10-Q/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

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

For the quarterly period ended June 30, 2011

OR

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

For the transition period from                      to                     

Commission file number 0-14289

GREEN BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

Tennessee	62-1222567
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 North Main Street, Greeneville, Tennessee	37743-4992
(Address of principle executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (423) 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 þ 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.

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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 5, 2011, the number of shares outstanding of the issuer’s common stock was: 13,257,606.

EXPLANATORY NOTE

The purpose of this Amendment No. 1 to Green Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 11, 2011 (the “Form 10-Q”), is solely to furnish Exhibit 101 to the Form 10-Q. Exhibit 101 provides the financial statements and related notes from the Form 10-Q formatted in XBRL (Extensible Business Reporting Language).

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

1

TABLE OF CONTENTS

EX-101 INSTANCE DOCUMENT

EX-101 SCHEMA DOCUMENT

EX-101 CALCULATION LINKBASE DOCUMENT

EX-101 LABELS LINKBASE DOCUMENT

EX-101 PRESENTATION LINKBASE DOCUMENT

EX-101 DEFINITION LINKBASE DOCUMENT

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: September 6, 2011	By:	/s/ Michael J. Fowler
		Michael J. Fowler
		Senior Vice President, Chief Financial Officer and Secretary

2

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*
	101	Interactive Data File**

*	Previously filed or furnished as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011.
**	Furnished with this Amendment No. 1.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Market value for Securities held to maturity	$ 467	$ 467
Valuation allowance for deferred tax asset	$ 52,268	$ 43,455
Shareholders' equity
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	72,278	72,278
Common stock, par value	$ 2	$ 2
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares outstanding	13,257,606	13,188,896

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Condensed Consolidated Statements of Income (Loss) (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Interest income
Interest and fees on loans	$ 23,804		$ 29,374		$ 48,404		$ 59,434
Taxable securities	1,686		1,391		3,088		2,679
Nontaxable securities	281		306		586		618
FHLB and other stock	134		134		272		272
Federal funds sold and other	170		99		350		193
Total interest income	26,075		31,304		52,700		63,196
Interest expense
Deposits	4,561		7,626		9,892		15,687
Federal funds purchased and repurchase agreements	4		5		8		11
FHLB advances and notes payable	1,570		1,712		3,113		3,406
Subordinated debentures	488		488		969		960
Total interest expense	6,623		9,831		13,982		20,064
Net interest income	19,452		21,473		38,718		43,132
Provision for loan losses	14,333		4,749		28,229		8,638
Net interest income after provision for loan losses	5,119		16,724		10,489		34,494
Non-interest income
Service charges on deposit accounts	6,377		6,692		12,208		12,632
Other charges and fees	369		383		799		739
Trust and investment services income	497		757		1,012		1,339
Mortgage banking income	112		123		199		241
Other income	881		909		1,646		1,599
Securities gains (losses), net
Other-than-temporary impairment			(553)				(553)
Less non-credit portion recognized in other comprehensive income			460				460
Total non-interest income	8,236		8,771		15,864		16,457
Non-interest expense
Employee compensation	7,324		7,972		15,455		15,637
Employee benefits	879		816		1,856		1,793
Occupancy expense	1,710		1,684		3,504		3,383
Equipment expense	638		668		1,516		1,376
Computer hardware/software expense	936		886		1,855		1,710
Professional services	1,122		576		1,910		1,183
Advertising	367		806		1,085		1,404
OREO maintenance expense	1,194		554		2,349		999
Collection and repossession expense	772		534		1,319		1,821
Loss on OREO and repossessed assets	4,328		926		6,429		1,435
FDIC Insurance	1,284		1,209		2,370		2,060
Core deposit and other intangibles amortization	623		640		1,249		1,291
Other expenses	3,593		4,003		6,901		7,728
Total non-interest expenses	24,770		21,274		47,798		41,820
Income (loss) before income taxes	(11,415)		4,221		(21,445)		9,131
Provision (benefit) for income taxes	(281)		1,410				3,124
Net income (loss)	(11,134)		2,811		(21,445)		6,007
Preferred stock dividends and accretion of discount	1,250		1,250		2,500		2,500
Net income (loss) available to common shareholders	$ (12,384)		$ 1,561		$ (23,945)		$ 3,507
Per share of common stock:
Basic earnings (loss)	$ (0.94)		$ 0.12		$ (1.83)		$ 0.27
Diluted earnings (loss)	$ (0.94)		$ 0.12		$ (1.83)		$ 0.27
Weighted average shares outstanding:
Basic	13,126,923		13,097,611		13,117,811		13,090,021
Diluted	13,126,923	[1]	13,158,131	[1]	13,117,811	[1]	13,148,226	[1]

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

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Document and Entity Information (USD $) In Millions, except Share data	6 Months Ended
	Jun. 30, 2011	Aug. 05, 2011	Jun. 30, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	GREEN BANKSHARES, INC.
Entity Central Index Key	0000764402
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 151
Entity Common Stock, Shares Outstanding		13,257,606

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Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

SEGMENT INFORMATION

NOTE 5 — SEGMENT INFORMATION

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

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

Three months ended June 30, 2011	Bank			Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	17,777		$	2,186	$	(511	)	$	—		$	19,452
Provision for loan losses		14,119			214		—			—			14,333
Noninterest income		8,019			381		64			(228	)		8,236
Noninterest expense		23,110			1,184		704			(228	)		24,770
Income tax expense (benefit)		(285	)		464		(460	)		—			(281	)
Segment profit (loss)	$	(11,148	)	$	705	$	(691	)	$	—		$	(11,134	)
Segment assets at June 30, 2011	$	2,242,705		$	43,448	$	7,662		$	—		$	2,293,815

