item 1A thereof and in Part II, Item 1A of thisForm 10-Q and the Company’sForm 10-Q for the quarter ended March 31, 2011, including (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the Investment Agreement by and among the Company, the Bank and North American Financial Holdings, Inc. (“North American”), dated as of May 5, 2011 (the “Investment Agreement”); (2) the outcome of any legal proceedings that have been or may be instituted against the Company and others following announcement of the Investment Agreement; (3) the inability to complete the transactions contemplated by the Investment Agreement due to the failure to obtain shareholder approval or the failure to satisfy other conditions to completion of the transaction, including the receipt of regulatory approval; (4) risks that the proposed transaction contemplated by the Investment Agreement disrupts current plans and operations and the potential difficulties in employee retention as a result of the proposed transaction; (5) the amount of the costs, fees, expenses and charges related to the proposed transaction contemplated by the Investment Agreement; (6) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; (7) continuation of the historically low short-term interest rate environment; (8) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (9) increased levels of non-performing and repossessed assets and the ability to resolve these may result in future losses; (10) greater than anticipated deterioration or lack of sustained growth in the national or local economies; (11) rapid fluctuations or unanticipated changes in interest rates; (12) the impact of governmental restrictions on entities participating in the Capital Purchase Program (the “CPP”) of the United States Department of the Treasury; (13) changes in state and federal legislation, regulations or policies applicable to banks or other financial service providers, including regulatory or legislative developments, like the Dodd-Frank Wall Street Reform and Consumer Protection Act, arising out of current unsettled conditions in the economy; (14) the results of regulatory ~~examinations including requirements contained in any enforcement action against the Company or the Bank as a result of such~~ examinations; (15) the remediation efforts related to the Company’s material weakness in its internal control over financial reporting; (16) increased competition with other financial institutions in the markets that the Bank serves; (17) the Company’s recording a further valuation allowance related to its deferred tax asset; (18) exploring alternatives available for

(Continued)

the failure to comply with the terms of regulatory enforcement actions, including informal commitments and formal agreements, including the proposed cease and desist order described in more detail below; (21) inability to comply with regulatory capital requirements and to secure any required regulatory approvals for capital actions to raise capital if necessary to comply with any regulatory capital requirements; and ~~(21)~~(22) 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 3335 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 onForm 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 2010 10-K as updated in Part II, Item 1A below and in Part II, Item 1A ~~below.~~of the Company’s Quarterly Report onForm 10-Q for the Quarter ended March 31, 2011. 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 onForm 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.

Green Bankshares, Inc. (the “Company”) is the bank holding company for GreenBank (the “Bank”), a Tennessee-chartered commercial bank that conducts the principal business of the Company. The Company is the third largest bank holding company headquartered in Tennessee based on asset size at ~~March 31,~~June 30, 2011 and at that date was also the second largest NASDAQ-listed bank holding company headquartered in Tennessee. The Bank currently maintains a main office in Greeneville, Tennessee and 64 full-service bank branches primarily in East and Middle Tennessee. In addition to its commercial banking operations, the Bank conducts separate businesses through its three wholly-owned subsidiaries: Superior Financial Services, Inc. (“Superior Financial”), a consumer finance company; GCB Acceptance Corporation (“GCB Acceptance”), an automobile lending company; and Fairway Title Co.~~, a title company formed in 1998.~~ The Bank also operates a wealth management office in Sumner County, Tennessee, and a mortgage banking operation in Knox County, Tennessee. All dollar amounts reported or discussed in Part I, Item 2 of this Quarterly Report on Form 10-Q are shown in thousands, except ~~share and~~ per share amounts.

~~Investment Agreement with North American Financial Holdings, Inc.~~

On May 5, 2011, the Company and the Bank entered into an Investment Agreement with North American Financial Holdings, Inc. (“North American”) pursuant to which North American has agreed to acquire approximately 120 million shares of the Company’s common stock at a per share purchase price of $1.81, for a total investment of approximately $217 million. The transaction, which is subject to shareholder and regulatory approval, as well as the satisfaction of other customary closing conditions, is expected to be consummated in the third quarter of 2011. In connection with the investment, the Company expects that North American will enter into a binding agreement with the U. S. Treasury Department to purchase all of the outstanding shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and related warrants to purchase shares of the Company’s common stock. In connection with the investment by North American, the Company’s shareholders as of a record date to be fixed near the closing of that transaction will receive a contingent value right, entitling them to cash proceeds of up to $0.75 per share of common stock based on the credit performance of the Bank’s legacy loan portfolio over the five-year period following closing.

Business Strategy

On May 5, 2011, the Company and the Bank entered into an Investment Agreement with North American pursuant to which North American has agreed to acquire approximately 120 million shares of the Company’s common stock at a per share purchase price of $1.81, for a total investment of approximately $217 million. The transaction, which is subject to shareholder and regulatory approval, as well as the satisfaction of other customary closing conditions, is expected to be consummated in the third quarter of 2011. In connection with the investment, the Company expects that North American will enter into a binding agreement with the U. S. Department of Treasury to purchase all of the outstanding shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and related warrants to purchase shares of the Company’s Common Stock.

A Special Meeting of Shareholders at which the Company’s shareholders will be asked to approve the transaction contemplated by the Investment Agreement with North American has been scheduled for September 7, 2011.

(Continued)

The Company expects that over the short term, given the current economic environment and high levels of nonperforming assets, there will be little to no loan growth until the current environment stabilizes in the Company’s markets and the economy begins to improve.

In the event that North American’s investment is consummated, we believe that the additional capital contributed to the Company in that transaction will facilitate loan growth as well as enable the Company to consider growth opportunities in the form of in-market mergers and acquisitions including acquisitions of both entire financial institutions and selected branches of financial institutions. Following consummation of the North American investment, de novo branching could also be a method of growth, particularly in high-growth and other demographically-desirable markets.

The Bank focuses its lending efforts predominately on individuals and small to medium-sized businesses while it generates deposits primarily from individuals in its local communities. To aid in deposit generation efforts, the Bank offers its customers extended hours of operation during the week as well as Saturday and Sunday banking in many of its markets. The Bank also offers free online banking along with its High Performance Checking Program which since its inception has generated a significant number of core transaction accounts.

In addition to the Company’s business model, which is summarized in the paragraphs above and the Company’s 2010 Annual Report on Form 10-K, the Company is continuously investigating and analyzing other lines and areas of business. Conversely, the Company frequently evaluates and analyzes the profitability, risk factors and viability of its various business lines and segments and, depending upon the results of these evaluations and analyses, may conclude to exit certain segments and/or business lines. Further, in conjunction with these ongoing evaluations and analyses, the Company may decide to sell, merge or close certain branch facilities.

Overview

For the three months ended ~~March 31,~~June 30, 2011, the Company reported a net loss available to common shareholders of ~~$11,561~~$12,384, compared with a net loss available to common shareholders of ~~$52,798~~$11,561 for the quarter ended ~~December~~March 31, ~~2010,~~2011, and net income available to common shareholders of ~~$1,946~~$1,561 for the ~~first~~second quarter of 2010. ~~The $41,237 improvement~~Elevated credit costs continue to significantly impact earnings as the $823 increased loss versus the quarter ended ~~December~~March 31, ~~2010~~2011 was driven largely by ~~an $11,749 decline~~a $2,491 increase in OREO expenses and a $436 increase in the loan loss provision, partially offset by a ~~$19,821~~$609 increase in non-interest income, a $748 decline in ~~OREO~~other non-interest expenses and ~~$10,407~~a $562 decline in income tax ~~expense related to a 2010 fourth quarter non-cash charge to record a valuation allowance for deferred tax assets.~~expense. The ~~$13,507~~$13,945 decline in net income versus the ~~first~~second quarter of 2010 related to a ~~$10,008~~$9,584 increase in loan loss provision, a ~~$1,592~~$4,280 increase in OREO expenses and a ~~$2,392~~$2,021 decline in net interest income ~~due to an~~reflecting the approximately ~~20%~~22% decline in average loan balances.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.

Management continually evaluates the Company’s accounting policies and estimates it uses to prepare the consolidated financial statements. In general, management’s estimates are based on historical experience, information from regulators and third party professionals and various assumptions that are believed to be reasonable under the existing facts and circumstances. Actual results could differ from those estimates made by management.

The Company believes its critical accounting policies and estimates include the valuation of the allowance for loan losses and the fair value of financial instruments and other accounts, including OREO. Based on management’s calculation, an allowance of ~~$65,109,~~$62,728, or ~~3.87%~~4.02% of total loans, net of unearned income, was deemed an adequate estimate of losses inherent in the loan portfolio as of ~~March 31,~~June 30, 2011. This estimate resulted in a provision for loan losses in the income statement of ~~$13,897~~$14,333 and $28,229 for the three and six months ended ~~March 31, 2011.~~June 30, 2011, respectively. If the mix and amount of future charge-off percentages differ significantly from those assumptions used by management in making its determination, the allowance for loan losses and provision for loan losses on the income statement could be materially affected.

