SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss. 240.14a-12

STATE OF FRANKLIN BANCSHARES, INC.
(Name of Registrant as Specified In Its Charter)

Charles E. Allen, Jr.
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the Appropriate box):

[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a6(i)(4) and
0-11.

1. Title of each class of securities to which transaction
applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
--------
2) Form, Schedule or Registration Statement No:
----------------
3) Filing Party:
-------------------------------------
4) Date Filed:
-------------------------------------

STATE OF FRANKLIN BANCSHARES, INC.
1907 North Roan Street
Johnson City, Tennessee 37601

April 15, 2002

To the Shareholders of
STATE OF FRANKLIN BANCSHARES, INC.

You are cordially invited to attend the annual meeting of shareholders
of State of Franklin Bancshares, Inc., which will be held at the Company's
offices at 1907 North Roan Street, Johnson City, Tennessee, on Monday, May 20,
2002, at 11:00 a.m., Eastern Time.

At the meeting, you will be asked to:

o elect four directors to serve until the 2005 annual meeting
of shareholders and elect one director to serve until the
2003 annual meeting of shareholders;

o ratify the appointment of Baylor and Backus as State of
Franklin's independent accountants and auditors for 2002;
and

o transact other business that properly comes before the
meeting or any adjournment of the meeting.

We have enclosed a notice of the annual meeting of shareholders, a
proxy statement, and a form of proxy. The matters listed in the notice of annual
meeting are more fully described in the proxy statement.

It is important that your shares are represented and voted at the
meeting, regardless of the size of your holdings. Accordingly, we would
appreciate your completing the enclosed form of proxy whether or not you plan to
attend the meeting. If you are present at the meeting and wish to vote your
shares personally, your form of proxy can be revoked upon your request prior to
balloting. If you wish to vote personally at the meeting, but your shares are
held in the name of a broker, trust, bank or other nominee, you should bring
with you a form of proxy or letter from the broker, trustee, bank or nominee
confirming your beneficial ownership of the shares.

We urge you to return your form of proxy by mailing it in the enclosed
postage-paid envelope to be received no later than 5:00 p.m. on May 17, 2002.

Upon request, we will provide to you, without charge, a copy of our
annual report on Form 10-KSB for the year ended December 31, 2001 as filed with
the SEC. Requests should be directed to Becky Mominee, Secretary, State of
Franklin Bancshares, Inc., 1907 North Roan Street, Johnson City, Tennessee
37601, (423) 926-3600.

Sincerely yours,

/s/ Charles E. Allen, Jr. /s/ Randal R. Greene
------------------------- --------------------
CHARLES E. ALLEN, JR. RANDAL R. GREENE
Chairman President
and Chief Executive Officer

STATE OF FRANKLIN BANCSHARES, INC.
1907 North Roan Street
Johnson City, Tennessee 37601

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 20, 2002

The regular annual meeting of shareholders of State of Franklin
Bancshares, Inc. will be held at the Company's offices at 1907 North Roan
Street, Johnson City, Tennessee, on Monday, May 20, 2002, at 11:00 a.m., Eastern
Time, for the following purposes:

1. Election of Directors. To elect four directors to serve until the
2005 annual meeting of shareholders or until their successors
have been duly elected and qualified and to elect one director to
serve until the 2003 annual meeting of shareholders or until his
successor has been duly elected and qualified.

2. Ratification of Auditors. To ratify the appointment of Baylor and
Backus as State of Franklin's independent accountants and
auditors for 2002.

3. Other Business. To transact such other business as may properly
come before the meeting or any adjournment of the meeting.

Shareholders of record at the close of business on March 31, 2002, are
entitled to notice of and to vote on all matters presented at the Annual Meeting
of Shareholders. On that day 1,465,512 shares of common stock were outstanding.
Each share entitles the holder to one vote.

By Order of the Board of Directors

/s/ Becky Mominee
-----------------
BECKY MOMINEE
Secretary

April 15, 2002

- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting and regardless of
the number of shares you own, please mark, sign, date and return
the enclosed form of proxy as promptly as possible in the enclosed envelope.
You may nevertheless vote in person if you attend the annual meeting.
- --------------------------------------------------------------------------------

STATE OF FRANKLIN BANCSHARES, INC.
1907 North Roan Street
Johnson City, Tennessee 37601

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS

Your vote is very important. For this reason, the board of directors
is requesting that, if you are not able to attend the annual meeting of
shareholders, you allow your common stock to be represented at the meeting by
the proxies named in the enclosed proxy card. This proxy statement and the form
of proxy are being sent to you in connection with this request and are being
mailed to all shareholders beginning on April 15, 2002.

