EXHIBIT 99.1


PRESS RELEASE



                           JEFFERSON BANCSHARES, INC.
                      TO INITIATE STOCK REPURCHASE PROGRAM

         July 30, 2004, Morristown, TN. Jefferson Bancshares, Inc. (Nasdaq:
JFBI) today announced that the Company's board of directors has approved the
repurchase of up to 838,552 shares, or 10% of the Company's outstanding common
stock. 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
and will be available for the Company's benefit plans.

         Jefferson Bancshares, Inc. is the holding company for Jefferson Federal
Bank, a federally chartered stock thrift institution headquartered in
Morristown, Tennessee. Jefferson Federal is a community oriented financial
institution offering traditional financial services within its local communities
through its main office and two drive through facilities in Morristown. More
information about Jefferson Bancshares and Jefferson Federal Bank can be found
at its website: www.jeffersonfederal.com.
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Contact:
Anderson L. Smith, 423-586-8421
Jane P. Hutton, 423-586-8421