(Continued)

The consolidated financial statements include certain accounting and disclosures that require management to make estimates about fair values. Estimates of fair value are used in the accounting for securities available for sale, loans held for sale, goodwill, other intangible assets, OREO and acquisition purchase accounting adjustments. Estimates of fair values are used in disclosures regarding securities held to maturity, stock compensation, commitments, and the fair values of financial instruments. Fair values are estimated using relevant market information and other assumptions such as interest rates, credit risk, prepayments and other factors. The fair values of financial instruments are subject to change as influenced by market conditions.

The Company believes its critical accounting policies and estimates also include the valuation of the allowance for net Deferred Tax Assets ~~(DTA)~~(“DTA”). A valuation allowance is recognized for a net DTA if, based on the weight of available evidence, it is more-likely-than-not that some portion or the entire DTA will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making such judgments, significant weight is given to evidence that can be objectively verified. As a result of the increased credit losses, the Company entered into a three-year cumulative pre-tax loss position (excluding the goodwill impairment charge recognized in the second quarter of 2009) as of September 30, 2010. A cumulative loss position is considered significant negative evidence in assessing the realizability of a deferred tax asset which is difficult to overcome.

The Company’s estimate of the realization of its net DTA was based on the scheduled reversal of deferred tax liabilities and taxable income available in prior carry back years, pre-tax core operating projections, tax planning strategies, and the longevity of the Company. Based on management’s calculation, a valuation allowance of ~~$47,563,~~$52,268, or ~~88%~~90% of the net DTA, was an adequate estimate as of ~~March 31,~~June 30, 2011. If the Company’s financial condition were to deteriorate significantly from those assumptions used by management in making its determination, the valuation allowance for the net DTA and the provision for the net DTA on the income

Changes in Results of Operations

Net Loss.The Company’s net loss available to common shareholders was ~~$11,561~~$12,384 and $23,945 for the three and six months ended ~~March 31,~~June 30, 2011, compared to net income available to common shareholders of ~~$1,946~~$1,561 and $3,507 for the three and six months ended ~~March 31, 2010.~~June 30, 2010, respectively. The ~~$13,507~~$13,945 decline ~~versus~~between the ~~year ago period~~2011 second quarter results and the second quarter of 2010 reflected a ~~higher~~$9,584 increase in the loan loss provision, coupled with ~~rising~~a $4,280 increase in costs associated with maintenance, disposition and revaluation of other real estate owned ~~(OREO)~~(“OREO”) and a $2,021 decline in net interest income, along with continued weakness in economic conditions in our markets. Our 2011 first quarter results reflected a $10,008 increase in loan loss provision, a $1,592 increase in OREO expenses and a $2,392 decline in net interest income in each case as compared to the first quarter of 2010. We incurred an approximately ~~20%~~22% decline in average loan balances between the periods as well.

Net Interest Income.The largest source of earnings for the Company is net interest income, which is the difference between interest income on earning assets and interest expense on deposits and other interest-bearing liabilities.

~~First~~Second quarter 2011 net interest income totaled ~~$19,267, down $2,392~~$19,452, up $185 or ~~11%~~1% versus the first quarter of 2011 but down $2,021 or 9% versus the second quarter of 2010. For the six months ended June 30, 2011, net interest income totaled $38,718, down from $43,132 for the comparable period in 2010. Versus the first quarter of 2011, the modest increase was driven by an increase in the number of days in the current quarter. The ~~decline was due to an approximately 20% decline~~adverse impact of continued declines in ~~average~~ performing loans (the combination of movement into non-performing loans coupled with credit worthy borrowers reducing their aggregate loans), with average balances down approximately $85 million or 5.5% during the second quarter, was offset in part by a 0.07% increase in loan yields, due to a reduction in interest reversals, and a 0.13% decline in deposit yields due to continued pricing discipline.

The decline in net interest income in the second quarter of 2011 versus the second quarter of 2010 was due to an approximately 22% decline in average loans partially offset by the Company’s ability to lower average rates paid on interest bearing deposits by ~~0.57%~~0.61% while achieving a ~~0.13%~~0.22% increase in average loan yields through pricing ~~discipline.~~discipline and lower interest reversals. The ~~3.77%~~3.91% net interest margin in the ~~first~~second quarter of 2011 was ~~down 0.13%~~up 0.15% versus the ~~first~~second quarter of 2010 ~~due to~~despite a shift from loans into lower yielding investment securities and short-term investments. Net interest margin for the six months ended June 30, 2011 was 3.84% compared to 3.88% for the comparable period in 2010. The reduction between the periods was principally the result of increased non-performing loans, offset in part by an improvement in our net interest spread. The Company’s average balance for interest-bearing ~~liabilities~~deposits decreased 3%5% or ~~$58,424~~$92,465 for the ~~first~~second quarter of 2011 versus the same period of 2010 as the Company reduced its reliance on jumbo time deposits and brokered deposits while focusing on building core deposit levels throughout its branch network. However, the average balance for core deposits (defined as total customer deposits excluding time deposits and brokered deposits) for the second quarter of 2011 grew by $101,398 or 9% compared to the second quarter of 2010.

Similarly, the 10% decline in net interest income in the first six months of 2011 versus the second quarter of 2010 was due to an approximately 21% decline in average loans partially offset by the Company’s ability to lower average rates paid on interest bearing deposits by 0.59% while achieving a 0.17% increase in average loan yields through pricing discipline and a reduction in interest reversals.

(Continued)

The following table sets forth certain information relating to the Company’s consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the periods indicated. These yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented.

Three Months Ended
March 31,
2011 2010
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Interest-earning assets:

Loans^{(1) (2)}
$ 1,567,761 $ 24,614 6.37 % $ 1,954,136 $ 30,080 6.24 %
Investment securities⁽²⁾
227,762 2,007 3.57 % 169,020 1,906 4.57 %
Other short-term investments 294,905 181 0.25 % 148,394 94 0.26 %

Total interest-earning assets $ 2,090,428 $ 26,802 5.20 % $ 2,271,550 $ 32,080 5.73 %

Non-interest earning assets 340,868 306,586

Total assets $ 2,431,296 $ 2,578,136

Interest-bearing liabilities:

Deposits:
Interest checking, savings and money market $ 1,079,824 $ 1,811 0.68 % $ 941,888 $ 2,398 1.03 %
Time deposits 763,967 3,519 1.87 % 940,388 5,663 2.44 %

Total interest-bearing deposits $ 1,843,791 $ 5,330 1.17 % $ 1,882,276 $ 8,061 1.74 %

Securities sold under repurchase agreements and short-term borrowings 16,994 4 0.10 % 23,615 6 0.10 %
Notes payable 158,628 1,543 3.94 % 171,946 1,694 4.00 %
Subordinated debentures 88,662 481 2.20 % 88,662 472 2.16 %

Total interest-bearing liabilities $ 2,108,075 $ 7,358 1.42 % $ 2,166,499 $ 10,233 1.92 %

Non-interest bearing liabilities:

Demand deposits 161,702 163,173
Other liabilities 17,731 18,098

Total non-interest bearing liabilities 179,433 181,271

Total liabilities 2,287,508 2,347,770

Shareholders’ equity 143,788 230,366

Total liabilities and shareholders’ equity $ 2,431,296 $ 2,578,136

Net interest income $ 19,444 $ 21,847

Interest rate spread 3.77 % 3.81 %

Net yield on interest-earning assets 3.77 % 3.90 %


	Three Months Ended
	June 30,
	2011							2010
	Average				Average			Average					Average
	Balance		Interest		Rate			Balance		Interest			Rate
Interest-earning assets:
Loans^{(1) (2)}	$	1,482,864	$	23,816		6.44	%	$	1,896,071	$	29,390			6.22	%
Investment securities⁽²⁾		251,231		2,254		3.60	%		193,961		1,996			4.13	%
Other short-term investments		277,133		170		0.24	%		158,208		99			0.25	%

Total interest-earning assets	$	2,011,228	$	26,240		5.23	%	$	2,248,240	$	31,485			5.62	%

Non-interest earning assets		335,683							305,374

Total assets	$	2,346,911						$	2,553,614


Interest-bearing liabilities:												��
Deposits:
Interest checking, savings and money market	$	1,070,869	$	1,428		0.53	%	$	970,304	$	2,487			1.03	%
Time deposits		691,008		3,133		1.82	%		884,038		5,138			2.33	%

Total interest-bearing deposits	$	1,761,877	$	4,561		1.04	%	$	1,854,342	$	7,625			1.65	%

Securities sold under repurchase agreements and short-term borrowings		16,710		4		0.10	%		21,943		5			0.09	%
Notes payable		158,493		1,570		3.97	%		171,847		1,712			4.00	%
Subordinated debentures		88,662		488		2.21	%		88,662		489			2.21	%

Total interest-bearing liabilities	$	2,025,742	$	6,623		1.31	%	$	2,136,794	$	9,831			1.85	%

Non-interest bearing liabilities:
Demand deposits		166,387							165,554
Other liabilities		19,064							17,477

Total non-interest bearing liabilities		185,451							183,031

Total liabilities		2,211,193							2,319,825

Shareholders’ equity		135,718							233,789

Total liabilities and shareholders’ Equity	$	2,346,911						$	2,553,614


Net interest income			$	19,617						$	21,654


Interest rate spread						3.91	%							3.77	%


Net yield on interest-earning assets						3.91	%							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.