Information About the Annual Meeting

When is the annual meeting?

Monday, May 20, 2002, 11:00 a.m. Eastern Time.

Where will the annual meeting be held?

State of Franklin Savings Bank, 1907 North Roan Street, Johnson City,
Tennessee.

What items will be voted upon at the annual meeting?

You will be voting upon the following matters:

1. Election of Directors. To elect four directors to serve
until the 2005 annual meeting of shareholders or until their
successors have been duly elected and qualified and to elect
one director to serve until the 2003 annual meeting of
shareholders or until his successor has been duly elected
and qualified.

2. Ratification of Auditors. To ratify the appointment of
Baylor and Backus as State of Franklin's independent
accountants and auditors for 2002.

3. Other Business. To transact such other business as may
properly come before the meeting or any adjournment of the
meeting.

Who can vote?

You are entitled to vote your common stock if our records show that
you held your shares as of the close of business on the record date, March 31,
2002. Each shareholder is entitled to one vote for each share of common stock
held on that date. On March 31, 2001, there were 1,465,512 shares of common
stock outstanding and entitled to vote.

How do I vote by proxy?

If you sign, date and return your signed proxy card before the annual
meeting, we will vote your shares as you direct. For the election of directors,
you may vote for (1) all of the nominees, (2) none of the nominees, or (3) all
of the nominees except those you designate. For the ratification of State of
Franklin's auditors, you may vote "For" or "Against" or you may "Abstain" from
voting.

If you return your signed proxy card but do not specify how you want
to vote your shares, we will vote them

o "For" the election of all of our nominees for director;

o "For" the ratification of Baylor and Backus as our
independent auditors.

The board of directors knows of no other business to be presented at
the annual meeting. If any matters other than those set forth above are properly
brought before the annual meeting, the individuals named in your proxy card may
vote your shares in accordance with their best judgment.

How do I change or revoke my proxy?

You can change or revoke your proxy at any time before it is voted at
the annual meeting by:

(1) submitting another proxy with a more recent date than that
of the proxy first given;

(2) attending the annual meeting and voting in person; or

(3) sending written notice of revocation to our corporate
secretary, Becky Mominee.

How many votes are required?

If a quorum is present at the annual meeting,

o the director nominees will be elected by a plurality of the
votes cast in person or by proxy at the meeting; and

o the approval of independent auditors and all other matters
submitted to the shareholders will require the affirmative
vote of a majority of the shares of common stock present or
represented by proxy at the meeting.

What constitutes a "quorum" for the meeting?

A majority of the outstanding shares, present or represented by proxy,
constitutes a quorum. A quorum is necessary to conduct business at the annual
meeting. You are part of the quorum if you have voted by proxy. Abstentions,
broker non-votes and votes withheld from director nominees count as "shares
present" at the meeting for purposes of determining a quorum. However,
abstentions and broker non-votes do not count in the voting results. A broker
non-vote occurs when a broker or other nominee who holds shares for another does
not vote on a particular item because the nominee does not have discretionary
authority for that item and has not received instructions from the owner of the
shares.

Who pays for the solicitation of proxies?

We will pay the cost of preparing, printing and mailing material in
connection with this solicitation of proxies. In addition to solicitation by
mail, regular employees of State of Franklin and paid solicitors may make
solicitations personally and by telephone or otherwise. We will, upon request,
reimburse brokerage firms, banks and others for their reasonable out-of-pocket
expenses in forwarding proxy material to beneficial owners of stock or otherwise
in connection with this solicitation of proxies. We have retained the Illinois
Stock Transfer Company to assist in the solicitation for a fee of $4,375 plus
reasonable out-of-pocket expenses.

When are the 2003 shareholder proposals due?

Proposals by shareholders to be considered for inclusion in the proxy
materials solicited by the directors for the annual meeting in 2003 must be
received by the Corporate Secretary, 1907 North Roan Street, Johnson City,
Tennessee 37604, no later than December 20, 2002. The use of certified mail,
return receipt requested, is advised. To be eligible for inclusion, a proposal
must also comply with Rule 14a-8 and all other applicable provisions of
Regulation 14A under the Securities Exchange Act of 1934.