Three months ended June 30, 2010	Bank		Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	19,859	$	2,103	$	(489	)	$	—		$	21,473
Provision for loan losses		4,439		310		—			—			4,749
Noninterest income		8,529		417		52			(227	)		8,771
Noninterest expense		19,948		1,141		412			(227	)		21,274
Income tax expense (benefit)		1,287		418		(295	)		—			1,410
Segment profit (loss)	$	2,714	$	651	$	(554	)	$	—		$	2,811
Segment assets at June 30, 2010	$	2,477,386	$	42,234	$	9,712		$	—		$	2,529,332

Six months ended June 30, 2011	Bank			Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	35,387		$	4,334	$	(1,003	)	$	—		$	38,718
Provision for loan losses		27,745			484		—			—			28,229
Noninterest income		15,399			857		78			(470	)		15,864
Noninterest expense		45,226			2,427		615			(470	)		47,798
Income tax expense (benefit)		(331	)		900		(569	)		—			—
Segment profit (loss)		(21,854	)	$	1,380	$	(971	)	$	—		$	(21,445	)

Six months ended June 30, 2010	Bank		Other Segments		Holding Company			Eliminations			Totals
Net interest income (expense)	$	39,927	$	4,166	$	(961	)	$	—		$	43,132
Provision for loan losses		7,795		843		—			—			8,638
Noninterest income		16,057		788		66			(454	)		16,457
Noninterest expense		39,417		2,256		601			(454	)		41,820
Income tax expense (benefit)		2,915		727		(518	)		—			3,124
Segment profit (loss)		5,857	$	1,128	$	(978	)	$	—		$	6,007

Asset Quality Ratios

As of and for the period ended June 30, 2011	Bank			Other			Total
Nonperforming loans as percentage of total loans, net of unearned income		8.51	%		1.58	%		8.46	%
Nonperforming assets as a percentage of total assets		9.17	%		2.03	%		9.23	%
Allowance for loan losses as a percentage of total loans, net of unearned income		3.87	%		6.86	%		4.02	%
Allowance for loan losses as a percentage of nonperforming loans		45.44	%		532.56	%		47.52	%
YTD net charge-offs to average total loans, net of unearned income		1.91	%		1.42	%		1.93	%

As of and for the period ended June 30, 2010	Bank			Other			Total
Nonperforming loans as percentage of total loans, net of unearned income		3.37	%		1.28	%		3.37	%
Nonperforming assets as a percentage of total assets		5.59	%		1.38	%		5.61	%
Allowance for loan losses as a percentage of total loans, net of unearned income		2.44	%		7.89	%		2.60	%
Allowance for loan losses as a percentage of nonperforming loans		72.35	%		616.49	%		77.02	%
YTD net charge-offs to average total loans, net of unearned income		0.40	%		2.09	%		0.44	%

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

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

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Principles of Consolidation

6 Months Ended

Jun. 30, 2011

Principles of Consolidation [Abstract]

PRINCIPLES OF CONSOLIDATION

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, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Certain amounts from prior period financial statements have been reclassified to conform to the current year’s presentation.

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Capital

6 Months Ended

Jun. 30, 2011

Capital [Abstract]

CAPITAL

NOTE 7 — CAPITAL

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

On May 2, 2011, the Bank received notice from the Federal Deposit Insurance Corporation (“FDIC”) and the Tennessee Department of Financial Institutions (“TDFI”) that, as a result of those agencies’ findings in their most recently completed joint safety and soundness examination, the agencies would be seeking a formal enforcement action against the Bank aimed at strengthening the Bank’s operations and its financial condition, and that accordingly, the FDIC was pursuing the issuance of a consent order against the Bank and the TDFI was pursuing the issuance of a written agreement against the Bank. The Company believes that the final terms of the order and written agreement will contain requirements similar to those that the Bank has already informally committed to comply with, including requirements to maintain the Bank’s capital ratios above those levels required to be considered “well-capitalized” under federal banking regulations.

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

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

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Contingencies

6 Months Ended

Jun. 30, 2011

Contingencies [Abstract]

CONTINGENCIES

NOTE 8 — CONTINGENCIES

The Company and its subsidiaries are subject to claims and suits arising in the ordinary course of business. In the opinion of management, the ultimate resolution of these pending claims and legal proceedings will not have a material adverse effect on the Company’s results of operations. No amounts for settlements are accrued as of June 30, 2011. The details of certain legal proceedings are outlined under Part II, Item 1 “Legal Proceedings” in this Form 10-Q.

