Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 0-14289
GREEN BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
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Tennessee
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62-1222567 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.) |
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100 North Main Street, Greeneville, Tennessee
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37743-4992 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (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. YES þ NO o
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). YES o
NO o
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.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if you are a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act.) YES o NO þ
As of August 7, 2009, the number of shares outstanding of the issuers common stock was:
13,175,817.
PART I FINANCIAL INFORMATION
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ITEM 1. |
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FINANCIAL STATEMENTS |
The unaudited condensed consolidated financial statements of Green Bankshares, Inc. and its
wholly owned subsidiaries are as follows:
1
GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2009 and December 31, 2008
(Amounts in thousands, except share and per share data)
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(Unaudited) |
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June 30, |
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December 31, |
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2009 |
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2008* |
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ASSETS |
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Cash and due from banks |
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$ |
103,454 |
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$ |
193,095 |
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Federal funds sold |
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4,119 |
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5,263 |
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Cash and cash equivalents |
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107,573 |
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198,358 |
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Securities available for sale |
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167,853 |
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203,562 |
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Securities held to maturity (with a market value of $629 and $601) |
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647 |
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657 |
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Loans held for sale |
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3,634 |
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442 |
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Loans, net of unearned interest |
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2,183,754 |
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2,223,390 |
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Allowance for loan losses |
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(50,157 |
) |
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(48,811 |
) |
Other real estate owned and repossessed assets |
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34,468 |
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45,371 |
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Premises and equipment, net |
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83,448 |
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83,359 |
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FHLB and other stock, at cost |
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12,734 |
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13,030 |
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Cash surrender value of life insurance |
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30,113 |
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29,539 |
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Goodwill |
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143,389 |
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Core deposit and other intangibles |
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10,629 |
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12,085 |
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Other assets |
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45,138 |
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40,300 |
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Total assets |
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$ |
2,629,834 |
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$ |
2,944,671 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Liabilities |
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Non-interest bearing deposits |
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$ |
165,735 |
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$ |
176,685 |
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Interest bearing deposits |
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1,746,895 |
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1,645,115 |
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Brokered deposits |
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114,092 |
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362,347 |
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Total deposits |
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2,026,722 |
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2,184,147 |
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Repurchase agreements |
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25,990 |
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35,302 |
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FHLB advances and notes payable |
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229,154 |
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229,349 |
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Subordinated debentures |
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88,662 |
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88,662 |
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Accrued interest payable and other liabilities |
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26,114 |
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25,980 |
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Total liabilities |
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$ |
2,396,642 |
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$ |
2,563,440 |
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Shareholders equity |
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Preferred stock: no par, 1,000,000 shares authorized, 72,278
shares outstanding |
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$ |
66,041 |
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$ |
65,346 |
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Common stock: $2 par, 20,000,000 shares authorized, 13,175,817
and 13,112,687 shares outstanding |
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26,351 |
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26,225 |
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Common stock warrants |
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6,934 |
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6,934 |
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Additional paid-in capital |
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187,966 |
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187,742 |
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Retained earnings (deficit) |
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(53,918 |
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95,647 |
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Accumulated other comprehensive (loss) |
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(182 |
) |
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(663 |
) |
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Total shareholders equity |
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233,192 |
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381,231 |
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Total liabilities and shareholders equity |
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$ |
2,629,834 |
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$ |
2,944,671 |
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* |
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Derived from the audited consolidated balance sheet, as filed in the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2008. |
See notes to condensed consolidated financial statements.
2
GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 2009 and 2008
(Amounts in thousands, except share and per share data)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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(Unaudited) |
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(Unaudited) |
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Interest income |
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Interest and fees on loans |
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$ |
32,528 |
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$ |
39,407 |
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$ |
65,173 |
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$ |
82,156 |
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Taxable securities |
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1,843 |
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2,784 |
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4,063 |
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5,647 |
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Nontaxable securities |
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314 |
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324 |
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634 |
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657 |
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FHLB and other stock |
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135 |
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157 |
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285 |
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317 |
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Federal funds sold and other |
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36 |
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22 |
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81 |
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26 |
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Total interest income |
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34,856 |
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42,694 |
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70,236 |
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88,803 |
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Interest expense |
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Deposits |
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11,511 |
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13,377 |
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24,164 |
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29,312 |
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Federal funds purchased and repurchase agreements |
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7 |
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700 |
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16 |
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1,792 |
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FHLB advances and notes payable |
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2,469 |
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2,565 |
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4,912 |
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5,743 |
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Subordinated debentures |
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689 |
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1,008 |
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1,535 |
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2,440 |
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Total interest expense |
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14,676 |
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17,650 |
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30,627 |
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39,287 |
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Net interest income |
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20,180 |
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25,044 |
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39,609 |
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49,516 |
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Provision for loan losses |
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24,384 |
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11,019 |
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25,369 |
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11,907 |
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Net interest income (loss) after provision for loan losses |
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(4,204 |
) |
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14,025 |
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14,240 |
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37,609 |
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Non-interest income |
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Service charges on deposit accounts |
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5,795 |
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5,988 |
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11,151 |
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11,455 |
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Other charges and fees |
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505 |
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505 |
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954 |
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|
1,009 |
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Trust and investment services income |
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489 |
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548 |
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|
877 |
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|
834 |
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Mortgage banking income |
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110 |
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293 |
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|
165 |
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|
550 |
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Other income |
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642 |
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|
778 |
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1,337 |
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1,570 |
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Total non-interest income |
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7,541 |
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8,112 |
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14,484 |
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15,418 |
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Non-interest expense |
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Employee compensation |
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8,064 |
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8,069 |
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15,756 |
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16,659 |
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Employee benefits |
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1,229 |
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1,187 |
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2,524 |
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2,446 |
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Occupancy expense |
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1,712 |
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1,649 |
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3,499 |
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3,364 |
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Equipment expense |
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895 |
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|
745 |
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1,637 |
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1,847 |
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Computer hardware/software expense |
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651 |
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|
719 |
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1,288 |
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1,351 |
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Professional services |
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|
446 |
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|
504 |
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|
975 |
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|
958 |
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Advertising |
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|
679 |
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|
814 |
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|
743 |
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|
1,688 |
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Loss on sale of OREO and repossessed assets |
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3,346 |
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|
1,066 |
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3,427 |
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1,080 |
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FDIC Insurance |
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2,550 |
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|
366 |
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3,250 |
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|
763 |
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Core deposit and other intangibles amortization |
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|
652 |
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|
655 |
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|
1,456 |
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|
1,309 |
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Goodwill impairment |
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143,389 |
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143,389 |
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Other expenses |
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5,530 |
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|
4,366 |
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9,030 |
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8,236 |
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Total non-interest expenses |
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169,143 |
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|
20,140 |
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186,974 |
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|
39,701 |
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Income (loss) before income taxes |
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(165,806 |
) |
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|
1,997 |
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(158,250 |
) |
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|
13,326 |
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Provision for income taxes (benefit) |
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(15,656 |
) |
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|
535 |
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(12,880 |
) |
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|
4,686 |
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Net income (loss) |
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$ |
(150,150 |
) |
|
$ |
1,462 |
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$ |
(145,370 |
) |
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$ |
8,640 |
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Preferred stock dividends and accretion of discount |
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1,250 |
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|
2,482 |
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Net income (loss) available to common shareholders |
|
$ |
(151,400 |
) |
|
$ |
1,462 |
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|
$ |
(147,852 |
) |
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$ |
8,640 |
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Per share of common stock: |
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Basic earnings (loss) |
|
$ |
(11.58 |
) |
|
$ |
0.11 |
|
|
$ |
(11.32 |
) |
|
$ |
0.67 |
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|
Diluted earnings (loss) |
|
|
(11.58 |
) |
|
|
0.11 |
|
|
|
(11.32 |
) |
|
|
0.67 |
|
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Dividends |
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|
0.00 |
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|
|
0.13 |
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|
|
0.13 |
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|
|
0.26 |
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Weighted average shares outstanding: |
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Basic |
|
|
13,070,216 |
|
|
|
12,931,669 |
|
|
|
13,066,569 |
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|
12,931,419 |
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Diluted1 |
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13,070,216 |
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|
12,958,439 |
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|
13,066,569 |
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|
12,939,638 |
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1 |
|
Diluted weighted average shares outstanding for the three and six months ended June 30,
2009 excludes 105,734 and 92,420 shares, respectively, because they are anti-dilutive. |
See notes to condensed consolidated financial statements.