(Continued)


	Six Months Ended
	June 30,
	2011							2010
	Average				Average			Average				Average
	Balance		Interest		Rate			Balance		Interest		Rate
Interest-earning assets:
Loans^{(1) (2)}	$	1,525,077	$	48,430		6.40	%	$	1,924,943	$	59,470		6.23	%
Investment securities⁽²⁾		239,562		4,261		3.59	%		181,559		3,902		4.33	%
Other short-term investments		285,969		350		0.25	%		153,328		193		0.25	%

Total interest-earning assets	$	2,050,608	$	53,041		5.22	%	$	2,259,830	$	63,565		5.67	%

Non-interest earning assets		338,258							305,977

Total assets	$	2,388,866						$	2,565,807


Interest-bearing liabilities:
Deposits:
Interest checking, savings and money market	$	1,075,322	$	3,240		0.61	%	$	956,174	$	4,885		1.03	%
Time deposits		727,286		6,652		1.84	%		912,057		10,801		2.39	%

Total interest-bearing deposits	$	1,802,608	$	9,892		1.11	%	$	1,868,231	$	15,686		1.69	%

Securities sold under repurchase agreements and short-term borrowings		16,851		8		0.10	%		22,774		11		0.10	%
Notes payable		158,551		3,113		3.96	%		171,897		3,406		4.00	%
Subordinated debentures		88,662		969		2.20	%		88,662		961		2.19	%

Total interest-bearing liabilities	$	2,066,672	$	13,982		1.36	%	$	2,151,564	$	20,064		1.88	%

Non-interest bearing liabilities:
Demand deposits		164,057							164,370
Other liabilities		18,402							17,786

Total non-interest bearing liabilities		182,459							182,156

Total liabilities		2,249,131							2,333,720

Shareholders’ equity		139,735							232,087

Total liabilities and shareholders’ equity	$	2,388,866						$	2,565,807


Net interest income			$	39,059						$	43,501


Interest rate spread						3.84	%						3.79	%


Net yield on interest-earning assets						3.84	%						3.88	%


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.

(Continued)

Provision for Loan Losses.During the three and six months ended ~~March 31,~~June 30, 2011, loan charge-offs were ~~$16,404~~$17,227 and $33,632, respectively, and recoveries of charged-off loans were ~~$786.~~$511 and $1,301, respectively. For the three ~~month period~~and six months ended ~~March 31,~~June 30, 2010, loan charge-offs were ~~$4,733~~$5,316 and $10,049, respectively, and recoveries of charged-off loans were ~~$850.~~$449 and $1,299, respectively. The Company’s provision for loan losses increased to ~~$13,897~~$14,333 and $28,229, respectively, for the three and six months ended ~~March 31,~~June 30, 2011 compared to ~~$3,889~~$4,749 and $8,838, respectively, for the ~~same period in~~three and six months ended June 30, 2010. The impact of the continuing challenging economic environment, elevated net charge-offs and increased non-performing assets were the primary reasons for the increase in provision expense in the ~~first~~second quarter of 2011 when compared to the comparable period in 2010. Management continually evaluates the existing portfolio in light of loan concentrations, current general economic conditions and economic trends. On a monthly basis, the Company undertakes an extensive review of every loan in excess of $1 million that is adversely risk graded and every loan regardless of amount graded substandard.

The Company’s allowance for loan losses ~~increased~~declined to $62,728 at June 30, 2011 from $65,109 at March 31, ~~2011 from $50,167 at March 31, 2010 while~~2011. However, due to continued reductions in loan balances, the reserve to outstanding loans ratio increased to 4.02% at June 30, 2011 from 3.87% at March 31, ~~2011 from 2.52% at March 31, 2010.~~2011. These estimates resulted in a provision for loan losses in the income statement of ~~$13,897~~$14,333 and $28,229 for the three and six months ended ~~March 31,~~June 30, 2011, respectively, versus ~~$3,889~~$4,749 and $8,638 for the three and six months ended ~~March 31,~~June 30, 2010. If economic conditions, including residential real estate market conditions, loan mix and amount of future charge-off percentages differ significantly from those assumptions used by management in making its determination, the allowance for loan losses and provision for loan losses on the income statement could be materially affected.

The ratio of allowance for loan losses to nonperforming loans was 47.52% as of June 30, 2011 versus 39.60% as of March 31, 2011, ~~versus 78.85%~~45.83% as of ~~March~~December 31, 2010 and 77.02% as of June 30, 2010. The ratio of nonperforming assets to total assets was 9.23% as of June 30, 2011 versus 9.38% as of March 31, 2011, ~~versus 5.27%~~8.56% at December 31, 2010 and 5.61% as of ~~March 31,~~June 30, 2010. The ratio of nonperforming loans to total loans, net of unearned ~~interest, was~~income, fell to 8.46% as of June 30, 2011 versus 9.78% as of March 31, 2011 ~~versus 3.19%~~as there was a shift from non-performing loans to OREO during the second quarter. The ratio of nonperforming loans to total loans was 8.35% as of ~~March~~December 31, 2010 and 3.37% as of June 30, 2010. Within the Bank, the Company’s largest subsidiary, the ratio of nonperforming assets to total assets was 9.17%, as of June 30, 2011 versus 9.34%, as of March 31, 2011 ~~versus 5.25% as of March~~and 8.52% at December 31, 2010. ~~This increase reflects both the rise in absolute levels of non-performing assets, compounded by the Company’s shrinking balance sheet.~~

Net charge-offs as a percentage of average loans increased ~~from 0.19% for the three months ended March 31, 2010~~ to ~~0.91%~~1.03% (annualized ~~4.04%~~4.1%) for the three months ended ~~March 31,~~June 30, 2011 from 0.25% (annualized 1.0%) for the three months ended June 30, 2010. For the six months ended June 30, 2011, net charge-offs as a percentage of average loans was 1.93% (annualized 3.9%), which was up from 0.44% (annualized 0.89%) for the comparable period in 2010.

Management believes that credit quality indicators will be driven by the current economic environment and condition of the residential real estate markets. Management continually evaluates the existing portfolio in light of loan concentrations, current general economic conditions and economic trends. During the second quarter of 2010, the Company segregated staffing for its special assets group and transferred additional independent resources into this area in an effort to accelerate problem asset resolution.

Based on its evaluation of the allowance for loan loss calculation and review of the loan portfolio, management believes the allowance for loan losses is adequate at ~~March 31,~~June 30, 2011. However, the provision for loan losses could further increase based on actions taken by the special assets group to resolve problem loans, and if general economic conditions remain sluggish or weaken further or the residential real estate markets in Nashville, Knoxville or the Company’s other markets or the financial conditions of borrowers deteriorate beyond management’s current ~~expectations, the provision for loan losses would likely remain elevated.~~expectations.

Non-interest Income.Fee income unrelated to interest-earning assets, consisting primarily of service charges, commissions and fees, is an important component to the Company’s total revenue stream. Total non-interest income for the three and six months ended ~~March 31,~~June 30, 2011 was ~~$7,627~~$8,236 and $15,864, respectively, down 1%6% and 4% versus the same ~~period~~periods in 2010.

Service charges on deposit accounts remain the largest component of total non-interest ~~income and declined 2% from the year ago period to $5,830~~income. Service charges on deposit accounts for the three and six months ended ~~March 31, 2011.~~June 30, 2011 were $6,377 and $12,208, respectively, down 5% and 4%, respectively, versus the comparable 2010 periods. The decline in service charges was primarily attributable to regulatory changes. We also experienced reductions in our trust and investment services income and mortgage banking income in the first three and six months of 2011, as compared to the comparable periods in 2010.

(Continued)

Non-interest Expense.Control of non-interest expense is a critical aspect in enhancing income. Non-interest expense includes personnel, occupancy, and other expenses such as OREO costs, data processing, printing and supplies, legal and professional fees, postage, Federal Deposit Insurance Corporation (“FDIC”) assessment fees and other expenses. Total non-interest expense was ~~$23,027~~$24,770 and $47,798 for the three and six months ended ~~March 31,~~June 30, 2011, up ~~$2,481~~$3,496 or ~~12%~~16% versus the three months ended ~~March 31,~~June 30, 2010 and 14% versus the six months ended June 30, 2010. The ~~increase was~~increases in each of these periods were principally the result of a ~~$1,592~~$4,280 and $5,842 increase, respectively, in ~~losses on~~costs associated with OREO and repossessed assets, including ~~as a result~~the impact of ~~revaluation~~results of revaluations of OREO properties following receipt of updated ~~appraisals,~~appraisals.

Personnel costs are the largest category of recurring non-interest expenses. For the three and ~~severance costs~~six months ended June 30, 2011, employee compensation and benefits represented $7,324 and $15,455, or 30% and 32%, respectively, of ~~approximately $570 associated with~~total non-interest expense. This represented a decline of $648 and $183, respectively, versus the year ago quarter and six month period, due to the Company’s reduction in force effected in the first quarter of 2011 given the current business environment and level of business activity.

~~Personnel costs are the largest category of recurring non-interest expenses. For the three months ended March 31, 2011,~~ Our employee compensation and ~~benefits represented $8,131 or 35% of total non-interest expense. This was an increase of $466 versus~~benefit costs for the ~~year ago quarter. Excluding current period~~six months ended June 30, 2011 included severance costs ~~noted above, personnel costs would be down 1% versus~~associated with the ~~year ago~~reduction in force that were recorded in the first quarter ~~despite normal non-executive compensation increases.~~of 2011.