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Fair Value Disclosures

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURES

NOTE 6 — FAIR VALUE DISCLOSURES

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

Level 1

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

Level 2

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

Level 3

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

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

Investment Securities Available-for-Sale

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

Loans Held for Sale

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

Impaired Loans

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

Other Real Estate

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

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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

							Total Carrying		Assets/Liabilities
	Fair Value Measurement Using						Amount in		Measured at Fair
Description	Level 1		Level 2		Level 3		Balance Sheet		Value
June 30, 2011
Securities available for sale
U.S. government agencies	$	—	$	68,878	$	—	$	68,878	$	68,878
States and political subdivisions		—		29,344		—		29,344		29,344
CMO Agency		—		90,954		—		90,954		90,954
CMO Non-Agency		—		3,311		—		3,311		3,311
Mortgage-backed securities		—		23,388		—		23,388		23,388
Trust preferred securities		—		1,043		638		1,681		1,681
December 31, 2010
Securities available for sale
U.S. government agencies	$	—	$	83,299	$	—	$	83,299	$	83,299
States and political subdivisions		—		31,501		—		31,501		31,501
CMO Agency		—		64,182		—		64,182		64,182
CMO Non-Agency		—		3,393		—		3,393		3,393
Mortgage-backed securities		—		17,964		—		17,964		17,964
Trust preferred securities		—		1,025		638		1,663		1,663

Level 3 Valuations

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

Currently the Company has one trust preferred security that is considered Level 3. For more information on this security please refer to Note 2 — Securities.

The following table shows a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs.

	June 30,		June 30,
	2011		2010
Beginning balance, January 1	$	638	$	638
Total gains or (loss) (realized/unrealized)
Included in earnings		—		(75	)
Included in other comprehensive income		—		11
Paydowns and maturities		—		—
Transfers into Level 3		—		—
Ending balance	$	638	$	574

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		Assets/Liabilities
	Fair Value Measurement Using						Amount in		Measured at Fair
Description	Level 1		Level 2		Level 3		Balance Sheet		Value
June 30, 2011
Other real estate	$	—	$	—	$	76,690	$	76,690	$	76,690
Impaired loans		—		—		92,270		92,270		92,270
Total assets at fair value	$	—	$	—	$	168,960	$	168,960	$	168,960
December 31, 2010
Other real estate	$	—	$	—	$	60,095	$	60,095	$	60,095
Impaired loans		—		—		129,088		129,088		129,088
Total assets at fair value	$	—	$	—	$	189,183	$	189,183	$	189,183

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

	June 30,				December 31,
	2011				2010
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets:
Cash and cash equivalents	$	344,265	$	344,265	$	294,214	$	294,214
Securities available for sale		217,556		217,556		202,002		202,002
Securities held to maturity		—		—		465		467
Loans held for sale		617		624		1,299		1,317
Loans, net		1,497,775		1,481,977		1,678,548		1,664,126
FHLB and other stock		12,734		12,734		12,734		12,734
Cash surrender value of life insurance		32,040		32,040		31,479		31,479
Accrued interest receivable		6,830		6,830		7,845		7,845
Financial liabilities:
Deposit accounts	$	1,883,388	$	1,905,599	$	1,976,854	$	1,987,105
Federal funds purchased and repurchase Agreements		18,713		18,713		19,413		19,413
FHLB Advances and notes payable		157,859		167,017		158,653		166,762
Subordinated debentures		88,662		60,552		88,662		64,817
Accrued interest payable		2,808		2,808		2,140		2,140

The following methods and assumptions were used to estimate the fair values for financial instruments that are not disclosed previously in this note. 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. No adjustment has been made for illiquidity in the market on loans as there is no information from which to reasonably base this estimate. Liabilities for FHLB advances and notes payable are estimated using rates of debt with similar terms and remaining maturities. Fair values for subordinated debentures is estimated by discounting future cash flows using current market rates for similar non-investment grade and unrated instruments. 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.

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Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Total		Preferred Stock	Common Stock	Warrants For Common Stock	Additional Paid-in Capital	Accumulated (Deficit)	Accumulated Other Comprehensive Income
Beginning balance at Dec. 31, 2010	$ 143,897	[1]	$ 68,121	$ 26,378	$ 6,934	$ 188,901	$ (147,436)	$ 999
Beginning balance, shares at Dec. 31, 2010	13,188,896			13,188,896
Preferred stock transactions:
Accretion of preferred stock discount			694				(694)
Preferred stock dividends accrued	(1,806)						(1,806)
Common stock transactions:
Issuance of restricted common shares, shares				77,356
Issuance of restricted common shares	183			154		29
Forfeiture of restricted common shares, shares				(8,646)
Forfeiture of restricted common shares	(104)			(17)		(87)
Compensation expense:
Stock options	50					50
Restricted stock	158					158
Comprehensive income/(loss):
Net (loss)	(21,445)						(21,445)
Change in unrealized gains, net of reclassification and taxes	1,113							1,113
Total comprehensive income/(loss)	(20,331)
Ending balance at Jun. 30, 2011	$ 122,046		$ 68,815	$ 26,515	$ 6,934	$ 189,051	$ (171,381)	$ 2,112
Ending balance, shares at Jun. 30, 2011	13,257,606			13,257,606

[1] Derived from the audited consolidated balance sheet, as filed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

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Securities

6 Months Ended

Jun. 30, 2011

Securities [Abstract]