3
GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the Six Months Ended June 30, 2009
(Amounts in thousands, except share and per share data)
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Warrants |
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Accumulated |
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For |
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Additional |
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Retained |
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Other |
|
|
Total |
|
|
|
Preferred |
|
|
Common Stock |
|
|
Common |
|
|
Paid-in |
|
|
Earnings |
|
|
Comprehensive |
|
|
Shareholders |
|
|
|
Stock |
|
|
Shares |
|
|
Amount |
|
|
Stock |
|
|
Capital |
|
|
(Deficit) |
|
|
Income(Loss) |
|
|
Equity |
|
Balance, December 31, 2008 |
|
$ |
65,346 |
|
|
|
13,112,687 |
|
|
$ |
26,225 |
|
|
$ |
6,934 |
|
|
$ |
187,742 |
|
|
$ |
95,647 |
|
|
$ |
(663 |
) |
|
$ |
381,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of preferred stock discount |
|
|
695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(695 |
) |
|
|
|
|
|
|
|
|
Preferred stock dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,787 |
) |
|
|
|
|
|
|
(1,787 |
) |
Common stock transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted common shares |
|
|
|
|
|
|
63,130 |
|
|
|
126 |
|
|
|
|
|
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
196 |
|
Restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154 |
|
|
|
|
|
|
|
|
|
|
|
154 |
|
Dividends paid ($.13 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,713 |
) |
|
|
|
|
|
|
(1,713 |
) |
Comprehensive (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(145,370 |
) |
|
|
|
|
|
|
(145,370 |
) |
Change in unrealized gains, net of
reclassification and taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
481 |
|
|
|
481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144,889 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2009 |
|
$ |
66,041 |
|
|
|
13,175,817 |
|
|
$ |
26,351 |
|
|
$ |
6,934 |
|
|
$ |
187,966 |
|
|
$ |
(53,918 |
) |
|
$ |
(182 |
) |
|
$ |
233,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
4
GREEN BANKSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2009 and 2008
(Amounts in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(145,370 |
) |
|
$ |
8,640 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities |
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
25,369 |
|
|
|
11,907 |
|
Impairment of goodwill |
|
|
143,389 |
|
|
|
|
|
Depreciation and amortization |
|
|
3,642 |
|
|
|
3,509 |
|
Security amortization and accretion, net |
|
|
47 |
|
|
|
(548 |
) |
Writedown of investment for impairment |
|
|
524 |
|
|
|
|
|
FHLB stock dividends |
|
|
|
|
|
|
(303 |
) |
Net gain on sale of mortgage loans |
|
|
(99 |
) |
|
|
(388 |
) |
Originations of mortgage loans held for sale |
|
|
(21,582 |
) |
|
|
(33,715 |
) |
Proceeds from sales of mortgage loans |
|
|
18,489 |
|
|
|
33,894 |
|
Increase in cash surrender value of life insurance |
|
|
(574 |
) |
|
|
(536 |
) |
Net losses from sales of fixed assets |
|
|
35 |
|
|
|
386 |
|
Stock-based compensation expense |
|
|
350 |
|
|
|
385 |
|
Net loss (gain) on other real estate and repossessed assets |
|
|
3,427 |
|
|
|
(105 |
) |
Deferred tax expense (benefit) |
|
|
305 |
|
|
|
(1,095 |
) |
Net changes: |
|
|
|
|
|
|
|
|
Other assets |
|
|
(5,453 |
) |
|
|
6,482 |
|
Accrued interest payable and other liabilities |
|
|
(228 |
) |
|
|
(15,748 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
22,271 |
|
|
|
12,765 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of securities available for sale |
|
|
(45,873 |
) |
|
|
(80,644 |
) |
Proceeds from maturities of securities available for sale |
|
|
82,098 |
|
|
|
37,276 |
|
Proceeds from maturities of securities held to maturity |
|
|
10 |
|
|
|
335 |
|
Purchase of FHLB stock |
|
|
|
|
|
|
(417 |
) |
Net change in loans |
|
|
19,980 |
|
|
|
(28,255 |
) |
Proceeds from sale of other real estate |
|
|
3,110 |
|
|
|
11,498 |
|
Improvements to other real estate |
|
|
|
|
|
|
(443 |
) |
Proceeds from sale of fixed assets |
|
|
555 |
|
|
|
50 |
|
Premises and equipment expenditures |
|
|
(2,865 |
) |
|
|
(2,949 |
) |
|
|
|
|
|
|
|
Net cash provided (used) by investing activities |
|
|
57,015 |
|
|
|
(63,549 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net change in core deposits |
|
|
90,830 |
|
|
|
161,219 |
|
Net change in brokered deposits |
|
|
(248,255 |
) |
|
|
112,938 |
|
Net change in repurchase agreements |
|
|
(9,312 |
) |
|
|
(102,884 |
) |
Proceeds from FHLB advances and notes payable |
|
|
|
|
|
|
20,916 |
|
Repayments of FHLB advances and notes payable |
|
|
(195 |
) |
|
|
(109,597 |
) |
Preferred stock dividends paid |
|
|
(1,426 |
) |
|
|
|
|
Common stock dividends paid |
|
|
(1,713 |
) |
|
|
(3,380 |
) |
Proceeds from issuance of common stock |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities |
|
|
(170,071 |
) |
|
|
79,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
(90,785 |
) |
|
|
28,442 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
198,358 |
|
|
|
65,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
107,573 |
|
|
$ |
94,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures cash and noncash |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
33,944 |
|
|
$ |
42,901 |
|
Income taxes paid |
|
|
1,675 |
|
|
|
5,250 |
|
Loans converted to other real estate |
|
|
34,193 |
|
|
|
26,901 |
|
Unrealized gain (loss) on available for sale securities, net of tax |
|
|
481 |
|
|
|
(1,709 |
) |
See notes to condensed consolidated financial statements.
5
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
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 June 30,
2009 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2009. For further information, refer to the consolidated financial statements and
notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31,
2008. Certain amounts from prior period financial statements have been reclassified to conform to
the current years presentation.
NOTE 2 SECURITIES
Securities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies |
|
$ |
36,860 |
|
|
$ |
242 |
|
|
$ |
(279 |
) |
|
$ |
36,823 |
|
Obligations of states and political
Subdivisions |
|
|
32,167 |
|
|
|
301 |
|
|
|
(789 |
) |
|
|
31,679 |
|
Mortgage-backed |
|
|
96,477 |
|
|
|
2,191 |
|
|
|
(1,143 |
) |
|
|
97,525 |
|
Trust preferred securities |
|
|
2,648 |
|
|
|
|
|
|
|
(822 |
) |
|
|
1,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
168,152 |
|
|
$ |
2,734 |
|
|
$ |
(3,033 |
) |
|
$ |
167,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies |
|
$ |
98,143 |
|
|
$ |
685 |
|
|
$ |
(22 |
) |
|
$ |
98,806 |
|
Obligations of states and political
Subdivisions |
|
|
32,641 |
|
|
|
139 |
|
|
|
(976 |
) |
|
|
31,804 |
|
Mortgage-backed |
|
|
70,915 |
|
|
|
945 |
|
|
|
(1,401 |
) |
|
|
70,459 |
|
Trust preferred securities |
|
|
2,954 |
|
|
|
|
|
|
|
(461 |
) |
|
|
2,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
204,653 |
|
|
$ |
1,769 |
|
|
$ |
(2,860 |
) |
|
$ |
203,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political
subdivisions |
|
$ |
395 |
|
|
$ |
8 |
|
|
$ |
|
|
|
$ |
403 |
|
Other securities |
|
|
252 |
|
|
|
|
|
|
|
(26 |
) |
|
|
226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
647 |
|
|
$ |
8 |
|
|
$ |
(26 |
) |
|
$ |
629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political
subdivisions |
|
$ |
404 |
|
|
$ |
7 |
|
|
$ |
|
|
|
$ |
411 |
|
Other securities |
|
|
253 |
|
|
|
|
|
|
|
(63 |
) |
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
657 |
|
|
$ |
7 |
|
|
$ |
(63 |
) |
|
$ |
601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
6
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 2 SECURITIES (Continued)
Contractual maturities of securities at June 30, 2009 are shown below. Securities not due at a
single maturity date, collateralized mortgage obligations and mortgage-backed securities are shown
separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale |
|
|
Held to Maturity |
|
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
Value |
|
|
Amount |
|
|
Value |
|
Due in one year or less |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Due after one year through five years |
|
|
2,882 |
|
|
|
647 |
|
|
|
629 |
|
Due after five years through ten years |
|
|
32,768 |
|
|
|
|
|
|
|
|
|
Due after ten years |
|
|
34,678 |
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations |
|
|
81,577 |
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
15,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total maturities |
|
$ |
167,853 |
|
|
$ |
647 |
|
|
$ |
629 |
|
|
|
|
|
|
|
|
|
|
|
There were no gross gains or (losses) for the three and six month periods ended June 30, 2009,
respectively, compared to no gain or loss and $23 of loss for the three and six months ended June
30, 2008, respectively, from the sale of securities available for sale and held to maturity.
Securities with a carrying value of $135,741 and $181,683 at June 30, 2009 and December 31, 2008,
respectively, were pledged for public deposits and securities sold under agreements to repurchase
and to the Federal Reserve Bank.
Securities with unrealized losses at June 30, 2009 and December 31, 2008 not recognized in income
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
Value |
|
|
Loss |
|
|
Value |
|
|
Loss |
|
|
Value |
|
|
Loss |
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. government agencies |
|
$ |
11,709 |
|
|
$ |
(279 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
11,709 |
|
|
$ |
(279 |
) |
Obligations of states and
political subdivisions |
|
|
10,852 |
|
|
|
(312 |
) |
|
|
3,356 |
|
|
|
(477 |
) |
|
|
14,208 |
|
|
|
(789 |
) |
Other securities |
|
|
1,145 |
|
|
|
(20 |
) |
|
|
907 |
|
|
|
(828 |
) |
|
|
2,052 |
|
|
|
(848 |
) |
Collateralized mortgage
obligations |
|
|
3,600 |
|
|
|
(24 |
) |
|
|
3,076 |
|
|
|
(1,060 |
) |
|
|
6,676 |
|
|
|
(1,084 |
) |
Mortgage-backed securities |
|
|
9,245 |
|
|
|
(54 |
) |
|
|
631 |
|
|
|
(5 |
) |
|
|
9,876 |
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
$ |
36,551 |
|
|
$ |
(689 |
) |
|
$ |
7,970 |
|
|
$ |
(2,370 |
) |
|
$ |
44,521 |
|
|
$ |
(3,059 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. government agencies |
|
$ |
977 |
|
|
$ |
(22 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
977 |
|
|
$ |
(22 |
) |
Obligations of states and
political subdivisions |
|
|
18,445 |
|
|
|
(838 |
) |
|
|
643 |
|
|
|
(139 |
) |
|
|
19,088 |
|
|
|
(977 |
) |
Other securities |
|
|
1,210 |
|
|
|
(14 |
) |
|
|
1,474 |
|
|
|
(509 |
) |
|
|
2,684 |
|
|
|
(523 |
) |
Collateralized mortgage
obligations |
|
|
8,721 |
|
|
|
(1,310 |
) |
|
|
|
|
|
|
|
|
|
|
8,721 |
|
|
|
(1,310 |
) |
Mortgage-backed securities |
|
|
640 |
|
|
|
(24 |
) |
|
|
1,446 |
|
|
|
(67 |
) |
|
|
2,086 |
|
|
|
(91 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired |
|
$ |
29,993 |
|
|
$ |
(2,208 |
) |
|
$ |
3,563 |
|
|
$ |
(715 |
) |
|
$ |
33,556 |
|
|
$ |
(2,923 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
7
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 2 SECURITIES (Continued)
Securities in a loss position are evaluated for other-than-temporary impairment, considering such
factors as the length of time and the extent to which the market value has been below cost, the
credit standing of the issuer, and the Companys ability and intent to hold the security until its
market value recovers. The Company held 55 and 61 securities with an unrealized loss position as
of June 30, 2009 and December 31, 2008, respectively. Management does not believe any remaining
individual unrealized loss represented other-than-temporary impairment as of June 30, 2009 or
December 31, 2008. During the six months ended June 30, 2009 the Company recognized a write-down of
$524, representing other-than-temporary impairment, related to equity and non-pooled trust
preferred securities.
