PRESS RELEASE



                           JEFFERSON BANCSHARES, INC.
                       ANNOUNCES STOCK REPURCHASE PROGRAM

         February 24, 2006, Morristown, TN. Jefferson Bancshares, Inc. (Nasdaq:
JFBI) today announced that the Company's board of directors has approved the
repurchase of up to 10% of the Company's outstanding common stock, or
approximately 690,000 shares. The program will commence immediately.
Repurchases, which will be conducted through open market purchases or privately
negotiated transactions, will be made from time to time depending on market
conditions and other factors. Repurchased shares will be held in treasury.

         Jefferson Bancshares, Inc. is the parent corporation for Jefferson
Federal Bank, which is headquartered in Morristown, Tennessee. The Bank has
banking facilities located in Hamblen and Knox County, Tennessee. More
information about Jefferson Bancshares and Jefferson Federal Bank can be found
at its website: www.jeffersonfederal.com.
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CONTACT:

Jefferson Bancshares, Inc., Morristown
Anderson L. Smith, 423-586-8421
or
Jane P. Hutton, 423-586-8421