The Proposals
- --------------------------------------------------------------------------------

Proposal 1 -- Election of Directors

The Board has nominated the following persons to serve as directors:

Three-year term: Kenneth E. Cutshall, M.D. Randal R. Greene
Cameron E. Perry Henry J. Williams, M.D.

One-year term: Alan R. Hubbard

We do not anticipate that any of these nominees will be unavailable
for election but, if such a situation arises, the proxy will be voted in
accordance with the best judgment of the named proxies unless you have directed
otherwise. The remaining members of the Board listed below will continue as
members of the Board until their respective terms expire, as indicated below.

Information about the three individuals nominated as directors and the
remaining members of the Board is provided below. Shares of common stock
represented by proxy cards returned to us will be voted for the nominees listed
below unless you specify otherwise.

Nominees for Election

(Terms Expiring 2005)

Director, Year First Elected As Director Age Principal Occupation, Business and Directorships
- ---------------------------------------- --- ------------------------------------------------

Randal R. Greene, 1996 .................... 42 President of State of Franklin; President and Chief
Executive Officer of the Savings Bank
Kenneth E. Cutshall, M.D., 1996 ........... 41 Physician
Cameron E. Perry, 1996..................... 72 Banker, retired
Henry J. Williams, M.D., 1996.............. 65 Physician

(Term Expiring 2003)

The board of directors of State of Franklin recommends a vote "FOR"
the election of the nominees listed above.

Incumbent Directors
(Terms Expiring 2004)

Director, Year First Elected As Director Age Principal Occupation, Business and Directorships
- ---------------------------------------- --- ------------------------------------------------

Charles E. Allen, Jr., 1996 ............... 41 Chairman of the Board and Chief Executive Officer of
State of Franklin; Chairman of the Board and Chief
Financial Officer of the Savings Bank
Stephen K. Gross, 1996 .................... 55 Chief Financial Officer and owner of Microporous
Products, LP
Verrill M. Norwood, Jr., 1996.............. 70 Environmental consultant, retired
Vance W. Cheek, 1996....................... 78 Banker, retired

Incumbent Directors
(Terms Expiring 2003)

Director, Year First Elected As Director Age Principal Occupation, Business and Directorships
- ---------------------------------------- --- ------------------------------------------------
Charles E. Allen, Sr., M.D., 1996 .......... 71 Physician, retired
Donald R. Jeanes, 1996 ..................... 56 President of Milligan College
Richard S. Venable, 1996 ................... 57 Owner and President of R.S.V. Inc.

Except for Mr. Hubbard, all of these persons have served as directors
of State of Franklin Savings Bank since 1996 and as directors of State of
Franklin since our formation in May 1998. Charles E. Allen, Sr., M.D., is the
father of Charles E. Allen, Jr. Verrill M. Norwood, Jr., is the father-in-law of
Randal R. Greene. No director of State of Franklin is a director or executive
officer of another bank holding company, bank, savings and loan association, or
credit union. The principal occupations and employments of the persons listed
above are for the past five years except as described below:

Charles E. Allen, Jr., has served as Chairman of the Board of State of
Franklin since our organization in May 1998 and also as Chief Executive Officer
since April 2000. He has also served as Chairman of the Board and Chief
Financial Officer of the Savings Bank since its inception in February 1996. He
is a certified public accountant and a certified financial planner. He served
two terms in the Tennessee General Assembly from 1990-1994. Previously he was an
investment broker with J.C. Bradford & Co., until his resignation in August 1995
to form the Savings Bank. He is also President of Charles E. Allen Co. Inc.
which manages and is owner/partner in six Stowaway Self Service Storage
facilities in East Tennessee and western North Carolina.

Randal R. Greene has served as President of State of Franklin since
our organization in May 1998 and as President and Chief Executive Officer of the
Savings Bank since its inception in February 1996. Previously, Mr. Greene was a
senior vice president of First American National Bank serving as division
manager of the corporate division responsible for the Johnson City, Kingsport
and Bristol markets.

Alan R. Hubbard has served as a director of State of Franklin
Bancshares and State of Franklin Savings Bank since May 2001. Mr. Hubbard
retired as an investment broker with J.C. Bradford & Co. He previously owned and
operated a business in Kingsport for approximately 20 years. Mr. Hubbard served
6 years as an elected official in the Tennessee House of Representatives, 2
years as minority whip. He also served 7 years on the Tennessee Registry of
Election Finance and was a past chair. Mr. Hubbard has also been involved in
various capacities in community service organizations in Kingsport, Tennessee.