NOTE 3 LOANS
Loans at June 30, 2009 and December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Commercial real estate |
|
$ |
1,409,007 |
|
|
$ |
1,430,425 |
|
Residential real estate |
|
|
400,207 |
|
|
|
397,922 |
|
Commercial |
|
|
300,325 |
|
|
|
315,099 |
|
Consumer |
|
|
86,491 |
|
|
|
89,733 |
|
Other |
|
|
2,933 |
|
|
|
4,656 |
|
Unearned income |
|
|
(15,209 |
) |
|
|
(14,245 |
) |
|
|
|
|
|
|
|
Loans, net of unearned income |
|
$ |
2,183,754 |
|
|
$ |
2,223,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
(50,157 |
) |
|
$ |
(48,811 |
) |
|
|
|
|
|
|
|
Transactions in the allowance for loan losses and certain information about nonaccrual loans and
loans 90 days past due but still accruing interest for the six months ended June 30, 2009 and
twelve months ended December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Balance at beginning of year |
|
$ |
48,811 |
|
|
$ |
34,111 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
25,369 |
|
|
|
52,810 |
|
Loans charged off |
|
|
(28,367 |
) |
|
|
(41,269 |
) |
Recoveries of loans charged off |
|
|
4,344 |
|
|
|
3,159 |
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
50,157 |
|
|
$ |
48,811 |
|
|
|
|
|
|
|
|
(Continued)
8
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 3 LOANS (Continued)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Impaired loans were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with no allowance allocated |
|
$ |
94,746 |
|
|
$ |
29,602 |
|
Loans with allowance allocated |
|
|
27,256 |
|
|
|
17,613 |
|
Amount of allowance allocated |
|
|
5,519 |
|
|
|
2,651 |
|
|
|
|
|
|
|
|
|
|
Nonperforming loans were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans past due 90 days still on accrual |
|
$ |
820 |
|
|
$ |
509 |
|
Nonaccrual loans |
|
|
93,889 |
|
|
|
30,926 |
|
|
|
|
|
|
|
|
Total |
|
$ |
94,709 |
|
|
$ |
31,435 |
|
|
|
|
|
|
|
|
(Continued)
9
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 4 EARNINGS PER SHARE OF COMMON STOCK
Basic earnings or loss per share (EPS) of common stock is computed by dividing net income (loss)
available to common shareholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share of common stock is computed by dividing net income (loss)
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 June 30, 2009, 1,059,947 options and warrants are
excluded from the effect of dilutive securities because they are anti-dilutive; 408,127 options are
similarly excluded from the effect of dilutive securities for the three and six months ended June
30, 2008.
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 June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
Basic Earnings (Loss) Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(150,150 |
) |
|
$ |
1,462 |
|
Less: preferred stock dividends and accretion of discount on warrants |
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
(151,400 |
) |
|
$ |
1,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
13,070,216 |
|
|
|
12,931,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
(11.58 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(150,150 |
) |
|
$ |
1,462 |
|
Less: preferred stock dividends and accretion of discount on warrants |
|
|
1,250 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
(151,400 |
) |
|
$ |
1,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
13,070,216 |
|
|
|
12,931,669 |
|
|
|
|
|
|
|
|
|
|
Add: Dilutive effects of assumed conversions of restricted stock and
exercises of stock options and warrants1 |
|
|
|
|
|
|
26,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and dilutive potential common shares
outstanding |
|
|
13,070,216 |
|
|
|
12,958,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share1 |
|
$ |
(11.58 |
) |
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Diluted earnings (loss) per share for the three months ended June 30, 2009 is calculated by using
the weighted average common shares outstanding, instead of the diluted weighted average shares outstanding
because they are anti-dilutive. |
(Continued)
10
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 4 EARNINGS PER SHARE OF COMMON STOCK (Continued)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
Basic Earnings (Loss) Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(145,370 |
) |
|
$ |
8,640 |
|
Less: preferred stock dividends and accretion of
discount on warrants |
|
|
2,482 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
(147,852 |
) |
|
$ |
8,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
13,066,569 |
|
|
|
12,931,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
(11.32 |
) |
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings (Loss) Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(145,370 |
) |
|
$ |
8,640 |
|
Less: preferred stock dividends and accretion of
discount on warrants |
|
|
2,482 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
(147,852 |
) |
|
$ |
8,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
13,066,569 |
|
|
|
12,931,419 |
|
|
|
|
|
|
|
|
|
|
Add: Dilutive effects of assumed conversions of
restricted stock and exercises of stock options and
warrants1 |
|
|
|
|
|
|
8,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and dilutive potential common
shares outstanding |
|
|
13,066,569 |
|
|
|
12,939,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share1 |
|
$ |
(11.32 |
) |
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Diluted earnings (loss) per share for the six months ended June 30, 2009 is calculated
by using the weighted average common shares outstanding, instead of the diluted weighted average
shares outstanding because they are anti-dilutive. |
(Continued)
11
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 5 SEGMENT INFORMATION
The Companys 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2009 |
|
Bank |
|
|
Other Segments |
|
|
Holding Company |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
$ |
18,683 |
|
|
$ |
2,185 |
|
|
$ |
(688 |
) |
|
$ |
|
|
|
$ |
20,180 |
|
Provision for loan losses |
|
|
23,645 |
|
|
|
739 |
|
|
|
|
|
|
|
|
|
|
|
24,384 |
|
Noninterest income |
|
|
7,204 |
|
|
|
540 |
|
|
|
24 |
|
|
|
(227 |
) |
|
|
7,541 |
|
Noninterest expense |
|
|
167,643 |
|
|
|
1,232 |
|
|
|
495 |
|
|
|
(227 |
) |
|
|
169,143 |
|
Income tax expense (benefit) |
|
|
(15,526 |
) |
|
|
298 |
|
|
|
(428 |
) |
|
|
|
|
|
|
(15,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
$ |
(149,875 |
) |
|
$ |
456 |
|
|
$ |
(731 |
) |
|
$ |
|
|
|
$ |
(150,150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets at June 30, 2009 |
|
$ |
2,577,886 |
|
|
$ |
42,282 |
|
|
$ |
9,666 |
|
|
$ |
|
|
|
$ |
2,629,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2008 |
|
Bank |
|
|
Other Segments |
|
|
Holding Company |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
$ |
24,078 |
|
|
$ |
1,974 |
|
|
$ |
(1,008 |
) |
|
$ |
|
|
|
$ |
25,044 |
|
Provision for loan losses |
|
|
10,502 |
|
|
|
517 |
|
|
|
|
|
|
|
|
|
|
|
11,019 |
|
Noninterest income |
|
|
7,730 |
|
|
|
566 |
|
|
|
30 |
|
|
|
(214 |
) |
|
|
8,112 |
|
Noninterest expense |
|
|
18,553 |
|
|
|
1,256 |
|
|
|
545 |
|
|
|
(214 |
) |
|
|
20,140 |
|
Income tax expense (benefit) |
|
|
815 |
|
|
|
301 |
|
|
|
(581 |
) |
|
|
|
|
|
|
535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
$ |
1,938 |
|
|
$ |
466 |
|
|
$ |
(942 |
) |
|
$ |
|
|
|
$ |
1,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets at June 30, 2008 |
|
$ |
2,969,897 |
|
|
$ |
39,778 |
|
|
$ |
8,861 |
|
|
$ |
|
|
|
$ |
3,018,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2009 |
|
Bank |
|
|
Other Segments |
|
|
Holding Company |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
$ |
36,893 |
|
|
$ |
4,251 |
|
|
$ |
(1,535 |
) |
|
$ |
|
|
|
$ |
39,609 |
|
Provision for loan losses |
|
|
23,986 |
|
|
|
1,383 |
|
|
|
|
|
|
|
|
|
|
|
25,369 |
|
Noninterest income |
|
|
13,801 |
|
|
|
989 |
|
|
|
149 |
|
|
|
(455 |
) |
|
|
14,484 |
|
Noninterest expense |
|
|
183,885 |
|
|
|
2,471 |
|
|
|
1,073 |
|
|
|
(455 |
) |
|
|
186,974 |
|
Income tax expense (benefit) |
|
|
(12,510 |
) |
|
|
545 |
|
|
|
(915 |
) |
|
|
|
|
|
|
(12,880 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
$ |
(144,667 |
) |
|
$ |
841 |
|
|
$ |
(1,544 |
) |
|
$ |
|
|
|
$ |
(145,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2008 |
|
Bank |
|
|
Other Segments |
|
|
Holding Company |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
$ |
48,148 |
|
|
$ |
3,808 |
|
|
$ |
(2,440 |
) |
|
$ |
|
|
|
$ |
49,516 |
|
Provision for loan losses |
|
|
10,916 |
|
|
|
991 |
|
|
|
|
|
|
|
|
|
|
|
11,907 |
|
Noninterest income |
|
|
14,604 |
|
|
|
1,064 |
|
|
|
177 |
|
|
|
(427 |
) |
|
|
15,418 |
|
Noninterest expense |
|
|
36,559 |
|
|
|
2,549 |
|
|
|
1,020 |
|
|
|
(427 |
) |
|
|
39,701 |
|
Income tax expense (benefit) |
|
|
5,446 |
|
|
|
522 |
|
|
|
(1,282 |
) |
|
|
|
|
|
|
4,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
$ |
9,831 |
|
|
$ |
810 |
|
|
$ |
(2,001 |
) |
|
$ |
|
|
|
$ |
8,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
12
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
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 June 30, 2009 |
|
Bank |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as percentage of total loans, net of unearned income |
|
|
4.33 |
% |
|
|
1.89 |
% |
|
|
4.34 |
% |
Nonperforming assets as a percentage of total assets |
|
|
4.88 |
% |
|
|
2.00 |
% |
|
|
4.91 |
% |
Allowance for loan losses as a percentage of total loans, net of
unearned income |
|
|
2.15 |
% |
|
|
8.11 |
% |
|
|
2.30 |
% |
Allowance for loan losses as a percentage of nonperforming loans |
|
|
49.70 |
% |
|
|
428.99 |
% |
|
|
52.96 |
% |
YTD net charge-offs to average total loans, net of unearned income |
|
|
1.04 |
% |
|
|
2.71 |
% |
|
|
1.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the period ended June 30, 2008 |
|
Bank |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as percentage of total loans, net of unearned income |
|
|
1.71 |
% |
|
|
1.51 |
% |
|
|
1.73 |
% |
Nonperforming assets as a percentage of total assets |
|
|
2.00 |
% |
|
|
2.13 |
% |
|
|
2.03 |
% |
Allowance for loan losses as a percentage of total loans, net of
unearned income |
|
|
1.37 |
% |
|
|
8.02 |
% |
|
|
1.51 |
% |
Allowance for loan losses as a percentage of nonperforming loans |
|
|
80.34 |
% |
|
|
530.82 |
% |
|
|
87.11 |
% |
YTD net charge-offs to average total loans, net of unearned income |
|
|
0.42 |
% |
|
|
2.04 |
% |
|
|
0.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31, 2008 |
|
Bank |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans as percentage of total loans, net of unearned income |
|
|
1.38 |
% |
|
|
2.48 |
% |
|
|
1.41 |
% |
Nonperforming assets as a percentage of total assets |
|
|
2.58 |
% |
|
|
2.57 |
% |
|
|
2.61 |
% |
Allowance for loan losses as a percentage of total loans, net of
unearned income |
|
|
2.06 |
% |
|
|
8.27 |
% |
|
|
2.20 |
% |
Allowance for loan losses as a percentage of nonperforming loans |
|
|
149.59 |
% |
|
|
333.81 |
% |
|
|
155.28 |
% |
Net charge-offs to average total loans, net of unearned income |
|
|
1.53 |
% |
|
|
6.42 |
% |
|
|
1.63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
Bank |
|
|
Other |
|
|
Total |
|
|
|
For the six month period ended June 30, 2009 |
|
$ |
22,893 |
|
|
$ |
1,130 |
|
|
$ |
24,023 |
|
For the six month period ended June 30, 2008 |
|
$ |
9,865 |
|
|
$ |
802 |
|
|
$ |
10,667 |
|
For the year ended December 31, 2008 |
|
$ |
35,564 |
|
|
$ |
2,546 |
|
|
$ |
38,110 |
|
(Continued)
13
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
Unaudited
(Amounts in thousands, except share and per share data)
NOTE 6 FAIR VALUE DISCLOSURES
Statement of Financial Accounting Standards (SFAS) No. 157 defines fair value 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. SFAS No. 157 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 securitys 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)
14
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
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 SFAS No. 114, Accounting by Creditors
for Impairment of a Loan (SFAS 114). 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 June 30, 2009, 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 SFAS No. 157, 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 the lower of cost or 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.