SECURITIES

NOTE 2 — SECURITIES

Securities are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available for Sale
June 30, 2011
U.S. government agencies	$	68,950	$	210	$	(282	)	$	68,878
States and political subdivisions		28,893		843		(392	)		29,344
CMO Agency		88,678		2,442		(166	)		90,954
CMO Non-Agency		3,354		32		(75	)		3,311
Mortgage-backed securities		22,362		1,032		(6	)		23,388
Trust preferred securities		1,844		—		(163	)		1,681
	$	214,081	$	4,559	$	(1,084	)	$	217,556
December 31, 2010
U.S. government agencies	$	84,106	$	115	$	(922	)	$	83,299
States and political subdivisions		31,192		705		(396	)		31,501
CMO Agency		62,589		1,858		(265	)		64,182
CMO Non-Agency		3,454		43		(104	)		3,393
Mortgage-backed securities		17,168		815		(19	)		17,964
Trust preferred securities		1,850		—		(187	)		1,663
	$	200,359	$	3,536	$	(1,893	)	$	202,002
Held to maturity
December 31, 2010
States and political subdivisions	$	215	$	1	$	—		$	216
Other securities		250		1		—			251
	$	465	$	2	$	—		$	467

Contractual maturities of securities at June 30, 2011 are shown below. Securities not due at a single maturity date, collateralized mortgage obligations and mortgage-backed securities are shown separately.

	Available for Sale
	Fair
	Value
Due in one year or less	$	1,018
Due after one year through five years		4,676
Due after five years through ten years		52,499
Due after ten years		41,710
Collateralized mortgage obligations		94,265
Mortgage-backed securities		23,388
Total maturities	$	217,556

There were no realized gross gains or (losses) from sales of investment securities for the three and six month periods ended June 30, 2011 and 2010, respectively.

Securities with a carrying value of $190,329 and $135,692 at June 30, 2011 and December 31, 2010, respectively, were pledged for public deposits and securities sold under agreements to repurchase and to the Federal Reserve Bank. The balance of pledged securities in excess of the pledging requirements was $27,833 and $7,983 at June 30, 2011 and December 31, 2010, respectively.

Securities with unrealized losses at June 30, 2011 and December 31, 2010 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, 2011
U. S. government agencies	$	23,690	$	(282	)	$	—	$	—		$	23,690	$	(282	)
States and political subdivisions		1,425		(162	)		1,754		(230	)		3,179		(392	)
CMO Agency		10,372		(166	)		—		—			10,372		(166	)
CMO Non-Agency		—		—			2,728		(75	)		2,728		(75	)
Mortgage-backed securities		2,040		(3	)		5		(3	)		2,045		(6	)
Trust preferred securities		—		—			1,681		(163	)		1,681		(163	)
Total temporarily impaired	$	37,527	$	(613	)	$	6,168	$	(471	)	$	43,695	$	(1,084	)
December 31, 2010
U. S. government agencies	$	65,178	$	(922	)	$	—	$	—		$	65,178	$	(922	)
States and political subdivisions		2,488		(114	)		1,659		(282	)		4,147		(396	)
CMO Agency		14,666		(265	)		—		—			14,666		(265	)
CMO Non-Agency		—		—			2,699		(104	)		2,699		(104	)
Mortgage-backed securities		2,821		(17	)		8		(2	)		2,829		(19	)
Trust preferred securities		—		—			1,663		(187	)		1,663		(187	)
Total temporarily impaired	$	85,153	$	(1,318	)	$	6,029	$	(575	)	$	91,182	$	(1,893	)

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

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

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

The following table presents more detail on selective Company security holdings as of June 30, 2011. These details are listed separately due to the inherent level of risk for OTTI on these securities.

			Current
			Credit	Book		Fair		Unrealized
Description	Cusip#		Rating	Value		Value		Loss
Collateralized mortgage obligations
Wells Fargo — 2007 - 4 A21		94985RAW2	Caa2	$	2,802	$	2,728	$	(74	)
Trust preferred securities
West Tennessee Bancshares, Inc.		956192AA6	N/A		675		638		(37	)

The following table presents a roll-forward of the cumulative amount of credit losses on the Company’s investment securities that have been recognized through earnings as of June 30, 2011 and 2010. There were no credit losses on the Company’s investment securities recognized in earnings for the three and six months ended June 30, 2011.

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

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Loans

6 Months Ended

Jun. 30, 2011

Loans [Abstract]

LOANS

NOTE 3 — LOANS

Loans at June 30, 2011 and December 31, 2010 were as follows:

	June 30,			December 31,
	2011			2010
Commercial real estate	$	932,955		$	1,080,805
Residential real estate		372,320			378,783
Commercial		193,158			222,927
Consumer		74,408			75,498
Other		3,058			1,913
Unearned income		(15,396	)		(14,548	)
Loans, net of unearned income	$	1,560,503		$	1,745,378
Allowance for loan losses	$	(62,728	)	$	(66,830	)

Activity in the allowance for loan losses for the three and six months ended June 30, 2011 and 2010 is as follows:

	June 30,			June 30,
	2011			2010
Beginning balance	$	66,830		$	50,161
Add (deduct):
Provision for loan losses		28,229			8,638
Loans charged off		(33,632	)		(10,049	)
Recoveries of loans charged off		1,301			1,299
Balance, end of year	$	62,728		$	50,049

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

3 Months Ended Allowance Rollforward:

	Commercial			Residential
	Real Estate			Real Estate			Commercial			Consumer			Other		Total
June 30, 2011
Allowance for loan losses:
Beginning balance	$	53,366		$	4,382		$	5,645		$	1,708		$	8	$	65,109
Add (deduct):
Charge-offs		(14,854	)		(506	)		(1,341	)		(524	)		—		(17,225	)
Recoveries		216			24			118			153			—		511
Provision		10,744			997			1,011			1,491			—		14,333
Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728