Income Taxes.~~The effective income tax rate~~A $281 benefit for the three months ended ~~March 31,~~June 30, 2011 was ~~significantly impacted by~~recorded The benefit offset the ~~valuation allowance for~~provision recorded in the ~~net DTA.~~linked quarter. Accounting guidance states that a DTA should be reduced by a valuation allowance if, based on the weight of all available evidence, it is more likely than not that some portion or the entire deferred tax asset will not be realized. The determination of whether a deferred tax asset is realizable is based on weighing all available evidence, including both positive and negative evidence. In making such judgments, significant weight is given to the evidence that can be objectively verified. The most significant negative verifiable evidence for the current quarter is the three year cumulative loss calculation, net of the non-cash goodwill impairment charge of ($143.4) million recognized in the second quarter of 2009. The Company’s estimate of the realization of its net DTA was based on the scheduled reversal of deferred tax liabilities and taxable income available in prior carry back years, pre-tax core operating projections and tax planning ~~strategies, and the longevity of the Company.~~strategies. Based on management’s calculation, an allowance of ~~$47,563,~~$52,268, or ~~88.2%~~90% of the ~~net~~ DTA, was an adequate estimate of the portion of the net DTA which is more likely than not to not be realized as of ~~March 31,~~June 30, 2011. ~~The effective income tax rate for~~For the ~~three~~six months ended ~~March 31, 2011 was (2.8%) or 38.2% adjusting for the non-cash DTA valuation allowance of $4,108. For the same period in~~June 30, 2010, which had no DTA valuation allowance provision, the effective income tax rate was ~~34.9%~~34.2%.

Changes in Financial Condition

Total assets at ~~March 31,~~June 30, 2011 were ~~$2,392,694,~~$2,293,815, a decrease of ~~$13,346~~$112,225 or ~~0.6%~~4.7% from December 31, 2010. The decrease in assets reflects a ~~$65,129~~$184,875 decline in loans, partially offset by an increase of ~~$61,582~~$65,140 in investment securities and liquid assets. Total assets at ~~March 31,~~June 30, 2011 declined ~~$177,038~~$235,517 or 7%9% from ~~March 31,~~June 30, 2010 reflecting a ~~$313,790~~$367,671 decline in loans, net of unearned income, which was partially offset by an increase of ~~$195,390~~$175,929 in investment securities and liquid assets.

Non-performing assets (“NPA’s”), which include non-accrual loans, loans past due 90 days or more and still accruing interest and OREO, totaled ~~$224,441~~$211,695 at ~~March 31,~~June 30, 2011 compared with $205,914 at December 31. 2010. NPAs at ~~March 31,~~June 30, 2011 increased ~~$89,075~~$69,780 or 49% versus ~~March 31,~~June 30, 2010. The Company expects that the levels of NPA’s will remain elevated for the remainder of 2011.

Non-performing loans include non-accrual loans and loans 90 or more days past due. All loans that are greater than 90 days past due are considered non-accrual unless they are adequately secured and there is reasonable assurance of full collection of principal and interest. Non-accrual loans that are 120 days past due without assurance of repayment are charged off against the allowance for loan losses. ~~Nonaccrual~~Non-performing loans totaled $132,005 at June 30, 2011, representing a decline of $13,814 versus December 31, 2010, due primarily to foreclosures and resulting transfer of the loan to OREO. Non-performing loans ~~past due 90 days~~increased $67,207 or 103% versus June 30, 2010.

OREO totaled ~~$164,408~~$79,690 at ~~March 31,~~June 30, 2011, representing an increase of ~~$18,589 versus~~$19,595 from December 31, 2010, and an increase of ~~$100,788~~$2,758 versus ~~March 31, 2010.~~

~~OREO totaled $60,033 at March 31, 2011 essentially unchanged from the December 31, 2010 balance of $60,095, though down $11,713 versus March 31,~~June 30, 2010 as ~~the Company~~recorded foreclosures exceeded recognized sales and ~~write-downs in excess of recorded foreclosures.~~write-downs.

Impaired loans, which are loans identified as being probable that the Company will not be able to collect all amounts of contractual interest and principal as scheduled in the loan agreement, totaled ~~$198,581~~$149,903 after impairment charges necessary to reflect current fair values at ~~March 31,~~June 30, 2011.

(Continued)

At ~~March 31,~~June 30, 2011, the ratio of the Company’s allowance for loan losses to non-performing loans (which include non-accrual loans) was ~~39.6%~~47.5% compared to ~~78.9%~~77.0% at ~~March 31,~~June 30, 2010.

The Company maintains an investment portfolio to provide liquidity and earnings. Investments at ~~March 31,~~June 30, 2011 with an amortized cost of ~~$225,141~~$214,081 had a market value of ~~$226,847.~~$217,556. At December 31, 2010, investments with an amortized cost of $200,824 had a market value of $202,469. At ~~March 31,~~June 30, 2010, investments with an amortized cost of ~~$172,425~~$173,361 had a market value of ~~$174,344.~~$176,746.

Liquidity and Capital Resources

Liquidity. Liquidity refers to the ability or the financial flexibility to meet the needs of depositors and borrowers and fund operations. Maintaining appropriate levels of liquidity allows the Company to have sufficient funds available for reserve requirements, customer demand for loans, withdrawal of deposit balances and maturities of deposits and other liabilities.

As of ~~March 31,~~June 30, 2011, the Bank’s liquidity reserves included ~~$263,140~~$275,680 of surplus cash with the Federal Reserve, ~~$7,931~~$5,023 of ~~federal~~fed funds sold to upstream correspondent banks, and ~~$63,000~~$27,227 of unpledged securities. As of June 30, 2011, the holding company’s liquidity reserves consisted of $1,773 of cash.

The Company’s primary source of liquidity is dividends paid by the Bank. Applicable Tennessee statutes and regulations impose restrictions on the amount of dividends that may be declared by the Bank. Under Tennessee law, the Bank can only pay dividends to the Company in an amount equal to or less than the total amount of its net income for that year combined with retained net income for the preceding two years. Payment of dividends in excess of this amount requires the consent of the Commissioner of the Tennessee Department of Financial Institutions (“TDFI”), FDIC, and the Federal Reserve Bank of Atlanta (“FRB”). Further, any dividend payments are subject to the continuing ability of the Bank to maintain compliance with minimum federal regulatory capital requirements, or any higher requirements that the Bank may be subject to, ~~like those that the Bank informally committed to the FDIC and TDFI it would maintain in 2010,~~ and to retain its characterization under federal regulations as a “well-capitalized” institution. Because of the Bank’s losses in 2009, 2010 and year-to-date 2011, dividends from the Bank to the holding company, including funds for payment of dividends on preferred stock and trust preferred, including the preferred stock issued to the U.S. Treasury, and interest on trust preferred securities to the extent that the Company does not have sufficient cash available at the holding company level, will require prior approval of the TDFI, FDIC and FRB.

Supervisory guidance from the FRB indicates that bank holding companies that are experiencing financial difficulties generally should eliminate, reduce or defer dividends on Tier 1 capital instruments including trust preferred securities, preferred stock or common stock, if the holding company needs to conserve capital for safe and sound operation and to serve as a source of strength to its subsidiaries. The Company has informally committed to the FRB that it will not (1) declare or pay dividends on the Company’s common or preferred stock, including the preferred shares owned by the U.S. Treasury Department (2) make any distributions on subordinated debentures or trust preferred securities or (3) incur any additional indebtedness without in each case, the prior written approval of the FRB. No dividends are expected to be paid in the foreseeable future.

(Continued)

Following consultation with the FRB, the Company gave notice on November 9, 2010 to the U.S. Treasury Department that the Company was suspending the payment of regular quarterly cash dividends on the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A issued to the U.S. Treasury Department. The dividends, which are cumulative, will continue to be accrued for payment in the future and will be reported for the duration of the deferral period as a preferred dividend requirement that is deducted from net income for financial statement purposes. Additionally the Company, following consultation with the FRB, has ~~also~~ exercised its rights beginning in the fourth quarter of 2010 to defer regularly scheduled interest payments on all of its issues of junior subordinated debentures having an outstanding principal amount of ~~$88.6~~$88.7 million, relating to outstanding trust preferred securities ~~(TRUPs)~~(“TRUPs”). Under the terms of the trust documents associated with these debentures, the Company may defer payments of interest for up to 20 consecutive quarterly periods without default or penalty. The regular scheduled interest payments will continue to be accrued for payment in the future and reported as an expense for financial statement purposes. Together, the deferral of interest payments on TRUPs and suspension of dividend payments to the U.S. Treasury Department will preserve approximately $5.1 million per year in Bank level capital. As of June 30, 2010, cumulative deferred interest payments on TRUPs and dividend payments to the U.S. Treasury Department totaled $4,669.

For the ~~three~~six months ended ~~March 31,~~June 30, 2011, operating activities of the Company provided ~~$16,495~~$32,457 of cash flows. The net loss of ~~$10,311~~$21,444 comprised a substantial portion of the cash generated from operations after removing various non-cash items, including ~~$13,897~~$28,229 in provision for loan losses and ~~$1,736~~$3,442 of depreciation and amortization. A decline in other assets added ~~$4,609.~~$12,191.