Loan Servicing Rights
Loan servicing rights are subject to impairment testing. A valuation model, which utilizes a
discounted cash flow analysis using interest rates and prepayment speed assumptions currently
quoted for comparable instruments and a discount rate determined by management, is used in the
completion of impairment testing. If the valuation model reflects a value less than the carrying
value, loan servicing rights are adjusted to fair value through a valuation allowance as determined
by the model. As such, the Company classifies loan servicing rights subjected to nonrecurring fair
value adjustments as Level 3.
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of |
|
|
Assets/Liabilities |
|
|
|
Fair Value Measurement Using |
|
|
Financial |
|
|
Measured at Fair |
|
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Position |
|
|
Value |
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale |
|
$ |
|
|
|
$ |
167,853 |
|
|
$ |
|
|
|
$ |
167,853 |
|
|
$ |
167,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale |
|
$ |
|
|
|
$ |
203,562 |
|
|
$ |
|
|
|
$ |
203,562 |
|
|
$ |
203,562 |
|
(Continued)
15
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
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 Nonrecurring Basis
The Company may be required, from time to time, to measure certain assets at fair value on a
nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of
cost or market that were recognized at fair value below cost at the end of the period. Assets
measured at fair value on a nonrecurring basis are included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of |
|
|
Assets/Liabilities |
|
|
|
Fair Value Measurement Using |
|
|
Financial |
|
|
Measured at Fair |
|
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Position |
|
|
Value |
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate |
|
$ |
|
|
|
$ |
|
|
|
$ |
12,511 |
|
|
$ |
12,511 |
|
|
$ |
12,511 |
|
Impaired loans |
|
|
|
|
|
|
|
|
|
|
21,737 |
|
|
|
21,737 |
|
|
|
21,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
34,248 |
|
|
$ |
34,248 |
|
|
$ |
34,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
|
|
|
|
|
|
|
|
|
43,364 |
|
|
|
43,364 |
|
|
|
43,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
43,364 |
|
|
$ |
43,364 |
|
|
$ |
43,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued)
16
GREEN BANKSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
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 Companys financial instruments are as follows
at June 30, 2009 and December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
Value |
|
|
Value |
|
|
Value |
|
|
Value |
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
107,573 |
|
|
$ |
107,573 |
|
|
$ |
198,358 |
|
|
$ |
198,358 |
|
Securities available for sale |
|
|
167,853 |
|
|
|
167,853 |
|
|
|
203,562 |
|
|
|
203,562 |
|
Securities held to maturity |
|
|
647 |
|
|
|
629 |
|
|
|
657 |
|
|
|
601 |
|
Loans held for sale |
|
|
3,634 |
|
|
|
3,649 |
|
|
|
442 |
|
|
|
445 |
|
Loans, net |
|
|
2,133,597 |
|
|
|
2,088,545 |
|
|
|
2,174,579 |
|
|
|
2,135,732 |
|
FHLB, Bankers Bank and other stock |
|
|
12,734 |
|
|
|
12,734 |
|
|
|
13,030 |
|
|
|
13,030 |
|
Cash surrender value of life insurance |
|
|
30,113 |
|
|
|
30,113 |
|
|
|
29,539 |
|
|
|
29,539 |
|
Accrued interest receivable |
|
|
9,075 |
|
|
|
9,075 |
|
|
|
10,808 |
|
|
|
10,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit accounts |
|
$ |
2,026,722 |
|
|
$ |
2,035,351 |
|
|
$ |
2,184,147 |
|
|
$ |
2,195,459 |
|
Federal funds purchased and repurchase
agreements |
|
|
25,990 |
|
|
|
25,990 |
|
|
|
35,302 |
|
|
|
35,302 |
|
FHLB Advances and notes payable |
|
|
229,154 |
|
|
|
236,048 |
|
|
|
229,349 |
|
|
|
232,731 |
|
Subordinated debentures |
|
|
88,662 |
|
|
|
70,976 |
|
|
|
88,662 |
|
|
|
74,570 |
|
Accrued interest payable |
|
|
3,511 |
|
|
|
3,511 |
|
|
|
6,828 |
|
|
|
6,828 |
|
The following methods and assumptions were used to estimate the fair values for financial
instruments that are not disclosed under SFAS No. 157. The carrying amount is considered to
estimate fair value for cash and short-term instruments, demand deposits, liabilities for
repurchase agreements, variable rate loans or deposits that reprice frequently and fully, and
accrued interest receivable and payable. For fixed rate loans or deposits and for variable rate
loans or deposits with infrequent repricing or repricing limits, the fair value is estimated by
discounted cash flow analysis using current market rates for the estimated life and credit risk.
Liabilities for FHLB advances and notes payable are estimated using rates of debt with similar
terms and remaining maturities. The fair value of off-balance sheet items is based on the current
fees or costs that would be charged to enter into or terminate such arrangements, which is not
material. The fair value of commitments to sell loans is based on the difference between the
interest rates at which the loans have been committed to sell and the quoted secondary market price
for similar loans, which is not material.
NOTE 7 SUBSEQUENT EVENTS
Management evaluated subsequent events through August 7, 2009, the date the financial statements
were available to be issued. Material events or transactions occurring after June 30, 2009 but
prior to August 7, 2009 that provided additional evidence about conditions that existed at June 30,
2009 have been recognized in the financial statements for the period ended June 30, 2009. Events
or transactions that provided evidence about conditions that did not exist at June 30, 2009 but
arose before the financial statements were available to be issued have not been recognized in the
financial statements for the period ended June 30, 2009.
(Continued)
17
|
|
|
ITEM 2. |
|
MANAGEMENTS 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 Companys 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 Companys Annual Report on Form 10-K for the year
ended December 31, 2008 (the 2008 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 2008 10-K in Part I, Item 1A thereof, which is
incorporated herein by this reference and (1) deterioration in the financial condition of borrowers
resulting in significant increases in loan losses and provisions for those losses; (2) continuation
of the historically low short-term interest rate environment; (3) changes in loan underwriting,
credit review or loss reserve policies associated with economic conditions, examination
conclusions, or regulatory developments; (4) increased competition with other financial
institutions in the markets that the Bank serves; (5) greater than anticipated deterioration or
lack of sustained growth in the national or local economies; (6) rapid fluctuations or
unanticipated changes in interest rates; (7) the impact of governmental restrictions on entities
participating in the Capital Purchase Program of the United States Department of the Treasury; (8)
changes in state and federal legislation, regulations or policies applicable to banks or other
financial service providers, including regulatory or legislative developments arising out of
current unsettled conditions in the economy and (9) the loss of key personnel, as well as other
factors discussed throughout this document, including, without limitation the factors described
under Critical Accounting Policies and Estimates on page 21 of this Quarterly Report on Form
10-Q, or from time to time, in the Companys 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 documents date. All forward-looking
statements included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety
by the cautionary statements in this section and to the more detailed risk factors included in the
Companys 2008 10-K. The Company has no obligation and does not intend to publicly update or
revise any forward-looking statements contained in or incorporated by reference into this Quarterly
Report on Form 10-Q, to reflect events or circumstances occurring after the date of this document
or to reflect the occurrence of unanticipated events. Readers are advised, however, to consult any
further disclosures the Company may make on related subjects in its documents filed with or
furnished to the SEC or in its other public disclosures.
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
June 30, 2009 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.
18
On December 23, 2008, we entered into a Securities Purchase Agreement Standard Terms with
the U.S. Department of Treasury ( the Treasury), pursuant to which we agreed to issue and sell,
and the Treasury agreed to purchase, (i) 72,278 shares of our Fixed Rate Cumulative Perpetual
Preferred Stock, Series A, having a liquidation preference of $1,000 per share, and (ii) a ten year
warrant to purchase up to 635,504 shares of our common stock, $2.00 par value, at an initial
exercise price of $17.06 per share. The warrant was immediately exercisable upon its issuance and
will expire on December 23, 2018.
Growth and Business Strategy
The Company expects that over the short term, given the current economic environment,
there will be little to no growth until this recessionary environment stabilizes and the economy
begins to improve.
The Companys long-term strategic plan outlines geographic expansion within a 300-mile radius
of its headquarters in Greene County, Tennessee. This could result in the Company expanding
westward and eastward up to and including Nashville, Tennessee and Roanoke, Virginia, respectively,
east/southeast up to and including the Piedmont area of North Carolina and western North Carolina,
southward to northern Georgia and northward into eastern and central Kentucky. In particular, the
Company believes the markets in and around Knoxville, Nashville and Chattanooga, Tennessee are
highly desirable areas with respect to expansion and growth plans.
The Bank had historically operated under a single bank charter while conducting business under
18 bank brands with a distinct community-based brand in almost every market. On March 31, 2007 the
Bank announced that it had changed all brand names to GreenBank throughout all the communities it
serves to better enhance recognition and customer convenience. The Bank continues to offer local
decision making through the presence of its regional executives in each of its markets, while
maintaining a cost effective organizational structure in its back office and support areas.
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. 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 Companys business model, which is summarized in the paragraphs above and
the Companys 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.
19
Overview
The Companys results of operations for the three and six month periods ended June 30, 2009,
before dividend and related costs associated with the issuance of Preferred Stock to the U.S.
Treasury, were negatively impacted by a non-cash pre-tax goodwill impairment charge of $143.4
million resulting in a net loss of $150.2 million and $145.4 million respectively. The net loss
applicable to common shareholders totaled $151.4 million for the second quarter of 2009 and $147.9
million for the six months ended June 30, 2009. The non-cash goodwill impairment charge had no
impact on the Companys regulatory capital ratios or its tangible common equity to tangible assets
ratio (Tangible common equity is total stockholders equity minus preferred stock and intangible
assets. Tangible assets are total assets minus intangible assets.) At year-end the Company obtained
an independent evaluation of goodwill based upon a discounted present value analysis of cash flows.
The results obtained at that time, compared with the market price of the stock at year-end,
indicated that there was no goodwill impairment. During the latter part of the first quarter of
2009, the Companys stock price began to decline and by the end of the quarter the stock price was
trading relatively close to tangible book value. In the Companys 2009 first quarter Form
10-Q, the Company indicated that it would monitor this situation closely and if this condition
were deemed to be other than a temporary aberration in the market, it would re-evaluate goodwill
for impairment. During the second quarter of 2009, the Companys stock price declined from a high
of $9.73 per share to a low of $4.14 per share, closing on June 30, 2009 at $4.48 per share. From
the end of June 2009 we consistently observed the price of the Companys stock trading in the mid
$3.00 per share range. During this period of time there were no positive, or negative, reports
issued on or by the Company which would have influenced the stock price performance witnessed.