Election of directors requires the affirmative vote of the holders of
a plurality of the shares of common stock represented at the annual meeting.

- --------------------------------------------------------------------------------
4

Information about the Board of Directors

Role of the Board

Pursuant to Tennessee law, our business, property and affairs are
managed under the direction of our board of directors. The Board has
responsibility for establishing broad corporate policies and for the overall
performance and direction of State of Franklin, but is not involved in
day-to-day operations. Members of the Board keep informed of our business by
participating in Board and committee meetings, by reviewing analyses and reports
sent to them regularly, and through discussions with our executive officers.

Board Structure

State of Franklin's bylaws provide that the board of directors shall
consist of no fewer than five nor more than 25 members. The Board is currently
composed of 12 members by Board resolution. The directors are divided into three
classes, each of which is equal in number. The directors in each class hold
office for staggered terms of three years each. Staggered terms make it more
difficult for shareholders, including those holding a majority of the common
stock of State of Franklin, to force an immediate change in the composition of a
majority of the board of directors. Since the terms of only one-third of the
incumbent directors expire each year, two annual meetings of shareholders would
be required to change a majority of the directors of State of Franklin, provided
that no directors resigned, were removed, or died during their terms of office
and the vacancies created thereby were not filled by an affirmative vote of
majority of the board of directors.

2001 Board Meetings

During 2001 the board of directors of State of Franklin held 7
meetings. The directors of State of Franklin also serve as directors of the
Savings Bank. The board of directors of the Savings Bank held 13 meetings in
2001. During 2001, no director attended less than 75% of the meetings held by
the Board of State of Franklin, the Board of the Savings Bank or by any
committee on which he served, except for Stephen K. Gross.

Board Committees

The Board has two committees: the Audit Committee and the Nominating
Committee.

The Audit Committee, consisting of directors Perry, Gross, Jeanes and
Allen, Sr., is responsible for the review and evaluation of State of Franklin's
internal controls and accounting procedures. It also periodically reviews audit
reports with State of Franklin's independent auditors and recommends the annual
appointment of auditors. The Audit Committee met 6 times during 2001. The Board
has not adopted a written charter for the Audit Committee. For more information,
please see the section called "Report of the Audit Committee of the Board of
Directors."

The entire Board acts as Nominating Committee for the nomination of
members of the board of directors. The board of directors met one time in its
capacity as the Nominating Committee during 2001.

Director Compensation

Beginning with the third quarter of 2001, each director receives
quarterly payments of $900, as well as a fee of $300 for each Savings Bank Board
meeting he attends. Each director also receives a $150 fee for each Savings Bank
committee meeting he attends.

- --------------------------------------------------------------------------------
Proposal 2 -- Ratification of Appointment of Independent Auditors

The board of directors has confirmed the appointment by the Audit
Committee of Baylor and Backus as State of Franklin's independent accountants
and auditors engaged for 2002. Baylor and Backus has served as independent
accountants and auditors of State of Franklin for the year ended December 31,
2001. Representatives of the firm will be present at the annual meeting, will
have an opportunity to make a statement if they so desire, and are expected to
be available to respond to appropriate questions by shareholders.

The affirmative vote of the holders of a majority of the outstanding
shares of common stock present or represented at the annual meeting, if a quorum
exists, entitled to vote at the annual meeting is required to ratify the
appointment of Baylor and Backus as State of Franklin's independent accountants
and auditors for 2002.

The board of directors recommends a vote "FOR" ratification of the
appointment of Baylor and Backus as State of Franklin's independent accountants
and auditors for 2002.

- --------------------------------------------------------------------------------

State of Franklin Stock Ownership

The following table sets forth certain information regarding the
ownership of the common stock as of March 15, 2002, for (i) each person who owns
more than 5% of the common stock, (ii) each director and the executive officers
who are listed in the executive compensation tables in this proxy statement, and
(iii) all executive officers and directors as a group.