Maturities of ~~$11,335~~$46,333 in investment securities, proceeds from the net change in loans of ~~$43,266~~$111,627 and proceeds of ~~$4,322~~$15,117 from the sale of OREO were the primary components of inflows from investing activities. These were offset in part by ~~$35,782~~$59,790 in purchases of investment securities available for sale for a net increase in net cash provided from investing activities of ~~$22,693.~~$112,517.

The net cash used in financing activities totaled ~~$1,986.~~$94,960, due to a $93,466 decline in customer deposits, due a decline of approximately $128 million in non-core time deposits, partially offset by an increase in core deposits.

Capital Resources.The Company’s capital position is reflected in its shareholders’ equity, subject to certain adjustments for regulatory purposes. Shareholders’ equity, or capital, is a measure of the Company’s net worth, soundness and viability.

As a result of the first ~~quarter~~half 2011 loss, the Bank’s capital ratios declined. Shareholders’ equity on ~~March 31,~~June 30, 2011 was ~~$132,830,~~$122,046, a decline of ~~$11,067~~$21,851 or ~~7.7%~~15.2% since December 31, 2010 and a decline of ~~$97,359~~$111,104 or ~~42.3%~~47.7% since ~~March 31,~~June 30, 2010.

During the second quarter of 2009 the Company suspended common stock dividends and on November 9, 2010 the Company announced that it had suspended preferred stock dividends and interest payments on its junior subordinated debentures associated with its trust preferred securities in order to preserve ~~capital.~~capital at the Bank level.

Risk-based capital regulations adopted by the Board of Governors of the FRB and the FDIC require bank holding companies and banks, respectively, to achieve and maintain specified ratios of capital to risk-weighted assets. The risk-based capital rules are designed to measure Tier 1 Capital and Total Capital in relation to the credit risk of both on- and off-balance sheet items. Under the guidelines, one of four risk weights is applied to the different on-balance sheet items. Off-balance sheet items, such as loan commitments, are also subject to risk-weighting after conversion to balance sheet equivalent amounts. All bank holding companies and banks must maintain a minimum total capital to total risk-weighted assets ratio of 8.00%, at least half of which must be in the form of core, or Tier 1, capital (consisting of common equity, retained earnings, and a limited amount of qualifying perpetual preferred stock and trust preferred securities, net of goodwill and other intangible assets and accumulated other comprehensive income). These guidelines also specify that bank holding companies that are experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels.

At ~~March 31,~~June 30, 2011, capital ratios for the Bank and the Company remained above the statutory minimums necessary to be deemed a well-capitalized financial institution. However, they fell below the Tier 1 leverage ratio of 10.0% and the Total risk-based capital ratio of 14.0% that the Bank had informally committed to its regulators that it would maintain, as discussed further in the 2010 Form 10-K. ~~As described above in “Note 7 — Subsequent Events,”~~

(Continued)

On May 2, 2011, the Bank ~~has been notified by~~received notice from the FDIC and the TDFI that, as a result of those agencies’ findings in their most recently completed joint safety and soundness examination, the agencies ~~intend to seek~~would be seeking a formal enforcement action against the Bank inaimed at strengthening the ~~form~~Bank’s operations and its financial condition, and that accordingly, the FDIC was pursuing the issuance of a consent order against the Bank and the TDFI was pursuing the issuance of a written agreement ~~respectively. Although~~against the Bank. The Company believes that the final terms of the ~~consent~~ order and written agreement ~~are not yet finalized, it is likely~~will contain requirements similar to those that the ~~order and agreement, if issued, would contain a requirement for the~~ Bank has already informally committed to comply with, including requirements to maintain the Bank’s capital ~~levels~~ratios above those levels required to be considered “well-capitalized” under federal banking ~~regulations,~~regulations.

The Company’s and ~~those levels may~~the Bank’s regulatory capital ratios as of June 30, 2011, and the minimum ratios required to be met under the federal statutory and regulatory guidelines as ~~high~~well as ~~those levels~~the minimum ratios that the Bank has ~~already~~ informally committed to ~~the FDIC and TDFI.~~

Required Required
Minimum to be
Ratio Well Capitalized Bank Company
Tier 1 risk-based capital 4.00 % 6.00 % 11.83 % 9.36 %
Total risk-based capital 8.00 % 10.00 % 13.11 % 13.03 %
Leverage Ratio 4.00 % 5.00 % 8.55 % 6.78 %

~~As described above, the Company recently announced~~its regulators that it ~~has~~will maintain are set forth below:


	Required			Required			Required by Bank’s
	Minimum			to be			Informal Commitment
	Ratio			Well Capitalized			to Regulators			Bank			Company
Tier 1 risk-based capital		4.00	%		6.00	%		12.00	%		11.97	%		9.03	%
Total risk-based capital		8.00	%		10.00	%		14.00	%		13.25	%		13.09	%
Leverage Ratio		4.00	%		5.00	%		10.00	%		8.47	%		6.39	%

The Company announced on May 5, 2011 that it had entered into a definitive agreement to raise approximately $217 million in new capital through the sale of newly issued common shares to North American. The transaction, which is subject to shareholder and regulatory approval, as well as the satisfaction of other customary closing conditions, is expected to be consummated in the third quarter of 2011. In connection with the investment, the Company expects that North American will enter into a binding agreement with the U. S. Department of Treasury to purchase all of the outstanding shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and related warrants to purchase shares of the Company’s common stock. The recapitalization will strengthen the Company’s and the Bank’s capital ratios and balance sheet.

(Continued)

Off-Balance Sheet Arrangements

At ~~March 31,~~June 30, 2011, the Company had outstanding unused lines of credit and standby letters of credit totaling ~~$261,936~~$234,801 and unfunded loan commitments outstanding of ~~$3,559.~~$5,382. Because these commitments generally have fixed expiration dates and most will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements. If needed to fund outstanding commitments, as noted in “Liquidity and Capital Resources — Liquidity”, as of ~~March 31,~~June 30, 2011, the Company had various liquidity reserves, including ~~$263,140~~$275,680 of surplus cash at the Federal Reserve, the ability to liquidate ~~$7,931~~$5,023 of Federal funds sold, and ~~$63,000~~$27,227 of unpledged investment ~~securities..~~securities. The following table presents additional information about the Company’s off-balance sheet commitments as of ~~March 31,~~June 30, 2011:


	Less than 1						More than 5				Less than 1						More than 5
	Year		1-3 Years		3-5 Years		Years		Total		Year		1-3 Years		3-5 Years		Years		Total
Commitments to make loans — fixed	$	272	$	862	$	744	$	152	$	2,030	$	—	$	1,084	$	1,585	$	766	$	3,435
Commitments to make loans — variable		606		225		—		698		1,529		500		205		24		1,218		1,947
Unused lines of credit		126,883		22,888		14,379		72,492		236,642		111,138		71,814		13,370		14,811		211,133
Letters of credit		17,532		7,762		—		—		25,294		16,167		7,501		—		—		23,668

Total	$	145,293	$	31,737	$	15,123	$	73,342	$	265,495	$	127,805	$	80,604	$	14,979	$	16,795	$	240,183


ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Part II, Item 7A of the 2010 10-K is incorporated in this item of this Quarterly Report by this reference. There have been no material changes in the quantitative and qualitative market risks of the Company since December 31, 2010.

~~ITEM 4.~~


ITEM 4.		CONTROLS AND PROCEDURES ~~Disclosure Controls and Procedures~~ The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2011, the Company’s disclosure controls and procedures were effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e).

Disclosure Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2011, the Company’s disclosure controls and procedures were effective.

As outlined per the Internal Control section below, management completed remediation efforts in the first quarter of 2011 related to the material weakness in internal control over financial reporting identified as of December 31, 2010 and reported on in the Company’s 2010 10-K. Management anticipates that these remedial actions strengthened the Company’s internal control over financial reporting and addressed the individual deficiencies identified as of December 31, 2010. Because some of these remedial actions take place on a quarterly basis, their successful implementation will continue to be evaluated to validate management’s assessment that the deficiencies have been remediated.

In addition to these remediation efforts, in light of the material weakness as of December 31, 2010, in preparing the Company’s Consolidated Financial Statements included in this quarterly report on Form 10-Q, the Company performed a thorough review of credit quality, focusing especially on the timely receipt and review of updated appraisals from outside independent third parties and internal supporting documentation to ensure that the Company’s Consolidated Financial Statements included in this Report have been prepared in accordance with U.S. GAAP.

~~Internal Control Over Financial Reporting~~

There have been no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, except for the remediation efforts management completed remediation efforts in the first quarter of 2011 related to the material weakness in internal control over financial reporting identified as of December 31, 2010 and reported on in the Company’s 2010 10-K. Management anticipates that these remedial actions strengthened the Company’s internal control over financial reporting and addressed the individual deficiencies identified as of December 31, 2010. Because some of these remedial actions take place on a quarterly basis, their successful implementation will continue to be evaluated to validate management’s assessment that the deficiencies have been remediated.