However, short sale activity in the Companys stock continued to escalate and totaled 2,510,519
shares by June 30, 2009 or 19.1% of outstanding shares. During the latter part of the second
quarter, the Company performed an interim impairment valuation analysis on its intangible assets
and placed more emphasis on the trading value of the Companys stock due to the steep market price
decline and the duration of time its stock was trading below both book value and tangible book
value. As previously mentioned in our annual report on Form 10-K, our annual evaluation performed
at year-end 2008 placed more emphasis on a discounted cash flow model. As a result of the continued
and prolonged decline in the second quarter of the Companys stock price, compared with the
tangible common book value of $11.88 per share at June 30, 2009, the non-cash goodwill impairment
charge was deemed appropriate. The table below is provided to better facilitate an understanding of
the earnings fundamentals of the Company and is incorporated in the discussion that follows:
GREEN BANKSHARES, INC.
Reconciliation of Non-GAAP Measures
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Total non-interest expense |
|
$ |
169,143 |
|
|
$ |
20,140 |
|
|
$ |
186,974 |
|
|
$ |
39,701 |
|
Goodwill impairment charge |
|
|
(143,389 |
) |
|
|
|
|
|
|
(143,389 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
$ |
25,754 |
|
|
$ |
20,140 |
|
|
$ |
43,585 |
|
|
$ |
39,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available
to common shareholders |
|
$ |
(151,400 |
) |
|
$ |
1,462 |
|
|
$ |
(147,852 |
) |
|
$ |
8,640 |
|
Goodwill impairment charge,
net of tax |
|
|
137,414 |
|
|
|
|
|
|
|
137,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) |
|
$ |
(13,986 |
) |
|
$ |
1,462 |
|
|
$ |
(10,438 |
) |
|
$ |
8,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Diluted Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available
to
common shareholders |
|
$ |
(11.58 |
) |
|
$ |
0.11 |
|
|
$ |
(11.32 |
) |
|
$ |
0.67 |
|
Goodwill impairment charge,
net of tax |
|
|
10.51 |
|
|
|
|
|
|
|
10.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) |
|
$ |
(1.07 |
) |
|
$ |
0.11 |
|
|
$ |
(0.80 |
) |
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company believes that the exclusion of goodwill impairment in expressing net operating
income (loss), operating expenses and earnings (loss) per share data provides a more meaningful
base for period to period comparisons which will assist the reader in analyzing the operating
results of the Company and predicting operating performance. The Company utilizes these non-GAAP
financial measures to compare the operating performance with comparable periods in prior years and
with internally prepared projections.
For the second quarter of 2009, the net loss available to common shareholders, including the
goodwill impairment charge, was $151,400 compared with net income of $1,462 in the same period a
year ago. The net operating loss (as defined above), excluding the goodwill impairment charge, was
$13,986 for the second quarter of 2009 versus net income of $1,462 for the second quarter of 2008.
Both the second quarter 2009 net operating loss of $13,986 and the year-to-date net operating
loss of $10,438 were primarily the result of a higher loan loss provision driven by an increase in
net loan charge-offs and an increase in non-performing assets, coupled with increased losses on
other real estate plus the special deposit insurance assessment levied against all banks during the
current quarter by the FDIC. The net operating loss continued to reflect the deepening recessionary
environment during the second quarter and its impact on the Companys customer base. At June 30,
2009 the Companys non-performing assets totaled $129,177 compared with
$121,272 at the end of the first quarter of 2009 and $61,212 at June 30, 2008. Net loan
charge-offs during the current quarter were $23,281 compared with $9,595 for the second quarter of
2008. At the end of the current quarter, the Companys loan loss reserve coverage to total loans
was 2.30% compared with 1.51% at the end of the same period a year ago.
20
The Company reported a net operating loss of $13,986 for the second quarter of 2009 compared
with net operating income of $1,462 for the same period a year ago. The decline from 2008 was
primarily the result of a lower level of net interest income, a higher loan loss provision and
increased operating expenses.
On a year-to-date basis, the Company reported a net operating loss of $10,438 through the
second quarter of 2009 compared with net operating income of $8,640 in the same period last year.
The principal reasons for the year-to-date decline in net operating income from 2008 paralleled the
decline in quarterly earnings.
At June 30, 2009, the Company had total consolidated assets of $2,629,834, total consolidated
deposits of $2,026,722, total consolidated loans, net of unearned income, of $2,183,754 and total
consolidated shareholders equity of $233,192.
Critical Accounting Policies and Estimates
The Companys 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 Companys accounting policies and estimates it uses to
prepare the consolidated financial statements. In general, managements 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.
Based on managements calculation, an allowance of $50,157, or 2.30% of total loans, net of
unearned income, was an adequate estimate of losses inherent in the loan portfolio as of June 30,
2009. This estimate resulted in a provision for loan losses in the income statement of $24,384 and
$25,369, respectively, for the three and six months ended June 30, 2009. If the economic
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 consolidated financial statements include certain accounting disclosures that require
management to make estimates about fair values. Independent third party valuations are used for
securities available for sale and securities held to maturity as well as acquisition purchase
accounting adjustments. Estimates of fair value are used in the accounting for loans held for sale,
goodwill and other intangible assets. Estimates of fair values are used in disclosures regarding
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.
Goodwill and intangible assets that have indefinite useful lives are generally evaluated for
impairment annually, in December of each year. Goodwill and intangible assets may be more regularly
monitored for impairment as part of the Companys review of its assets if events and circumstances
occur between annual tests that would suggest that the fair value of a reporting unit might have
declined below its carrying value. As discussed above, goodwill was evaluated for impairment due
to the prolonged decline of the Companys stock price relative to its tangible net book value
during the second quarter of 2009 and a goodwill impairment charge was taken.
21
Changes in Results of Operations
Net Income (Loss). Net income (loss) available to common shareholders for the three
months ended June 30, 2009 was ($151,400), as compared to $1,462 for the same period in 2008. This
decrease of $152,862 resulted primarily from a $137,400, net of tax, charge for goodwill
impairment. Second quarter 2009 net interest income
totaled $20,180 compared with $25,044 during the year ago period and declined as a result of a
narrowing in the net interest margin from 3.92% in the second quarter of last year to 3.43% in the
current quarter plus the net interest income impact of carrying a higher level of non-interest
earning assets. Non-interest income declined by $571 from the second quarter of last year and
totaled $7,541 for the current quarter. The decline was principally reflected in lower deposit
service charges, reflecting a slower economic environment despite the continued success in adding
4,418 net new checking account customers during the quarter, and mortgage banking income. Total
non-interest expenses amounted to $169,143 during the quarter and included a one-time, non-cash
goodwill impairment charge of $143,389. Operating expenses (total non-interest expenses minus the
goodwill impairment charge) totaled $25,754 for the second quarter compared with $20,140 during the
same period last year. The principal expense items driving this increase, over the same period a
year ago, were higher real estate foreclosure losses of $2,280; an increase in FDIC deposit
insurance costs of $2,184; the impairment loss taken on three investment portfolio securities of
$524 and higher loan collection costs of $563.
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. The primary factors which affect net interest income are
changes in volume and rates on interest-earning assets and interest-bearing liabilities, which are
affected in part by managements responses to changes in interest rates through asset/liability
management. During the three months ended June 30, 2009, net interest income was $20,180, as
compared to $25,044 for the same period in 2008, representing a decrease of 19%. This decrease of
$4,864 in net interest income resulted primarily from the contraction of the net interest margin
plus the income impact of carrying a higher level of non-performing assets.
The Companys average balance for interest-earning assets decreased 8% from $2,591,822 for the
three months ended June 30, 2008 to $2,382,377 for the three months ended June 30, 2009. The
primary reason for the decline in interest-earning assets was the movement of loans to
non-performing assets as the recession continued to escalate.
The Companys average balance for interest-bearing liabilities decreased 7% from $2,401,297
for the three months ended June 30, 2008 to $2,232,953 for the three months ended June 30, 2009 as
the Company reduced its reliance on short-term borrowings and brokered deposits while focusing on
building core deposit levels throughout its branch network.
22
The Companys yield on loans (the largest component of interest-earning assets) decreased by
75 basis points from the second quarter of 2008 to the second quarter of 2009. Approximately
one-half of the Companys loan portfolio is set at variable rates and was impacted by the result of
the FOMCs action to lower market interest rates by 400 basis points during this period of time as
detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
FOMC Meeting |
|
Beginning |
|
|
Increase/ |
|
|
Ending |
|
Date |
|
Rate |
|
|
Decrease |
|
|
Rate |
|
January 22, 2008 |
|
|
4.25 |
% |
|
|
(0.75 |
%) |
|
|
3.50 |
% |
January 30, 2008 |
|
|
3.50 |
% |
|
|
(0.50 |
%) |
|
|
3.00 |
% |
March 18, 2008 |
|
|
3.00 |
% |
|
|
(0.75 |
%) |
|
|
2.25 |
% |
April 30, 2008 |
|
|
2.25 |
% |
|
|
(0.25 |
%) |
|
|
2.00 |
% |
June 25, 2008 |
|
|
2.00 |
% |
|
|
0.00 |
% |
|
|
2.00 |
% |
August 6, 2008 |
|
|
2.00 |
% |
|
|
0.00 |
% |
|
|
2.00 |
% |
September 16, 2008 |
|
|
2.00 |
% |
|
|
0.00 |
% |
|
|
2.00 |
% |
September 29, 2008 |
|
|
2.00 |
% |
|
|
0.00 |
% |
|
|
2.00 |
% |
October 7, 2008 |
|
|
2.00 |
% |
|
|
(0.50 |
%) |
|
|
1.50 |
% |
October 29, 2008 |
|
|
1.50 |
% |
|
|
(0.50 |
%) |
|
|
1.00 |
% |
December 16, 2008 |
|
|
1.00 |
% |
|
|
(0.75%) (1.00 |
%) |
|
|
0.00% 0.25 |
% |
January 28, 2009 |
|
|
0.00% 0.25 |
% |
|
|
0.00 |
% |
|
|
0.00% 0.25 |
% |
March 17, 2009 |
|
|
0.00% 0.25 |
% |
|
|
0.00 |
% |
|
|
0.00% 0.25 |
% |
April 30, 2009 |
|
|
0.00% 0.25 |
% |
|
|
0.00 |
% |
|
|
0.00% 0.25 |
% |
June 25, 2009 |
|
|
0.00% 0.25 |
% |
|
|
0.00 |
% |
|
|
0.00% 0.25 |
% |
The Companys cost of interest-bearing liabilities decreased by 32 basis points from the
second quarter ended June 30, 2008 to the second quarter ended June 30, 2009. The velocity of
change on fixed maturity interest-bearing liabilities is slower than the immediate change on
variable rate assets. The re-pricing characteristics of this portion of interest-bearing
liabilities which comprise 66% of total interest-bearing liabilities will lag behind market
interest rate changes especially in a rapidly changing interest rate environment.
