Jefferson Bancshares, Inc. (the "Company"), the holding company for Jefferson Federal Bank (the "Bank"), recently received final appraisals for seven branch offices acquired in connection with the Company's acquisition of State of Franklin Bancshares, Inc. and State of Franklin Savings Bank on October 31, 2008. The appraisals have resulted in an increase of $5.5 million to the provisional carrying values of these assets as previously recorded as of the date of the acquisition. This increase in carrying value was offset by a reduction of $3.5 million in the carrying amount of goodwill and the establishment of a $2.0 million deferred tax liability. These adjustments, applied retrospectively for the periods ended March 31, 2009 and December 31, 2008, increased the Bank's capital ratios at March 31, 2009 and December 31, 2008 as follows:

                                                  Previously
                                                   Reported          Amended
                                                    Ratio             Ratio
                                               ---------------    --------------
           MARCH 2009

           Tier 1 leverage ratio                     6.74%             7.56%
           Tier 1 risk-based capital ratio           8.19%             9.13%
           Total risk-based capital ratio            9.14%            10.07%


                                                  Previously
                                                   Reported          Amended
                                                    Ratio             Ratio
                                               ---------------    --------------

           DECEMBER 2008

           Tier 1 leverage ratio                     6.48%             7.31%
           Tier 1 risk-based capital ratio           8.16%             9.18%
           Total risk-based capital ratio            9.00%            10.01%

Because of the increases in the Bank's total risk-based capital ratio, the Bank was considered "well capitalized" under the regulatory framework for prompt corrective action at March 31, 2009 and December 31, 2008. Accordingly, the Bank may, without applying for a waiver from the Federal Deposit Insurance Corporation (the "FDIC"), obtain additional brokered deposits, roll over existing brokered deposits or offer rates of interest which are more than 75 basis points higher than the prevailing rates of interest offered on deposits by other insured depository institutions in its normal market area or a national rate specified in the FDIC's regulations. The Bank has filed amended Call Reports with the FDIC for the periods ended March 31, 2009 and December 31, 2008 reflecting these adjustments.