6 Months Ended Allowance Rollforward:

	Commercial			Residential
	Real Estate			Real Estate			Commercial			Consumer			Other		Total
June 30, 2011
Allowance for loan losses:
Beginning balance	$	54,203		$	4,431		$	5,080		$	3,108		$	8	$	66,830
Add (deduct):
Charge-offs		(29,775	)		(819	)		(2,069	)		(969	)		—		(33,632	)
Recoveries		413			53			496			339			—		1,301
Provision		24,631			1,232			2,016			350			—		28,229
Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728
As of June 30, 2011
Allowance for loan losses:
Allocation for loans individually evaluated for impairment	$	19,296		$	229		$	1,071		$	88		$	—	$	20,684
Allocation for loans collectively evaluated for impairment		30,176			4,668			4,452			2,740			8		42,044
Ending balance	$	49,472		$	4,897		$	5,523		$	2,828		$	8	$	62,728
As of December 31, 2010
Allowance for loan losses:
Allocation for loans individually evaluated for impairment	$	22,939		$	1,027		$	722		$	146		$	—	$	24,834
Allocation for loans collectively evaluated for impairment		31,264			3,404			4,358			2,962			8		41,996
Ending balance	$	54,203		$	4,431		$	5,080		$	3,108		$	8	$	66,830
As of June 30, 2011
Loans:
Ending balance: individually evaluated for impairment	$	139,240		$	9,044		$	8,036		$	988		$	—	$	157,308
Ending balance: collectively evaluated for impairment	$	793,715		$	356,800		$	185,122		$	64,500		$	3,058	$	1,403,195
As of December 31, 2010
Loans:
Ending balance: individually evaluated for impairment	$	170,175		$	8,697		$	6,149		$	970		$	—	$	185,991
Ending balance: collectively evaluated for impairment	$	910,630		$	363,506		$	216,778		$	66,470		$	1,913	$	1,559,387

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

											3 Months Ended				6 Months Ended
	Unpaid		Recorded		Recorded		Total				Average		Interest		Average		Interest
	Principal		investment with		investment		Recorded		Related		Recorded		Income		Recorded		Income
	Balance		no allowance		with allowance		Investment		Allowance		Investment		Recognized		Investment		Recognized
Commercial Real Estate:
Speculative 1-4 Family	$	92,992	$	33,514	$	32,970		66,484	$	13,942	$	67,203	$	178	$	79,743	$	231
Construction		45,137		22,341		7,725		30,066		2,700		31,769		75		49,747		71
Owner Occupied		14,385		15,162		353		15,515		100		15,966		57		15,144		18
Non-owner Occupied		22,839		18,559		7,497		26,056		2,554		26,883		169		44,177		182
Other		1,159		1,119		—		1,119		—		1,160		—		706		—
Residential Real Estate:
HELOC		3,173		3,369		—		3,369		—		3,381		23		3,206		15
Mortgage-Prime		5,097		4,399		656		5,055		156		5,237		37		6,334		41
Mortgage-Subprime		484		—		484		484		73		474		—		562		—
Other		156		136		—		136		—		137		1		142		1
Commercial:		8,945		3,380		4,656		8,036		1,071		8,056		36		7,825		17
Other		—		—		—		—		—		—		—		—		—
Consumer:
Prime		235		225		—		225		—		234		2		235		3
Subprime		262		—		262		262		38		252		—		169		—
Auto-Subprime		501		—		501		501		50		490		—		457		—
Other:		—		—		—		—		—		—		—		—		—
Total		195,365	$	102,204	$	55,104		157,308		20,684		161,242		578		208,447		579

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

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
Commercial Real Estate:
Speculative 1-4 Family	$	72,138	$	98,141	$	11,830	$	85,487	$	2,292
Construction		56,758		69,355		8,366		63,710		2,565
Owner Occupied		13,590		14,513		851		14,119		644
Non-owner Occupied		25,824		27,561		1,823		28,786		1,375
Other		1,865		2,090		69		2,278		66
Residential Real Estate:
HELOC		2,807		2,894		346		2,603		88
Mortgage-Prime		4,539		4,722		590		4,661		209
Mortgage-Subprime		370		370		57		370		—
Other		981		1,285		34		2,419		47
Commercial:		6,149		7,510		722		6,729		171
Consumer:
Prime		217		228		32		252		13
Subprime		228		228		35		228		—
Auto-Subprime		525		525		79		525		—
Other:		—		—		—		—		—
Total		185,991		229,422		24,834		212,167		7,470

The Bank manages the loan portfolio by assigning one of nine credit risk ratings based on an internal assessment of credit risk. The credit risk categories are prime, desirable, satisfactory I or pass, satisfactory II, acceptable with care, management watch, substandard, and loss.

Prime credit risk rating: Assets of this grade are the highest quality credits of the Bank. They exceed substantially all the Bank’s underwriting criteria, and provide superior protection for the Bank through the paying capacity of the borrower and value of the collateral. The Bank’s credit risk is considered to be negligible. Included in this section are well-established borrowers with significant, diversified sources of income and net worth, or borrowers with ready access to alternative financing and unquestioned ability to meet debt obligations as agreed. A loan secured by cash or other highly liquid collateral, where the Bank holds such collateral, may be assigned this grade.