23
The following table sets forth certain information relating to the Companys
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 |
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(1) (2) |
|
$ |
2,127,104 |
|
|
$ |
32,538 |
|
|
|
6.14 |
% |
|
$ |
2,340,923 |
|
|
$ |
39,421 |
|
|
|
6.77 |
% |
Investment securities (2) |
|
|
195,390 |
|
|
|
2,461 |
|
|
|
5.05 |
% |
|
|
246,541 |
|
|
|
3,439 |
|
|
|
5.61 |
% |
Other short-term investments |
|
|
59,883 |
|
|
|
36 |
|
|
|
0.24 |
% |
|
|
4,358 |
|
|
|
22 |
|
|
|
2.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
2,382,377 |
|
|
$ |
35,035 |
|
|
|
5.90 |
% |
|
$ |
2,591,822 |
|
|
$ |
42,882 |
|
|
|
6.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest earning assets |
|
|
420,404 |
|
|
|
|
|
|
|
|
|
|
|
352,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,802,781 |
|
|
|
|
|
|
|
|
|
|
$ |
2,944,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking, savings and money
market |
|
$ |
731,422 |
|
|
$ |
2,542 |
|
|
|
1.39 |
% |
|
$ |
675,467 |
|
|
$ |
2,255 |
|
|
|
1.34 |
% |
Time deposits |
|
|
1,155,533 |
|
|
|
8,969 |
|
|
|
3.11 |
% |
|
|
1,233,075 |
|
|
|
11,122 |
|
|
|
3.63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
$ |
1,886,955 |
|
|
$ |
11,511 |
|
|
|
2.45 |
% |
|
$ |
1,908,542 |
|
|
$ |
13,377 |
|
|
|
2.82 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase
agreements and short-term borrowings |
|
|
28,171 |
|
|
|
7 |
|
|
|
0.10 |
% |
|
|
157,317 |
|
|
|
700 |
|
|
|
1.79 |
% |
Notes payable |
|
|
229,165 |
|
|
|
2,469 |
|
|
|
4.32 |
% |
|
|
246,776 |
|
|
|
2,565 |
|
|
|
4.18 |
% |
Subordinated debentures |
|
|
88,662 |
|
|
|
689 |
|
|
|
3.12 |
% |
|
|
88,662 |
|
|
|
1,008 |
|
|
|
4.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
$ |
2,232,953 |
|
|
$ |
14,676 |
|
|
|
2.64 |
% |
|
$ |
2,401,297 |
|
|
$ |
17,650 |
|
|
|
2.96 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
162,458 |
|
|
|
|
|
|
|
|
|
|
|
186,136 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
21,597 |
|
|
|
|
|
|
|
|
|
|
|
23,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest bearing liabilities |
|
|
184,055 |
|
|
|
|
|
|
|
|
|
|
|
209,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,417,008 |
|
|
|
|
|
|
|
|
|
|
|
2,610,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
385,773 |
|
|
|
|
|
|
|
|
|
|
|
333,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders
equity |
|
$ |
2,802,781 |
|
|
|
|
|
|
|
|
|
|
$ |
2,944,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
20,359 |
|
|
|
|
|
|
|
|
|
|
$ |
25,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
|
|
|
3.26 |
% |
|
|
|
|
|
|
|
|
|
|
3.70 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net yield on interest-earning assets |
|
|
|
|
|
|
|
|
|
|
3.43 |
% |
|
|
|
|
|
|
|
|
|
|
3.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
|
Balance |
|
|
Interest |
|
|
Rate |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(1) (2) |
|
$ |
2,151,190 |
|
|
$ |
65,193 |
|
|
|
6.11 |
% |
|
$ |
2,332,642 |
|
|
$ |
82,187 |
|
|
|
7.09 |
% |
Investment securities (2) |
|
|
206,015 |
|
|
|
5,323 |
|
|
|
5.21 |
% |
|
|
246,202 |
|
|
|
6,975 |
|
|
|
5.70 |
% |
Other short-term investments |
|
|
65,141 |
|
|
|
81 |
|
|
|
0.25 |
% |
|
|
2,408 |
|
|
|
25 |
|
|
|
2.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
$ |
2,422,346 |
|
|
$ |
70,597 |
|
|
|
5.88 |
% |
|
$ |
2,581,252 |
|
|
$ |
89,187 |
|
|
|
6.95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest earning assets |
|
|
402,244 |
|
|
|
|
|
|
|
|
|
|
|
355,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,824,590 |
|
|
|
|
|
|
|
|
|
|
$ |
2,936,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking, savings and money
market |
|
$ |
677,863 |
|
|
$ |
4,394 |
|
|
|
1.31 |
% |
|
$ |
686,444 |
|
|
$ |
5,580 |
|
|
|
1.63 |
% |
Time deposits |
|
|
1,225,516 |
|
|
|
19,770 |
|
|
|
3.25 |
% |
|
|
1,185,132 |
|
|
|
23,732 |
|
|
|
4.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
$ |
1,903,379 |
|
|
$ |
24,164 |
|
|
|
2.45 |
% |
|
$ |
1,871,576 |
|
|
$ |
29,312 |
|
|
|
3.15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under repurchase
agreements and short-term borrowings |
|
|
30,609 |
|
|
|
16 |
|
|
|
0.11 |
% |
|
|
155,188 |
|
|
|
1,792 |
|
|
|
2.32 |
% |
Notes payable |
|
|
229,223 |
|
|
|
4,912 |
|
|
|
4.32 |
% |
|
|
278,822 |
|
|
|
5,743 |
|
|
|
4.14 |
% |
Subordinated debentures |
|
|
88,662 |
|
|
|
1,535 |
|
|
|
3.49 |
% |
|
|
88,662 |
|
|
|
2,440 |
|
|
|
5.53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
$ |
2,251,873 |
|
|
$ |
30,627 |
|
|
|
2.74 |
% |
|
$ |
2,394,248 |
|
|
$ |
39,287 |
|
|
|
3.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
165,268 |
|
|
|
|
|
|
|
|
|
|
|
186,295 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
22,098 |
|
|
|
|
|
|
|
|
|
|
|
24,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest bearing liabilities |
|
|
187,366 |
|
|
|
|
|
|
|
|
|
|
|
210,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,439,239 |
|
|
|
|
|
|
|
|
|
|
|
2,605,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
385,351 |
|
|
|
|
|
|
|
|
|
|
|
331,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders
equity |
|
$ |
2,824,590 |
|
|
|
|
|
|
|
|
|
|
$ |
2,936,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
39,970 |
|
|
|
|
|
|
|
|
|
|
$ |
49,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread |
|
|
|
|
|
|
|
|
|
|
3.13 |
% |
|
|
|
|
|
|
|
|
|
|
3.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
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|
Net yield on interest-earning assets |
|
|
|
|
|
|
|
|
|
|
3.33 |
% |
|
|
|
|
|
|
|
|
|
|
3.89 |
% |
|
|
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25
Provision for Loan Losses. During the three and six months ended June 30, 2009, loan
charge-offs were $24,631 and $28,367, respectively and recoveries of charged-off loans were $1,351
and $4,344. The Companys provision for loan losses increased by $13,365 to $24,384 for the three
months ended June 30, 2009, as compared to $11,019 for the same period in 2008. Compared with the
first quarter of 2009, the provision for loan losses increased by $23,399 as the Company continued
to experience higher loan defaults during the second quarter with net loan charge-offs increasing
from $742 in the first quarter to $23,281 during the second quarter as the economy continued to
decline. The Companys allowance for loan losses increased by $1,346 to $50,157 at June 30, 2009
from $48,811 at December 31, 2008 and the reserve to outstanding loans ratio increased 10 basis
points to 2.30% from 2.20% at December 31, 2008 and also increased 79 basis points from the ratio
of 1.51% at June 30, 2008. Credit quality ratios have declined since September 30, 2007,
principally as a result of the prolonged deterioration of the residential real estate construction
and development market beginning in the fourth quarter of 2007 in the Companys urban markets,
primarily Nashville and Knoxville. Management continually evaluates the Companys credit policies
and procedures for effective risk and control management. The ratio of allowance for loan losses
to nonperforming loans was 52.96%, 155.28% and 87.11% at June 30, 2009, December 31, 2008 and June
30, 2008, respectively, and the ratio of nonperforming assets to total assets was 4.91%, 2.61% and
2.03% at June 30, 2009, December 31, 2008 and June 30, 2008, respectively. The ratio of
nonperforming loans to total loans, net of unearned interest, was 4.34%, 1.41% and 1.73% at June
30, 2009, December 31, 2008 and June 30, 2008, respectively. Within the Bank, the Companys
largest subsidiary, the ratio of nonperforming assets to total assets was 4.88%, 2.58% and 2.00% at
June 30, 2009, December 31, 2008 and June 30, 2008, respectively.
The Companys year-to-date (YTD) net charge-offs as a percentage of average loans increased
from 0.45% (annualized 0.90%) for the three months ended June 30, 2008 to 1.08% (annualized 2.16%)
for the three months ended June 30, 2009. Net charge-offs as a percentage of average loans were
1.63% for the year ended December 31, 2008.
Management believes that credit quality indicators will be driven by the current economic
environment and the resiliency of residential real estate markets. Management continually evaluates
the existing portfolio in light of loan concentrations, current general economic conditions and
economic trends. Management believes these evaluations strongly suggest an economic slowdown in
the Companys markets has and will continue to occur throughout 2009. 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 June 30, 2009. However, the provision for loan losses
could further increase for the entire year of 2009 if the general economic conditions continue to
weaken or the residential real estate markets in Nashville or Knoxville or the financial conditions
of borrowers deteriorate beyond managements current 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 Companys total revenue
stream.
Total non-interest income for the three and six months ended June 30, 2009 was $7,541 and
$14,484 as compared to $8,112 and $15,418 for the same period in 2008. Service charges, commissions
and fees remain the largest component of total non-interest income and decreased slightly from
$5,988 and $11,455 for the three and six months ended June 30, 2008 to $5,795 and $11,151,
respectively, for the same periods in 2009. Although the Company continues to see solid growth in
net new checking account customers due to its High Performance Checking Program, as evidenced by
the 8,710 net new accounts opened during the first six months of 2009, the service charges and NSF
fees associated with this product have declined modestly due to the current economic environment.
The Company believes that as the economy begins to recover, non-interest income will continue to
improve given the expansion of its customer base. Mortgage banking income decreased by $183 and
$385, respectively, to $110 and $165 for the three and six months ended June 30, 2009 from $293 and
$550 for the same periods in 2008. In addition other non-interest income decreased by $136 and
$233, respectively, to $642 and $1,337 for the three and six months ended June 30, 2009 from $778
and $1,570 for the same periods in 2008.