Internal Control Over Financial Reporting

• During the fourth quarter of 2010 and as of December 31, 2010 all appraisals on impaired assets are, and will continue to be, ordered 90 days prior to the annual appraisal date, or when evidence of impairment has occurred, and submitted to the independent third party for review upon completion, in order to assure that all appraisals on impaired assets are received in accordance with the Company’s internal policies;

• Pre-reviewed appraisals indicating evidence that impairment has occurred will be separately reviewed and discussed in the monthly valuation meeting held between the Special Assets Group ~~Loan Review~~ and Accounting to ensure that there is adequate documentation of the consideration for recording a potential impairment when the review process is not 100% complete but it is probable that a loss has been incurred; and

• Controls evidencing adequate secondary review and approval of impaired loan valuations and other real estate owned will be appropriately documented and evident within the Special Assets Group.

Management believes these remedial actions strengthened the Company’s internal control over financial reporting and addressed the individual deficiencies identified as of December 31, 2010. Because some of these remedial actions take place on a quarterly basis, their successful implementation will continue to be evaluated to validate management’s assessment that the deficiencies have been remediated.

The independent loan review function has been absent since the first quarter of 2011 and, given the pending Investment Agreement with North American, plans to outsource this function have been deferred. While not performed by an independent loan review function, there are a number of procedures presently in place which provide for review of past due loans, assessment of renewals, and re-grading of loans. Such procedures are conducted by credit officers, the interim Chief Credit Officer, special assets managers and credit analysts, as well as the line lending personnel.

PART II — OTHER INFORMATION

Item 1.
Legal Proceedings
~~On November 18, 2010 a shareholder of the Company filed a putative class action lawsuit (styled~~~~Bill Burgraff v. Green Bankshares, Inc., et al., U.S. District Court, Eastern District of Tennessee, Northeastern Division, Case No. 2:10-cv-00253)~~against the Company and certain of its current and former officers in the United States District Court for the Eastern District of Tennessee in Greeneville, Tennessee on behalf of all persons that acquired shares of the Company’s common stock between January 19, 2010 and November 9, 2010. On January 18, 2011, a separate shareholder of the Company filed a putative class action lawsuit (styled~~Brian Molnar v. Green Bankshares, Inc., et al., U.S. District Court, Eastern District of Tennessee, Northeastern Division, Case No. 2:11-cv-00014~~) against the Company and certain of its current and former officers in the same court on behalf of all persons that acquired shares of the Company’s common stock between January 19, 2010 and October 20, 2010. These lawsuits were filed following, and relate to the drop in value of the Company’s common stock price after, the Company announced its third quarter performance results on October 20, 2010. The Burgraff case also complains of the Company’s decision on November 9, 2010, to suspend payment of certain quarterly cash dividends.
42

Securities Class Action.On November 18, 2010 a shareholder of the Company filed a putative class action lawsuit (styledBill Burgraff v. Green Bankshares, Inc., et al., U.S. District Court, Eastern District of Tennessee, Northeastern Division, Case No. 2:10-cv-00253) against the Company and certain of its current and former officers in the United States District Court for the Eastern District of Tennessee in Greeneville, Tennessee on behalf of all persons that acquired shares of the Company’s common stock between January 19, 2010 and November 9, 2010. On January 18, 2011, a separate shareholder of the Company filed a putative class action lawsuit (styledBrian Molnar v. Green Bankshares, Inc., et al., U.S. District Court, Eastern District of Tennessee, Northeastern Division, Case No. 2:11-cv-00014) against the Company and certain of its current and former officers in the same court on behalf of all persons that acquired shares of the Company’s common stock between January 19, 2010 and October 20, 2010. These lawsuits were filed following, and relate to the drop in value of the Company’s common stock price after, the Company announced its third quarter performance results on October 20, 2010. The Burgraff case also complains of the Company’s decision on November 9, 2010, to suspend payment of certain quarterly cash dividends.

The plaintiffs allege that defendants made false and/or misleading statements or failed to disclose that the Company was purportedly overvaluing collateral of certain loans; failing to timely take impairment charges of these certain loans; failing to properly account for loan charge-offs; lacking adequate internal and financial controls; and providing false and misleading financial results. The plaintiffs have asserted federal securities laws claims against all defendants for alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The plaintiffs have also asserted control person liability claims against the individual defendants named in the complaints pursuant to Section 20(a) of the Exchange Act. The two cases were consolidated on February 4, 2011. On February 11, 2011, the Court appointed movant Jeffrey Blomgren as lead plaintiff. On May 3, 2011, Plaintiff filed an amended and consolidated complaint alleging a class period of January 19, 2010 to November 9, 2010. On July 11, 2011, Defendants filed a motion to dismiss the consolidated amended complaint. Plaintiff has until August 29, 2011 to file an opposition to that motion.

The Company and the individual named defendants collectively intend to vigorously defend themselves against these allegations.

North American Transaction. On May 12, 2011, a shareholder of the Company filed a putative class action lawsuit (styledBetty Smith v. Green Bankshares, Inc. et al., Case No. 11-625-III, Davidson County, Tennessee, Chancery Court) against the Company, the Bank, the Company’s Board of Directors (Steven M. Rownd, Robert K. Leonard, Martha M. Bachman, Bruce Campbell, W.T. Daniels, Samuel E. Lynch, Bill Mooningham, John Tolsma, Kenneth R. Vaught, and Charles E. Whitfield, Jr., and North American on behalf of all persons holding common stock of the Company. This complaint, which has been subsequently amended, was filed following the Company’s public announcement on May 5, 2011 of its entering into the Investment Agreement with North American and relates to the proposed investment in the Company by North American.

The amended complaint alleges that the individual defendants breached their fiduciary duties by accepting a sale price for the shares to be sold to North American that was unfair to the Company’s shareholders and by issuing a proxy statement that contained material omissions. The complaint also alleges that the Company, the Bank and North American aided and abetted these breaches of fiduciary duty. It seeks injunctive relief and/or rescission of the proposed investment by North American and fees and expenses in an unspecified amount.

On May 25, 2011, another shareholder of the Company filed a similar putative class action lawsuit (styledMark McClinton v. Green Bankshares, Inc. et al., Case No. 11-CV-284ktl, Greene County Circuit Court, Greeneville, Tennessee)against the Company, the Company’s Board of Directors and North American on behalf of all persons holding the Company’s common stock. The complaint similarly alleges that the individual defendants breached their fiduciary duties to the Company by agreeing to sell shares to North American at a price unfair to the Company’s shareholders. The complaint also alleges that the Company and North American aided and abetted these breaches of fiduciary duty. It seeks and injunction and/or rescission of North American’s investment in the Company and fees and expenses in an unspecified amount.

On June 16, 2011, another shareholder of the Company filed a putative class action lawsuit (styledThomas W. Cook Jr. v. Green Bankshares, Inc. et al., Civil Action No. 2:11-cv-00176, United States District Court for the Eastern District of Tennessee, Greeneville) against the Company, the Company’s Board of Directors and North American on behalf of all persons holding the Company’s common stock. The complaint alleges that the individual defendants breached their fiduciary duties to the Company by failing to maximize shareholder value in the proposed transaction with North American. The complaint also alleges that the Company and the individual defendants violated the securities laws by issuing a Preliminary Proxy Statement that contains alleged material misstatements and omissions. The complaint also alleges that the Company and North American aided and abetted the breaches of fiduciary duty. It seeks an injunction and/or rescission of North American’s investment in the Company, monetary damages and fees and expenses in an unspecified amount.

On July 6, 2011, another shareholder of the Company filed a lawsuit (styledBarbara N. Ballard v. Stephen M. Rownd, et al., Civil Action No. 2:11-cv-00201, United States District Court for the Eastern District of Tennessee, Greeneville)against the Company, the Company’s Board of Directors and North American asserting an individual claim that alleges that the individual defendants violated the securities laws by issuing a Preliminary Proxy Statement that contains alleged material misstatements and omissions. The complaint also alleges a class action claim on behalf of all persons holding the Company’s common stock against the individual defendants for breach of fiduciary duty based on these same alleged material misstatements and omissions. The complaint also alleges that the Company and North American aided and abetted the breaches of fiduciary duty. It seeks an injunction and/or rescission of North American’s investment in the Company and fees and expenses in an unspecified amount.

On July 26, 2011, the parties to the four North American transaction-related class action lawsuits reached an agreement in principle to resolve those four lawsuits on the basis of the inclusion of certain additional disclosures regarding the North American transaction in the proxy statement in connection with the proposed North American transaction. The proposed settlement is subject to, among other things, court approval.

The Company and the individual defendants collectively intend to vigorously defend themselves against these class action allegations.

General. The Company and its subsidiaries are subject to claims and suits arising in the ordinary course of business. In the opinion of management, the ultimate resolution of these pending claims and legal proceedings will not have a material adverse effect on the Company’s results of operations.

The two cases were consolidated on February 4, 2011. On February 11, 2011, the Court appointed movant Jeffrey Blomgren as lead plaintiff. On May 3, 2011, Plaintiff filed an amended and consolidated complaint alleging a class period of January 19, 2010 to November 9, 2010. Defendants have until July 11, 2011 to file a response to this amended complaint.