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

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

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

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

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

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

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

Credit quality indicators by class are presented below as of June 30, 2011:

	Speculative 1-4				Owner		Non-Owner
	Family		Construction		Occupied		Occupied		Other
Commercial Real Estate Credit Exposure
Prime	$	—	$	—	$	—	$	—	$	—
Desirable		—		1,585		905		168		—
Satisfactory tier I		2,535		910		24,776		26,888		654
Satisfactory tier II		12,294		19,052		101,512		155,877		6,171
Acceptable with care		57,686		42,313		58,237		172,882		6,005
Management Watch		24,454		14,637		7,535		35,457		2,024
Substandard		73,833		32,509		16,645		32,427		2,984
Loss		—		—		—		—		—
Total		170,802		111,006		209,610		423,699		17,838

Credit quality indicators by class are presented below as of December 31, 2010:

	Speculative 1-4				Owner		Non-Owner
	Family		Construction		Occupied		Occupied		Other
Commercial Real Estate Credit Exposure
Prime	$	—	$	—	$	—	$	—	$	—
Desirable		—		1,573		968		177		—
Satisfactory tier I		2,836		978		38,623		56,221		4,246
Satisfactory tier II		14,010		34,239		102,383		130,850		17,999
Acceptable with care		69,902		47,093		62,198		159,216		45,597
Management Watch		27,383		15,259		5,298		26,415		2,965
Substandard		91,845		61,388		16,289		38,037		6,817
Loss		—		—		—		—		—
Total		205,976		160,530		225,759		410,916		77,624

	June 30,		December 31,
	2011		2010
	Commercial		Commercial
Commercial Credit Exposure
Prime	$	1,421	$	1,236
Desirable		4,595		7,951
Satisfactory tier I		29,006		33,859
Satisfactory tier II		76,894		91,505
Acceptable with care		63,420		72,286
Management Watch		5,077		8,511
Substandard		12,745		7,579
Loss		—		—
Total		193,158		222,927

As of June 30, 2011

					Mortgage –
	HELOC		Mortgage		Subprime		Other
Consumer Real Estate Credit Exposure
Pass	$	192,875	$	147,183	$	11,682	$	3,304
Management Watch		797		2,076		—		—
Substandard		3,055		4,750		—		122
Total		196,727		154,009		11,682		3,426

As of December 31, 2010

					Mortgage –
	HELOC		Mortgage		Subprime		Other
Consumer Real Estate Credit Exposure
Pass	$	188,086	$	131,845	$	11,692	$	29,833
Management Watch		1,017		317		—		—
Substandard		2,807		5,117		50		1,529
Total		191,910		137,279		11,742		31,362

			Consumer –		Consumer Auto
As of June 30, 2011	Consumer – Prime		Subprime		– Subprime
Consumer Credit Exposure
Pass	$	32,195	$	13,515	$	19,453
Management Watch		—		—		—
Substandard		225		8		92
Total		32,420		13,523		19,545

			Consumer –		Consumer Auto
As of December 31, 2010	Consumer – Prime		Subprime		– Subprime
Consumer Credit Exposure
Pass	$	35,029	$	13,093	$	18,588
Management Watch		—		—		—
Substandard		217		39		474
Total		35,246		13,132		19,062

A substantial portion of commercial real estate loans are secured by real estate in markets in which the Company is located. These loans are often restructured with interest reserves to fund interest costs during the construction and development period. Additionally, certain of these loans are structured with interest-only terms. A portion of the consumer mortgage and commercial real estate portfolios were originated through the permanent financing of construction, acquisition and development loans. The prolonged economic downturn has negatively impacted many borrower’s and guarantors’ ability to make payments under the terms of the loans as their liquidity has been depleted. Accordingly, the ultimate collectability of a substantial portion of these loans and the recovery of a substantial portion of the carrying amount of other real estate owned are susceptible to changes in real estate values in these areas. Continued economic distress could negatively impact additional borrowers’ and guarantors’ ability to repay their debt which will make more of the Company’s loans collateral dependent.

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

													Recorded
													Investment
					Greater								> 90 Days
	30-59 Days		60-89 Days		Than 90		Total Past						and
	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial real estate:
Speculative 1-4 Family	$	6,221	$	331	$	38,835	$	45,387	$	125,415	$	170,802	$	—
Construction		19		18,225		3,332		21,576		89,430		111,006		—
Owner Occupied		1,262		1,865		9,374		12,501		197,109		209,610		—
Non-owner Occupied		4,293		3,411		6,495		14,199		409,500		423,699		—
Other		232		507		114		853		16,985		17,838		160
Residential real estate:
HELOC		1,264		221		612		2,097		194,630		196,727		—
Mortgage-Prime		2,773		930		2,270		5,973		148,036		154,009		—
Mortgage-Subprime		75		—		—		75		11,607		11,682		—
Other		148		46		115		309		3,117		3,426		—
Commercial		4,330		42		3,401		7,773		185,385		193,158		248
Consumer:
Prime		153		39		31		223		32,196		32,419		—
Subprime		164		62		10		236		13,287		13,523		—
Auto-Subprime		572		139		134		845		18,701		19,546
Other		—		—		—		—		3,058		3,058		—
Total		21,506		25,818		64,723		112,047		1,448,456		1,560,503		408