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 goodwill
impairment charges, write-downs on OREO, data processing, printing and supplies, legal and
professional fees, postage, Federal Deposit Insurance Corporation (FDIC) assessment, etc. Total
non-interest expense was $169,143 and $186,974 for the three and six months ended June 30, 2009
compared to $20,140 and $39,701 for the same periods in 2008. The $149,003 increase in total
non-interest expense for the three months ended June 30, 2009 compared to the same period of 2008
primarily reflects a one-time charge for goodwill impairment of $143,389, increased FDIC
assessments of $2,184 which includes a one-time special assessment levied against all banks in
proportion to their asset size, an increase of $2,280 in loss on OREO cost, increased collection costs of $563
associated with OREO and a write-down of $524 taken in connection with three investments held in
the securities portfolio.
26
Personnel costs are the primary element of the Companys non-interest expenses. For the three
and six months ended June 30, 2009, employee compensation and benefits represented $9,293, or 36%,
and $18,280, or 42% of total non-interest expense, excluding the one-time charge for goodwill
impairment of $143,389. This was an increase of $37, or 0.4%, and a decrease of $825, or 4%,
respectively, from the $9,256 and $19,105 for the three and six months ended June 30, 2008.
Including Bank branches and non-bank office locations the Company had 75 locations at June 30, 2009
and December 31, 2008, as compared to 76 at June 30, 2008, and the number of full-time equivalent
employees declined from 795 at June 30, 2008 to 730 at June 30, 2009.
The increases in FDIC assessments were due to increases in the fee assessment rates during
2009 and a special assessment applied to all insured institutions as of June 30, 2009. With regard
to the increase in fee assessment rates, the FDIC finalized a rule in December 2008 that raised the
then current assessment rates uniformly by 7 basis points for the first quarter of 2009 assessment.
The new rule resulted in annualized assessment rates for Risk Category 1 institutions, like the
Company, ranging from 12 to 14 basis points. In February 2009, the FDIC issued final rules to amend
the deposit insurance fund restoration plan, change the risk-based assessment system and set
assessment rates for Risk Category 1 institutions beginning in the second quarter of 2009. The new
initial base assessment rates for Risk Category 1 institutions range from 12 to 16 basis points, on
an annualized basis, and from 7 to 24 basis points after the effect of potential base-rate
adjustments, in each case depending upon various factors. The increase in deposit insurance expense
during the six months ended June 30, 2009 compared to the same period a year ago was also partly
related to the Companys utilization of available credits to offset assessments during the first
six months of 2008. The increases were also partly related to the additional 10 basis point
assessment paid on covered transaction accounts exceeding $250 thousand under the Temporary
Liquidity Guaranty Program.
In May 2009, the FDIC issued a final rule which levied a special assessment applicable to all
insured depository institutions totaling 5 basis points of each institutions total assets less
Tier 1 capital as of June 30, 2009, not to exceed 10 basis points of domestic deposits. The special
assessment is part of the FDICs efforts to rebuild the Deposit Insurance Fund (DIF). Deposit
insurance expense during the three and six months ended June 30, 2009 included a $1.2 million
accrual related to the special assessment. The final rule also allows the FDIC to impose additional
special assessments of 5 basis points for the third and fourth quarters of 2009, if the FDIC
estimates that the DIF reserve ratio will fall to a level that would adversely affect public
confidence in federal deposit insurance or to a level that would be close to or below zero. Any
additional special assessment would also be capped at 10 basis points of domestic deposits. The
Company cannot provide any assurance as to the ultimate amount or timing of any such special
assessments, should such special assessments occur, as such special assessments depend upon a
variety of factors which are beyond the Companys control.
Income Taxes. The effective income tax rate for the three and six months ended June 30, 2009
was 9.44% and 8.14%, respectively, compared to 26.79% and 35.16% for the same period in 2008. The
effective tax rates for the three and six month periods ending June 30, 2009 were lower than the
statutory tax rates primarily due to the goodwill impairment charge recognized during the second
quarter. The effective tax rates for both periods reflect the tax treatment of the $143,389
goodwill impairment charge, of which $126,317 was non-deductible for tax purposes.
Changes in Financial Condition
Total assets at June 30, 2009 were $2,629,834, a decrease of $314,837, or 11%, from
December 31, 2008. The decrease in assets was primarily reflective of the $143,389 write-off of
goodwill and decreases of $90,785 in cash and cash equivalents, $39,636 in loans, net of unearned
income, $35,709 in securities available-for-sale and a $10,903 reduction in other real estate owned
and repossessed assets. The Company expects that its total assets will decline slightly over the
remainder of 2009.
Non-performing assets (NPAs), which include non-accrual loans, loans past due 90 days or
more and still accruing interest and other real estate owned and repossessed assets (OREO),
totaled $129,177 at June 30, 2009 compared with $76,806 at December 31, 2008. During the six month
period the Company experienced an increase in net NPAs of $52,371 as the economy continued to
weaken and it continued its aggressive approach to identify and recognize NPAs.
Non-performing loans include non-accrual loans and loans 90 or more days past due. All loans
that are 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 loans and loans past due 90 days
totaled $94,709 at June 30, 2009 an increase of $63,274 from December 31, 2008.
27
OREO totaled $34,468 at June 30, 2009 compared with $45,371 at December 31, 2008. During the
first quarter of 2009, $36,368 of OREO balances were returned to non-accrual loan status due to the
aforementioned bankruptcy filings and the extended period of time now required to achieve
possession of the property and at the end of the second quarter of 2009 most of these properties
have now been foreclosed and reside in OREO balances. Additionally, the Company received proceeds
on the disposition of OREO totaling $3,110 and it incurred a net loss on the disposition of OREO
property of $3,427 during the first six months of 2009.
At June 30, 2009, the ratio of the Companys allowance for loan losses to non-performing loans
(which include non-accrual loans) was 52.96% compared to 87.11% at June 30, 2008.
The Company maintains an investment portfolio to provide liquidity and earnings. Investments
at June 30, 2009 with an amortized cost of $168,799 had a market value of $168,482. At year-end
2008, investments with an amortized cost of $205,310 had a market value of $204,163.
Liquidity and Capital Resources
Liquidity. Liquidity refers to the ability or the financial flexibility to manage future
cash flows 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. The Companys liquid assets include cash and due from banks, federal funds
sold, investment securities and loans held for sale. Including securities pledged to collateralize
municipal deposits, these assets represented 12% and 16% of the total liquidity base at June 30,
2009 and December 31, 2008, respectively. The liquidity base is generally defined to include
deposits, repurchase agreements, notes payable and subordinated debentures. The Company maintains
borrowing availability with the Federal Home Loan Bank of Cincinnati (FHLB), which was fully
utilized at June 30, 2009. The Company also maintains federal funds lines of credit totaling
$116,000 at six correspondent banks, of which $116,000 was available at June 30, 2009. The Company
believes it has sufficient liquidity to satisfy its current operating needs.
For the six months ended June 30, 2009, operating activities of the Company provided $22,271
of cash flows. This was primarily comprised of net income (loss) of ($145,370), positively adjusted
for (i) goodwill impairment of $143,389, (ii) 25,369 in provision for loan losses, (iii) $3,642 of
depreciation and amortization and (iv) $3,427 net loss on other real estate and repossessed assets.
This was offset in part by an increase of $5,453 in other assets.
Maturities of $82,098 in investment securities available for sale was the primary component of
the $57,015 in net cash provided from investing activities for the six months ended June 30, 2009.
During the first six months of 2009, as the U.S. Treasury implemented its program of repurchasing
$1.3 trillion of previously issued Government Agency Securities, certain securities held by the
Company were called, at par, resulting in no gain or loss to the Company. In addition proceeds
from the net change in loans provided $19,980 in cash flows. These were offset by (i) $45,873 in
proceeds from the purchase of investment securities available for sale, and (ii) $2,865 in premises
and equipment expenditures.
The net decrease in total deposits of $157,424 was the primary source of cash flows used in
financing activities of $170,070. The net decrease in total deposits reflects a decrease in
brokered deposits of $248,255 and an increase in core customer deposits of $90,831, as the Company,
as well as other banks, experienced an inflow of deposit balances due to the economic environment.
In addition, the net change in repurchase agreements of $9,312, dividends paid on preferred stock
of $1,426 and dividends paid on common stock of $1,713 further increased the total net cash used in
financing activities.
28
Capital Resources. The Companys capital position is reflected in its shareholders equity,
subject to certain adjustments for regulatory purposes. Shareholders equity, or capital, is a
measure of the Companys net worth, soundness and viability. The Company continues to exhibit a
strong capital position. Further, the capital base of the Company allows it to take advantage of
business opportunities while maintaining the level of resources deemed appropriate by management of
the Company to address business risks inherent in the Companys daily operations. During the second
quarter of 2009, the Company suspended common stock dividends, in an abundance of caution, in order
to preserve capital in these uncertain economic times.
Shareholders equity on June 30, 2009 was $233,192, a decrease of $148,039, or 39%, from
$381,231 on December 31, 2008. The decrease in shareholders equity primarily reflects net income
(loss) available to common shareholders for the six months ended June 30, 2009 of ($147,852)
(($11.32) per share) and the common stock dividend payments during the six months ended June 30,
2009 totaling $1,713 ($0.13 per share). These decreases were offset by the cumulative change of
$481 in unrealized gains, net of reclassification and taxes, on available for sale securities.
The Companys 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. Further, any dividend payments are subject to the continuing ability of the Bank to maintain
its compliance with minimum federal regulatory capital requirements and the Companys self-imposed
restrictions to retain its characterization under federal regulations as a well-capitalized
institution.