~~The Company and the individual named defendants collectively intend to vigorously defend themselves against these allegations.~~

~~On May 12, 2011, a shareholder of the Company filed a putative class action lawsuit (styled~~~~Betty Smith v. Green Bankshares, Inc. et al., Case No. 11-625-III, Davidson County, Tennessee, Chancery Court~~) against the Company, the Bank, the Company’s Board of Directors (Steven M. Rownd, Robert K. Leonard, Martha M. Bachman, Bruce Campbell, W.T. Daniels, Samuel E. Lynch, Bill Mooningham, John Tolsma, Kenneth R. Vaught, and Charles E. Whitfield, Jr.), and North American on behalf of all persons holding common stock of the Company. This lawsuit was filed following the Company’s public announcement on May 5, 2011 of its entering into the Investment Agreement with North American and relates to the proposed investment in the Company by North American.

The complaint alleges that the individual defendants breached their fiduciary duties by accepting a sale price for the shares to be sold to North American that was unfair to the Company’s shareholders. The complaint also alleges that the Company, the Bank and North American aided and abetted these breaches of fiduciary duty. It seeks injunctive relief and/or rescission of the proposed investment by North American and fees and expenses in an unspecified amount.

~~The Company and the individual defendants collectively intend to vigorously defend themselves against these class action allegations.~~

Item 1A.
Risk Factors
~~Except as set forth below, there were~~

Except as set forth below and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, there have been no material changes to our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010:

If the Bank becomes subject to the cease and desist order to which the FDIC has sought the Bank’s consent, its and the Company’s operations, liquidity and capital resources could be negatively impacted.

The FDIC is requesting that the Bank consent to the issuance of a cease and desist order and the TDFI is pursuing the issuance of a written agreement against the Bank. The Company believes that this order and written agreement will require, among other things, that the Bank maintain its capital ratios above those levels required to be considered “well-capitalized” under federal banking regulations. The Company also expects that this order and written agreement will prohibit the Bank from paying dividends to the Company and will require the Bank to, among other things, institute a plan for the reduction of charge-offs and classified assets, restrict its advances to certain classified borrowers and implement a plan for the reduction of certain loan concentrations. Because the consent order will constitute a formal enforcement action requiring the Bank to maintain specified capital levels above those required to be “well-capitalized” under the prompt corrective action provisions of the FDICIA, the Bank will, upon issuance of the order, be subject to additional limitations on its operations including its ability to pay interest on deposits above proscribed rates and its ability to accept, rollover or renew brokered deposits, which could adversely affect the Bank’s liquidity and/or operating results. If the Bank fails to comply with the requirements of the consent order, after it is issued, it may be subject to further regulatory action. The FDIC and the TDFI each has broad authority to take additional actions against the Bank, including assessing civil fines and penalties, issuing additional consent or cease and desist orders and removing officers and directors.

~~We have a significant deferred tax asset and cannot assure you that it will be fully realized.~~

We had net DTA of $6 million as of the period ended March 31, 2011. A valuation allowance is recognized for a net DTA if, based on the weight of available evidence, it is more-likely-than-not that some portion or the entire DTA will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making such judgments, significant weight is given to evidence that can be objectively verified. As a result of the increased credit losses, the Company entered into a three-year cumulative pre-tax loss position (excluding the goodwill impairment charge recognized in the second quarter of 2009) as of September 30, 2010. A cumulative loss position is considered significant negative evidence in assessing the realizability of a deferred tax asset which is difficult to overcome. The Company’s estimate of the realization of its net DTA was based on the scheduled reversal of deferred tax liabilities and taxable income available in prior carry back years, pre-tax core operating projections, tax planning strategies, and the longevity of the Company. Based on management’s calculation, a valuation allowance of $47,563, or 88.2% of the net DTA, was an adequate estimate as of March 31, 2011. This estimate resulted in an allowance for the DTA in the income statement of $4,108 (?) for the three months ended March 31, 2011. If the Company’s financial condition were to deteriorate significantly from those assumptions used by management in making its determination, we could be required to take an additional valuation allowance against the remaining $6 million net DTA. Once profitability has

been restored for a reasonable time, generally considered four consecutive quarters, and such profitability is considered sustainable, the valuation allowance would be reversed. Reversal of the valuation allowance requires a great deal of judgment and will be based on the circumstances that exist as of that future date.

~~Failure to complete our proposed issuance of common stock to North American could negatively affect us.~~

On May 5, 2011, we entered into the Investment Agreement with North American to raise approximately $217 million in new capital through the sale of newly issued common shares to North American. The transaction, which is subject to shareholder and regulatory approval, as well as the satisfaction of other customary closing conditions, is expected to be consummated in the third quarter of 2011. There is no assurance that our shareholders will approve the issuance of common stock pursuant to the terms of the investment agreement, or any of the other matters related to the transaction requiring shareholder approval, and there is no assurance that the other conditions to the completion of the transaction will be satisfied. In connection with the transaction, we will be subject to several risks, including the following:

	•		the current market price of our common stock may reflect a market assumption that the transaction will occur, and a failure to complete the transaction could result in a decline in the market price of our common stock;

•		the occurrence of any event, change or other circumstances that could give rise to the termination of the investment agreement, including a termination that under certain circumstances would require us to pay a $750,000 expense reimbursement and $8 million termination fee to North American;

•		~~the outcome of any legal proceedings that have been or may be instituted against us and others relating to the investment agreement;~~

•		the failure of the transaction to close for any reason, including the inability to complete the transaction due to the failure to obtain shareholder approval or the failure to satisfy other conditions to consummation of the transaction, and the risk that any failure of the transaction to close may adversely affect our business and the price of our common stock;

•		~~the potential adverse effect on our business, properties and operations of any affirmative or negative covenants we agreed to in the investment agreement;~~

•		~~risks that the proposed transaction diverts management’s attention and disrupts current plans and operations, and potential difficulties in employee retention as a result of the transaction;~~

•		~~the effect of the announcement of the transaction and actions taken in anticipation of the transaction on our business relationships, operating results and business generally; and~~

•		~~the amount of the costs, fees, expenses and charges related to the transaction.~~

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
~~The Company made no unregistered sales of its equity securities or repurchases of its common stock during the quarter ended March 31,~~
The Company made no unregistered sales of its equity securities or repurchases of its common stock during the quarter ended June 30, 2011.

Item 3.
Defaults Upon Senior Securities
None

Item 4.
(Removed and Reserved)
~~None~~
44

Item 5.
Other Information

None

Item 6.
Exhibits
     ~~See Exhibit Index immediately following the signature page hereto.~~
45
~~SIGNATURES~~
          ~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~
~~Green Bankshares, Inc.~~
~~Registrant~~
~~Date: May 16, 2011~~ ~~By:~~   ~~/s/ James E. Adams~~
~~James E. Adams~~
~~Executive~~
See Exhibit Index immediately following the signature page hereto.
50
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Green Bankshares, Inc.
Registrant
Date: August 11, 2011 By:   /s/ Michael J. Fowler
Michael J. Fowler
Senior Vice President, Chief Financial Officer and Secretary
51
EXHIBIT INDEX

46
~~EXHIBIT INDEX~~
Exhibit No. Description

31.1 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 2002
32.2
~~Exhibit No.~~ ~~Description~~
~~10.1~~ ~~Consulting Agreement, dated as of March 18, 2011, by and among Green Bancshares, Inc., GreenBank and James E. Adams.~~
~~10.2~~ Investment Agreement, dated May 5, 2011, among Green Bankshares, Inc., GreenBank and North American Financial Holdings, Inc. — incorporated herein by reference to the Company’s Current Report on Form 8-K filed May 6, 2011.
~~10.3~~ Stock Option Agreement, dated May 5, 2011, between Green Bankshares, Inc. and North American Financial Holdings, Inc. — incorporated herein by reference to the Company’s Current Report on Form 8-K filed May 6, 2011.
~~31.1~~ ~~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 2002
~~32.2~~ ~~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~~


PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements of Green Bankshares, Inc. and its wholly owned subsidiaries are as follows:

Condensed Consolidated Balance Sheets — ~~March 31,~~June 30, 2011 and December 31, 2010	2	2

Condensed Consolidated Statements of Income (Loss) — For the three and six months ended ~~March 31,~~June 30, 2011 and 2010	3	3

Condensed Consolidated Statement of Changes in Shareholders’ Equity — For the ~~three~~six months ended ~~March 31,~~June 30, 2011	4	4

Condensed Consolidated Statements of Cash Flows — For the ~~three~~six months ended ~~March 31,~~June 30, 2011 and 2010	5	5

Notes to Condensed Consolidated Financial Statements	6	6

~~EX-10.1~~Exhibit 31.1
~~EX-31.1~~Exhibit 31.2
~~EX-31.2~~Exhibit 32.1
~~EX-32.1~~
~~EX-32.2~~Exhibit 32.2


	March 31,		December 31,		June 30,		December 31,
	2011		2010		2011		2010
	Commercial		Commercial		Commercial		Commercial
Commercial Credit Exposure
Prime	$	1,418	$	1,236	$	1,421	$	1,236
Desirable		6,098		7,951		4,595		7,951
Satisfactory tier I		31,276		33,859		29,006		33,859
Satisfactory tier II		85,849		91,505		76,894		91,505
Acceptable with care		63,295		72,286		63,420		72,286
Management Watch		8,826		8,511		5,077		8,511
Substandard		11,734		7,579		12,745		7,579
Loss		—		—		—		—