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

													Recorded
													Investment
					Greater								> 90 Days
	30-59 Days		60-89 Days		Than 90		Total Past						and
	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial real estate:
Speculative 1-4 Family	$	22,267	$	1,777	$	30,802	$	54,846	$	151,130	$	205,976	$	1,758
Construction		14,541		—		26,915		41,456		119,074		160,530		—
Owner Occupied		8,114		1,633		4,137		13,884		211,875		225,759		—
Non-owner Occupied		4,014		5,961		8,814		18,789		392,127		410,916		170
Other		116		865		1,491		2,472		75,152		77,624		18
Residential real estate:
HELOC		747		358		644		1,749		190,161		191,910		—
Mortgage-Prime		1,359		915		1,779		4,053		133,226		137,279		8
Mortgage-Subprime		100		51		98		249		11,493		11,742		—
Other		403		176		566		1,145		30,217		31,362		19
Commercial		2,422		593		3,922		6,937		215,990		222,927		92
Consumer:
Prime		315		86		108		509		34,737		35,246		29
Subprime		155		64		6		225		12,907		13,132		—
Auto-Subprime		476		166		101		743		18,319		19,062		18
Other		73		—		—		73		1,840		1,913		—
Total		55,102		12,645		79,383		147,130		1,598,248		1,745,378		2,112

Non-accrual loans by class are presented below:

	June 30, 2011		December 31, 2010
Commercial real estate:
Speculative 1-4 Family	$	61,521	$	63,298
Construction		29,550		41,789
Owner Occupied		12,808		5,511
Non-owner Occupied		12,747		18,772
Other		1,119		1,865
Residential real estate:
HELOC		1,797		1,668
Mortgage-Prime		3,355		3,350
Mortgage-Subprime		275		254
Other		115		957
Commercial		7,754		5,813
Consumer:
Prime		126		130
Subprime		167		107
Auto-Subprime		215		193
Other		—		—
Total		131,549		143,707

Nonperforming loans were as follows:

	June 30, 2011		December 31, 2010
Loans past due 90 days still on accrual	$	408	$	2,112
Nonaccrual loans		131,549		143,707
Total	$	131,957	$	145,819

Nonperforming loans and impaired loans are defined differently. Nonperforming loans are loans that are 90 days past due and still accruing interest and nonaccrual loans. Impaired loans are loans that based upon current information and events it is considered probable that the Company will be unable to collect all amounts of contractual interest and principal as scheduled in the loan agreement. Some loans may be included in both categories, whereas other loans may only be included in one category.

The Company may elect to formally restructure a loan due to the weakening credit status of a borrower so that the restructuring may facilitate a repayment plan that minimizes the potential losses that the Company may have to otherwise incur. At June 30, 2011, the Company had $44,580 of restructured loans of which $23,183 was classified as non-accrual and the remaining were performing. The Company had taken charge-offs of $3,181 on the restructured non-accrual loans as of June 30, 2011. At December 31, 2010, the Company had $49,537 of restructured loans of which $9,597 was classified as non-accrual and the remaining were performing. The Company had taken charge-offs of $843 on the restructured non-accrual loans as of December 31, 2010.

The aggregate amount of loans to executive officers and directors of the Company and their related interests was approximately $6,784 and $7,848 at June 30, 2011 and December 31, 2010, respectively.

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Earnings Per Share of Common Stock

6 Months Ended

Jun. 30, 2011

Earnings Per Share [Abstract]

EARNINGS PER SHARE OF COMMON STOCK

NOTE 4 — EARNINGS PER SHARE OF COMMON STOCK

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

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

	Three Months Ended
	June 30,
	2011			2010
Basic Earnings (loss) Per Share
Net income (loss)	$	(11,134	)	$	2,811
Less: preferred stock dividends and accretion of discount on warrants		1,250			1,250
Net income (loss) available to common shareholders	$	(12,384	)	$	1,561
Weighted average common shares outstanding		13,126,923			13,097,611
Basic earnings (loss) per share available to common shareholders	$	(0.94	)	$	0.12
Diluted Earnings (loss) Per Share
Net income (loss)	$	(11,134	)	$	2,811
Less: preferred stock dividends and accretion of discount on warrants		1,250			1,250
Net income (loss) available to common shareholders	$	(12,384	)	$	1,561
Weighted average common shares outstanding		13,126,923			13,097,611
Add: Dilutive effects of assumed conversions of restricted stock and exercises of stock options and warrants		—			60,520
Weighted average common and dilutive potential common shares outstanding		13,126,923			13,158,131
Diluted earnings (loss) per share available to common shareholders	$	(0.94	)	$	0.12

¹ Diluted weighted average shares outstanding exclude 105,734 restricted average shares for the three month period ended June 30, 2011 because their impact would be anti-dilutive.

	Six Months Ended
	June 30,
	2011			2010
Basic Earnings (Loss) Per Common Share
Net income (loss)	$	(21,445	)	$	6,007
Less: preferred stock dividends and accretion of discount on warrants		2,500			2,500
Net income (loss) available to common shareholders	$	(23,945	)	$	3,507
Weighted average common shares outstanding		13,117,811			13,090,021
Basic earnings (loss) per share available to common shareholders	$	(1.83	)	$	.27
Diluted Earnings (Loss) Per Common Share
Net income (loss)	$	(21,445	)	$	6,007
Less: preferred stock dividends and accretion of discount on warrants		2,500			2,500
Net income (loss) available to common shareholders	$	(23,945	)	$	3,507
Weighted average common shares outstanding		13,117,811			13,090,021
Add: Dilutive effects of assumed conversions of restricted stock and exercises of stock options and warrants1		—			58,025
Weighted average common and dilutive potential common shares outstanding		13,117,811			13,148,226
Diluted earnings (loss) per share available to common shareholders	$	(1.83	)	$	.27