Risk-based capital regulations adopted by the Board of Governors of the Federal Reserve Board
(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 June 30, 2009, the Bank and the
Company each satisfied their respective minimum regulatory capital requirements, and the Bank was
well-capitalized within the meaning of federal regulatory requirements. The table below sets
forth the capital position of the Bank and the Company at June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required |
|
|
Required |
|
|
|
|
|
|
|
|
|
Minimum |
|
|
to be |
|
|
|
|
|
|
|
|
|
Ratio |
|
|
Well Capitalized |
|
|
Bank |
|
|
Company |
|
Tier 1 risk-based
capital |
|
|
4.00 |
% |
|
|
6.00 |
% |
|
|
13.45 |
% |
|
|
13.72 |
% |
Total risk-based capital |
|
|
8.00 |
% |
|
|
10.00 |
% |
|
|
14.72 |
% |
|
|
14.98 |
% |
Leverage Ratio |
|
|
4.00 |
% |
|
|
5.00 |
% |
|
|
10.85 |
% |
|
|
11.07 |
% |
29
Off-Balance Sheet Arrangements
At June 30, 2009, the Company had outstanding unused lines of credit and standby letters of
credit totaling $313,067 and unfunded loan commitments outstanding of $18,194. 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 these outstanding commitments, the Company has the ability to liquidate Federal funds sold or
securities available-for-sale or, on a short-term basis, to borrow any then available amounts from
the FHLB and/or purchase Federal funds from other financial institutions. At June 30, 2009, the
Company had accommodations with upstream correspondent banks for unsecured Federal funds lines of
$116,000. These accommodations have various covenants related to their term and availability, and
in most cases must be repaid within less than a month. The following table presents additional
information about the Companys off-balance sheet commitments as of June 30, 2009, which by their
terms have contractual maturity dates subsequent to June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
More than 5 |
|
|
|
|
|
|
Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
Year |
|
|
Total |
|
Commitments to make loans fixed |
|
$ |
3,804 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,804 |
|
Commitments to make loans
variable |
|
|
14,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,390 |
|
Unused lines of credit |
|
|
157,790 |
|
|
|
24,655 |
|
|
|
8,829 |
|
|
|
82,283 |
|
|
|
273,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Letters of credit |
|
|
24,529 |
|
|
|
734 |
|
|
|
7,353 |
|
|
|
6,894 |
|
|
|
39,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
200,513 |
|
|
$ |
25,389 |
|
|
$ |
16,182 |
|
|
$ |
89,177 |
|
|
$ |
331,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of Contractual Obligations
In the ordinary course of operations, the Company enters into certain contractual obligations.
Such obligations include the funding of operations through debt issuances as well as leases for
premises and equipment. The following table summarizes the Companys significant fixed and
determinable contractual obligations as of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
More than 5 |
|
|
|
|
|
|
Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
Years |
|
|
Total |
|
Certificates of deposits |
|
$ |
905,204 |
|
|
$ |
140,191 |
|
|
$ |
10,876 |
|
|
$ |
3,563 |
|
|
$ |
1,059,834 |
|
FHLB advances and notes payable |
|
|
54,937 |
|
|
|
37,863 |
|
|
|
65,932 |
|
|
|
70,422 |
|
|
|
229,154 |
|
Subordinated debentures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,662 |
|
|
|
88,662 |
|
Operating lease obligations |
|
|
1,232 |
|
|
|
2,010 |
|
|
|
1,431 |
|
|
|
1,270 |
|
|
|
5,943 |
|
Deferred compensation |
|
|
1,712 |
|
|
|
|
|
|
|
|
|
|
|
2,210 |
|
|
|
3,922 |
|
Purchase obligations |
|
|
1,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
964,593 |
|
|
$ |
180,064 |
|
|
$ |
78,239 |
|
|
$ |
166,127 |
|
|
$ |
1,389,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additionally, the Company routinely enters into contracts for services. These contracts
may require payment for services to be provided in the future and may also contain penalty clauses
for early termination of the contract. Management is not aware of any additional commitments or
contingent liabilities which may have a material adverse impact on the liquidity or capital
resources of the Company.
Effect of New Accounting Standards
Financial Accounting Standards Board (FASB) Staff Position (FSP), Statement of Financial
Accounting Standards (SFAS) No. 157-4, Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly was issued April 9, 2009. FSP SFAS 157-4 affirms that the objective of fair value
when the market for an asset is not active is the price that would be received to sell the asset in
an orderly transaction, and clarifies and includes additional factors for determining whether there
has been a significant decrease in market activity for an asset when the market for that asset is
not active. FSP SFAS 157-4 requires an entity to base its conclusion about whether a transaction
was not orderly on the weight of the evidence. FSP SFAS 157-4 also amended SFAS 157, Fair Value
Measurements, to expand certain disclosure requirements. FSP SFAS 157-4 is effective for interim
and annual periods ending after June 15, 2009, with early adoption permitted for periods ending
after March 15, 2009. FSP SFAS 157-4 became effective for the Company on June 15, 2009 and did not
have a significant impact on the Companys financial statements.
FSP SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments were issued April 9, 2009. FSP SFAS 115-2 and SFAS 124-2 (i) changes existing
guidance for determining whether an impairment is other than temporary to debt securities and (ii)
replaces the existing requirement that the entitys management assert it has both the intent and
ability to hold an impaired security until recovery with a requirement that management assert: (a)
it does not have the intent to sell the security; and (b) it is more likely than not it will not
have to sell the security before recovery of its cost basis. Under FSP SFAS 115-2 and SFAS 124-2,
declines in the fair value of held-to-maturity and available-for-sale securities below their cost
that are deemed to be other than temporary are reflected in earnings as realized losses to the
extent the impairment is related to credit losses. The amount of the impairment related to other
factors is recognized in other comprehensive income. FSP SFAS 115-2 and SFAS 124-2 are effective
for interim and annual periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. FSP SFAS 115-2 and SFAS 124-2 became effective for the
Company on June 15, 2009 and did not have a significant impact on the Companys financial
statements.
30
FSP SFAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair
Value of Financial Instruments were issued April 9, 2009. FSP SFAS 107-1 and APB 28-1 amends SFAS
107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide
disclosures about fair value of financial instruments in interim financial information and amends
APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized
financial information at interim reporting periods. Under FSP SFAS 107-1 and APB 28-1, a publicly
traded company shall include disclosures about the fair value of its financial instruments whenever
it issues summarized financial information for interim reporting periods. In addition, entities
must disclose, in the body or in the accompanying notes of its summarized financial information for
interim reporting periods and in its financial statements for annual reporting periods, the fair
value of all financial instruments for which it is practicable to estimate that value, whether
recognized or not recognized in the statement of financial position, as required by SFAS 107. The
new interim disclosures required by FSP SFAS 107-1 and APB 28-1 are included in the Companys
interim financial statements for the second quarter, June 30, 2009.
On May 28, 2009, the FASB issued SFAS No. 165, Subsequent Events. Under SFAS 165, companies
are required to evaluate events and transactions that occur after the balance sheet date but before
the date the financial statements are issued, or available to be issued in the case of non-public
entities. SFAS 165 requires entities to recognize in the financial statements the effect of all
events or transactions that provide additional evidence of conditions that existed at the balance
sheet date, including the estimates inherent in the financial preparation process. Entities shall
not recognize the impact of events or transactions that provide evidence about conditions that did
not exist at the balance sheet date but arose after that date. SFAS 165 also requires entities to
disclose the date through which subsequent events have been evaluated. SFAS 165 was effective for
interim and annual reporting periods ending after June 15, 2009. The Company reviewed events for
inclusion in the financial statements through August 7, 2009, the date that the accompanying
financial statements were issued. The Company adopted the provisions of SFAS 165 for the quarter
ended June 30, 2009, as required, and adoption did not have a material impact on the financial
statements taken as a whole.
On June 29, 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement
No. 162. SFAS 168 establishes the FASB Accounting Standards Codification as the source of
authoritative accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with U.S. Generally Accepted
Accounting Principles. SFAS 168 will be effective for financial statements issued for interim and
annual periods ending after September 15, 2009, for most entities. On the effective date, all
non-SEC accounting and reporting standards will be superseded. The Company will adopt SFAS 168 for
the quarterly period ended September 30, 2009, as required, and adoption is not expected to have a
material impact on the financial statements taken as a whole.
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Part II, Item 7A of the 2008 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, 2008.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
The Companys management, with the participation of the Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the Companys 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,
2009, the Companys disclosure controls and procedures were effective for the purposes set forth in
the definition thereof in Exchange Act Rule 13a-15(e).
Internal Control Over Financial Reporting
There have been no changes in the Companys internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f)) during the quarter ended June 30, 2009 that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting.
31
PART II OTHER INFORMATION
|
|
|
Item 1. |
|
Legal Proceedings |
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 Companys results of operations.
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, 2008.
|
|
|
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 June 30, 2009.
|
|
|
Item 3. |
|
Defaults Upon Senior Securities |
None
|
|
|
Item 4. |
|
Submission of Matters to a Vote of Security Holders |
|
(a) |
|
The annual meeting of shareholders (the Annual Meeting) of the Company was
held on April 24, 2009. In addition to the election of directors, the proposals
described in section (c) below were considered by shareholders at the Annual Meeting. |
|
(b) |
|
Proxies for the Annual Meeting were solicited in accordance with Regulation 14
of the Exchange Act; there was no solicitation in opposition to managements nominees
and all of managements nominees were elected. Each director is elected to serve for a
3-year term and until his or her successor is elected and qualified. Accordingly, in
section (c) below, the Company has reported the voting results only with respect to
those directors who were voted on at the Annual Meeting. |
|
(c) |
|
The following sets forth the results of voting on each matter at the Annual
Meeting: |
Proposal 1 Election of directors
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
|
Votes |
|
|
|
For |
|
|
Withheld |
|
Martha M. Bachman |
|
|
10,005,900 |
|
|
|
376,822 |
|
W.T. Daniels |
|
|
9,987,692 |
|
|
|
395,029 |
|
Charles H. Whitfield, Jr. |
|
|
9,924,572 |
|
|
|
458,150 |
|
Proposal 2 Shareholder proposal regarding majority election of
directors
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
Votes |
|
|
|
|
|
Broker |
|
For |
|
Against |
|
|
Abstentions |
|
|
Non-Votes |
|
3,490,805 |
|
|
4,805,986 |
|
|
|
241,965 |
|
|
|
1,884,630 |
|
Proposal 3 Shareholder proposal regarding annual election of
directors
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
Votes |
|
|
|
|
|
Broker |
|
For |
|
Against |
|
|
Abstentions |
|
|
Non-Votes |
|
3,577,166 |
|
|
4,726,470 |
|
|
|
235,122 |
|
|
|
1,884,628 |
|
32
Proposal 4 Ratification of the use of the performance measures in the
Companys 2004 Long-Term Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
Votes |
|
|
|
|
|
|
Broker |
|
For |
|
Against |
|
|
Abstentions |
|
|
Non-Votes |
|
9,522,661 |
|
|
596,787 |
|
|
|
263,272 |
|
|
|
40,665 |
|
Proposal 5 Approval of the Companys executive compensation program
and procedures in accordance with recently enacted say on pay regulations
of the American Recovery and Reinvestment Act of 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
Votes |
|
|
|
|
|
|
Broker |
|
For |
|
Against |
|
|
Abstentions |
|
|
Non-Votes |
|
9,537,961 |
|
|
524,970 |
|
|
|
319,787 |
|
|
|
40,668 |
|
Proposal 6 Ratification of the appointment of Dixon Hughes PLLC as
the Companys independent registered public accounting firm for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
Votes |
|
|
|
|
|
|
Broker |
|
For |
|
Against |
|
|
Abstentions |
|
|
Non-Votes |
|
10,048,843 |
|
|
117,982 |
|
|
|
214,899 |
|
|
|
41,662 |
|
|
|
|
Item 5. |
|
Other Information |
None
See Exhibit Index immediately following the signature page hereto.
33
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 7, 2009 |
By: |
/s/ James E. Adams
|
|
|
|
James E. Adams |
|
|
|
Executive Vice President, Chief Financial
Officer and Secretary |
|
34
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 |
|
|
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 |