Total		208,496		222,927		193,158		222,927


	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss			Value		Loss			Value		Loss			Value		Loss
March 31, 2011
June 30, 2011
U. S. government agencies	$	66,950	$	(1,031	)	$	—	$	—		$	66,950	$	(1,031	)	$	23,690	$	(282	)	$	—	$	—		$	23,690	$	(282	)
States and political subdivisions		3,798		(58	)		1,749		(213	)		5,547		(271	)		1,425		(162	)		1,754		(230	)		3,179		(392	)
Collateralized mortgage obligations		19,893		(383	)		2,790		(12	)		22,683		(395	)
CMO Agency																	10,372		(166	)		—		—			10,372		(166	)
CMO Non-Agency																	—		—			2,728		(75	)		2,728		(75	)
Mortgage-backed securities		2,986		(27	)		6		(3	)		2,992		(30	)		2,040		(3	)		5		(3	)		2,045		(6	)
Trust preferred securities		—		—			1,690		(160	)		1,690		(160	)		—		—			1,681		(163	)		1,681		(163	)

Total temporarily impaired	$	93,627	$	(1,499	)	$	6,235	$	(388	)	$	99,862	$	(1,887	)	$	37,527	$	(613	)	$	6,168	$	(471	)	$	43,695	$	(1,084	)


December 31, 2010
U. S. government agencies	$	65,178	$	(922	)	$	—	$	—		$	65,178	$	(922	)	$	65,178	$	(922	)	$	—	$	—		$	65,178	$	(922	)
States and political subdivisions		2,488		(114	)		1,659		(282	)		4,147		(396	)		2,488		(114	)		1,659		(282	)		4,147		(396	)
Collateralized mortgage obligations		14,666		(266	)		2,699		(104	)		17,365		(370	)
CMO Agency																	14,666		(265	)		—		—			14,666		(265	)
CMO Non-Agency																	—		—			2,699		(104	)		2,699		(104	)
Mortgage-backed securities		2,821		(17	)		8		(2	)		2,829		(19	)		2,821		(17	)		8		(2	)		2,829		(19	)
Trust preferred securities		—		—			1,663		(186	)		1,663		(186	)		—		—			1,663		(187	)		1,663		(187	)

Total temporarily impaired	$	85,153	$	(1,319	)	$	6,029	$	(574	)	$	91,182	$	(1,893	)	$	85,153	$	(1,318	)	$	6,029	$	(575	)	$	91,182	$	(1,893	)


			Current											Current
			Credit		Book		Fair		Unrealized					Credit	Book		Fair		Unrealized
Description	Cusip#		Rating		Value		Value		Loss			Cusip#		Rating	Value		Value		Loss

Collateralized mortgage obligations
Wells Fargo — 2007 - 4 A21		94985RAW2	Caa2		$	2,802	$	2,790	$	(12	)		94985RAW2	Caa2	$	2,802	$	2,728	$	(74	)

Trust preferred securities
West Tennessee Bancshares, Inc.		956192AA6		N/A		675		638		(37	)		956192AA6	N/A		675		638		(37	)


	First Quarter		First Quarter		Six months		Six months
	2011		2010		ended		ended
					6/30/2011		6/30/2010
Beginning balance of credit losses at January 1, 2011 and 2010	$	1,069	$	976	$	1,069	$	976
Other-than-temporary impairment credit losses		—		—		—		93


Ending balance of cumulative credit losses recognized in earnings	$	1,069	$	976	$	1,069	$	1,069


	Speculative 1-4				Owner		Non-Owner				Speculative 1-4				Owner		Non-Owner
	Family		Construction		Occupied		Occupied		Other		Family		Construction		Occupied		Occupied		Other
Commercial Real Estate Credit Exposure
Prime	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Desirable				1,585		971		173				—		1,585		905		168		—
Satisfactory tier I		2,773		899		29,677		35,754		919		2,535		910		24,776		26,888		654
Satisfactory tier II		13,816		18,949		111,367		155,082		6,664		12,294		19,052		101,512		155,877		6,171
Acceptable with care		60,611		43,092		58,729		185,416		6,850		57,686		42,313		58,237		172,882		6,005
Management Watch		25,855		15,592		8,985		34,028		2,036		24,454		14,637		7,535		35,457		2,024
Substandard		78,764		55,190		19,051		52,929		3,146		73,833		32,509		16,645		32,427		2,984
Loss		—		—		—		—		—		—		—		—		—		—

Total		181,819		135,307		228,780		463,382		19,615		170,802		111,006		209,610		423,699		17,838


					Mortgage –								Mortgage –
	HELOC		Mortgage		Subprime		Other		HELOC		Mortgage		Subprime		Other
Consumer Real Estate Credit Exposure
Pass	$	192,083	$	151,975	$	11,668	$	3,932	$	192,875	$	147,183	$	11,682	$	3,304
Management Watch		1,017		2,042		—				797		2,076		—		—
Substandard		3,695		6,359		50		102		3,055		4,750		—		122

Total		196,795		160,376		11,718		4,034		196,727		154,009		11,682		3,426


			Consumer –		Consumer Auto
As of June 30, 2011	Consumer – Prime		Subprime		– Subprime
Consumer Credit Exposure
Pass	$	32,195	$	13,515	$	19,453
Management Watch		—		—		—
Substandard		225		8		92

Total		32,420		13,523		19,545


	March 31,		December
	2011		31, 2010
					June 30, 2011		December 31, 2010
Commercial real estate:
Speculative 1-4 Family	$	60,024	$	63,298	$	61,521	$	63,298
Construction		38,629		41,789		29,550		41,789
Owner Occupied		14,458		5,511		12,808		5,511
Non-owner Occupied		30,720		18,772		12,747		18,772
Other		192		1,865		1,119		1,865
Residential real estate:
HELOC		2,025		1,668		1,797		1,668
Mortgage-Prime		4,758		3,350		3,355		3,350
Mortgage-Subprime		351		254		275		254
Other		102		957		115		957
Commercial		7,034		5,813		7,754		5,813
Consumer:
Prime		143		130		126		130
Subprime		163		107		167		107
Auto-Subprime		217		193		215		193
Other		—		—		—		—

Total		158,816		143,707		131,549		143,707


			Other		Holding
Three months ended March 31, 2010	Bank		Segments		Company			Eliminations			Totals
Three months ended June 30, 2010													Bank		Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	20,068	$	2,063	$	(472	)	$	—		$	21,659	$	19,859	$	2,103	$	(489	)	$	—		$	21,473
Provision for loan losses		3,356		533		—			—			3,889		4,439		310		—			—			4,749
Noninterest income		7,528		371		14			(227	)		7,686		8,529		417		52			(227	)		8,771
Noninterest expense		19,469		1,115		189			(227	)		20,546		19,948		1,141		412			(227	)		21,274
Income tax expense (benefit)		1,628		309		(223	)		—			1,714		1,287		418		(295	)		—			1,410

Segment profit (loss)		3,143	$	477	$	(424	)	$	—		$	3,196	$	2,714	$	651	$	(554	)	$	—		$	2,811


Segment assets at March 31, 2010	$	2,520,503	$	41,663	$	7,566		$	—		$	2,569,732
Segment assets at June 30, 2010													$	2,477,386	$	42,234	$	9,712		$	—		$	2,529,332


Six months ended June 30, 2011	Bank			Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	35,387		$	4,334	$	(1,003	)	$	—		$	38,718
Provision for loan losses		27,745			484		—			—			28,229
Noninterest income		15,399			857		78			(470	)		15,864
Noninterest expense		45,226			2,427		615			(470	)		47,798
Income tax expense (benefit)		(331	)		900		(569	)		—			—

Segment profit (loss)		(21,854	)	$	1,380	$	(971	)	$	—		$	(21,445	)


Six months ended June 30, 2010	Bank		Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	39,927	$	4,166	$	(961	)	$	—		$	43,132
Provision for loan losses		7,795		843		—			—			8,638
Noninterest income		16,057		788		66			(454	)		16,457
Noninterest expense		39,417		2,256		601			(454	)		41,820
Income tax expense (benefit)		2,915		727		(518	)		—			3,124

Segment profit (loss)		5,857	$	1,128	$	(978	)	$	—		$	6,007


Item 1.		Legal Proceedings ~~On November 18, 2010 a shareholder of the Company filed a putative class action lawsuit (styled~~~~Bill Burgraff v. Green Bankshares, Inc., et al., U.S. District Court, Eastern District of Tennessee, Northeastern Division, Case No. 2:10-cv-00253)~~against the Company and certain of its current and former officers in the United States District Court for the Eastern District of Tennessee in Greeneville, Tennessee on behalf of all persons that acquired shares of the Company’s common stock between January 19, 2010 and November 9, 2010. On January 18, 2011, a separate shareholder of the Company filed a putative class action lawsuit (styled~~Brian Molnar v. Green Bankshares, Inc., et al., U.S. District Court, Eastern District of Tennessee, Northeastern Division, Case No. 2:11-cv-00014~~) against the Company and certain of its current and former officers in the same court on behalf of all persons that acquired shares of the Company’s common stock between January 19, 2010 and October 20, 2010. These lawsuits were filed following, and relate to the drop in value of the Company’s common stock price after, the Company announced its third quarter performance results on October 20, 2010. The Burgraff case also complains of the Company’s decision on November 9, 2010, to suspend payment of certain quarterly cash dividends. 42


Item 1A.		Risk Factors ~~Except as set forth below, there were~~