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

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Condensed Consolidated Statements of Income (Loss) (Unaudited) (Parenthetical)	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011
Weighted average shares outstanding:
Diluted weighted average shares outstanding excluding restricted average shares	92,524	85,697

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities
Net income (loss)	$ (21,445)	$ 6,007
Adjustments to reconcile net income / (loss) to net cash provided by operating Activities
Provision for loan losses	28,229	8,638
Depreciation and amortization	3,442	3,619
Security amortization and accretion, net	199	235
Write down of investments for impairment		93
Net gain on sale of mortgage loans	(185)	(222)
Originations of mortgage loans held for sale	(14,560)	(18,759)
Proceeds from sales of mortgage loans	15,427	19,685
Increase in cash surrender value of life insurance	(561)	(595)
Net losses from sales of fixed assets	223	5
Stock-based compensation expense	287	316
Net loss on other real estate and repossessed assets	6,429	1,435
Deferred tax benefit		(516)
Net changes:
Other assets	12,193	6,631
Accrued interest payable and other liabilities	2,779	(3,561)
Net cash provided by operating activities	32,457	23,011
Cash flows from investing activities
Purchase of securities available for sale	(59,790)	(85,684)
Proceeds from maturities of securities available for sale	45,868	70,025
Proceeds from maturities of securities held to maturity	465	10
Net change in loans	111,627	77,775
Proceeds from sale of other real estate	15,154	8,357
Improvements to other real estate	(261)	(450)
Proceeds from sale of fixed assets	7
Premises and equipment expenditures	(516)	(951)
Net cash provided by investing activities	112,554	69,082
Cash flows from financing activities
Net change in deposits	(93,466)	(87,072)
Net change in brokered deposits		(5,185)
Net change in repurchase agreements	(700)	(209)
Repayments of FHLB advances and notes payable	(794)	(161)
Preferred stock dividends paid		(1,805)
Net cash (used) in financing activities	(94,960)	(94,432)
Net change in cash and cash equivalents	50,051	(2,339)
Cash and cash equivalents, beginning of period	294,214	210,494
Cash and cash equivalents, end of period	344,265	208,155
Supplemental disclosures - cash and noncash
Interest paid	13,313	20,639
Loans converted to other real estate	41,261	30,879
Unrealized gain on available for sale securities, net of tax	1,113	1,863
Loans Originated to finance / sell other real estate	1,568
Preferred Dividends Declared	$ 1,806

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Investment Agreement With North American Financial Holdings, Inc.

6 Months Ended

Jun. 30, 2011

Investment Agreement With North American Financial Holdings, Inc. [Abstract]

INVESTMENT AGREEMENT WITH NORTH AMERICAN FINANCIAL HOLDINGS, INC.

NOTE 9 —INVESTMENT AGREEMENT WITH NORTH AMERICAN FINANCIAL HOLDINGS, INC.

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

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

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

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

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

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

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

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

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

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

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and due from banks	$ 339,242	$ 289,358	[1]
Federal funds sold	5,023	4,856	[1]
Cash and cash equivalents	344,265	294,214	[1]
Interest earning deposits in other banks	0	0	[1]
Securities available for sale	217,556	202,002	[1]
Securities held to maturity (with a market value of $467)	0	465	[1]
Loans held for sale	617	1,299	[1]
Loans, net of unearned interest	1,560,503	1,745,378	[1]
Allowance for loan losses	(62,728)	(66,830)	[1]
Other real estate owned and repossessed assets	79,690	60,095	[1]
Premises and equipment, net	76,886	78,794	[1]
FHLB and other stock, at cost	12,734	12,734	[1]
Cash surrender value of life insurance	32,040	31,479	[1]
Core deposit and other intangibles	5,502	6,751	[1]
Deferred tax asset (net of valuation allowance of $52,268 and $43,455)	5,645	2,177	[1]
Other assets	21,105	37,482	[1]
Total assets	2,293,815	2,406,040	[1]
Liabilities
Non-interest bearing deposits	171,369	152,752	[1]
Interest bearing deposits	1,710,620	1,822,703	[1]
Brokered deposits	1,399	1,399	[1]
Total deposits	1,883,388	1,976,854	[1]
Repurchase agreements	18,713	19,413	[1]
FHLB advances and notes payable	157,859	158,653	[1]
Subordinated debentures	88,662	88,662	[1]
Accrued interest payable and other liabilities	23,147	18,561	[1]
Total liabilities	2,171,769	2,262,143	[1]
Shareholders' equity
Preferred stock: no par, 1,000,000 shares authorized, 72,278 shares outstanding	68,815	68,121	[1]
Common stock: $2 par, 20,000,000 shares authorized, 13,257,606 and 13,188,896 shares outstanding	26,515	26,378	[1]
Common stock warrants	6,934	6,934	[1]
Additional paid-in capital	189,051	188,901	[1]
Accumulated Deficit	(171,381)	(147,436)	[1]
Accumulated other comprehensive income	2,112	999	[1]
Total shareholders' equity	122,046	143,897	[1]
Total liabilities and shareholders' equity	$ 2,293,815	$ 2,406,040	[1]

[1] Derived from the audited consolidated balance sheet, as filed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010.