Amount and Nature
of Beneficial Ownership Percent
Name of Beneficial Owner (Number of Shares) of Class(1)
------------------------ ------------------ -----------

Charles E. Allen, Jr.(2)(3)....................................... 197,734 13.1
Charles E. Allen, Sr., M.D.(4).................................... 33,522 2.3
Vance W. Cheek(5)................................................. 13,022 *
Kenneth E. Cutshall, M.D.(4)...................................... 41,622 2.8
Randal R. Greene(2)(3)............................................ 163,358 10.8
Stephen K. Gross(4)............................................... 30,841 2.1
Alan R. Hubbard(6)................................................ 2,700 *
Donald R. Jeanes(4)............................................... 10,522 *
Verrill M. Norwood, Jr.(5)........................................ 40,522 2.8
Cameron E. Perry(5)............................................... 15,522 1.1
Henry J. Williams, Jr., M.D.(4)................................... 62,292 4.2
Richard S. Venable(4)............................................. 16,922 1.1
Directors and executive officers as a group (12 persons)(7)....... 477,051 29.5

State of Franklin Savings Bank Employee Stock Ownership Plan...... 151,528 10.3
- -------------------
* Less than 1%

(1) Unless otherwise indicated, beneficial ownership consists of sole
voting and investing power based on 1,465,512 shares issued and
outstanding on March 15, 2002. Options to purchase 153,008 shares are
exercisable or become exercisable within 60 days of March 15, 2002.
These shares issuable under options are deemed to be outstanding for
the purpose of computing the percentage of outstanding shares owned by
each person to whom a portion of these options relate but are not
deemed to be outstanding for the purpose of computing the percentage
owned by any other person.

(2) Includes 48,155 shares issuable within 60 days of March 15, 2002 upon
the exercise of options.

(3) Includes 86,098 shares held by the State of Franklin Savings Bank
Employee Stock Ownership Plan for which Mr. Allen and Mr. Greene serve
as co-trustees.

(4) Includes 6,522 shares issuable within 60 days of March 15, 2002 upon
the exercise of options.

(5) Includes 5,522 shares issuable within 60 days of March 15, 2002 upon
the exercise of options.

(6) Includes 1,000 shares issuable within 60 days of March 15, 2002 upon
the exercise of options.

(7) Includes 153,008 shares issuable upon the exercise of options granted
under the Stock Incentive Plan and 86,098 shares held by the State of
Franklin Savings Bank Employee Stock Ownership Plan.

Messrs. Charles E. Allen, Jr. and Randal R. Greene serve as executive
officers and directors of State of Franklin.

Executive Compensation

The following table sets forth the aggregate cash compensation paid by
State of Franklin to the Chairman and Chief Executive Officer and the President
of State of Franklin. No other executive officer of the Savings Bank received
cash compensation in excess of $100,000 for the years ended December 31, 2001,
2000 and 1999.

Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------- ------------
Securities Underlying
Name and Position Year Salary ($) Bonus($)(1) Options/SARs(#)
----------------- ---- ---------- ----------- ---------------

Charles E. Allen, Jr............................ 2001 159,500 (2) 15,823 (2)
Chairman and Chief Executive Officer 2000 140,735 24,646 18,519
1999 130,000 23,543 --

Randal R. Greene................................ 2001 152,924 38,231 --
President 2000 140,735 20,000 18,519
1999 130,000 23,543 --

- -------------------
(1) Salary and bonus amounts reflect amounts earned during the stated
fiscal year, even if paid in the subsequent fiscal year. All amounts
have been restated to reflect this position.
(2) Mr. Allen elected to receive a stock option to purchase 15,823 shares
of common stock in lieu of his 2001 bonus of $39,875. The option was
granted on March 15, 2002.

Option Grants

There were no stock options granted to any of the executive officers
during the year ended December 31, 2001.

Aggregated Option/SAR Exercises in Last Fiscal Year And Fiscal Year-End
Option/SAR Values

The following table discloses information regarding stock options held
at the end of or exercised in the year 2001 for each of the executive officers.

Shares Securities underlying Value of unexercised
acquired on Value unexercised options in-the-money options
Name exercise(1) realized (1) at December 31, 2001 at December 31, 2001 (2)
---- ----------- ------------ -------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------

Charles E. Allen, Jr. --- --- 48,155 46,910 $ 265,547 $ 103,888
Randal R. Greene .... --- --- 48,155 25,928 $ 265,547 $ 103,888
- ---------------------

(1) As of December 31, 2001, no options have been exercised by the
executive officers under the Stock Incentive Plan.
(2) Based on the appraised value of $16.20 per share of State of
Franklin's common stock as of June 30, 2001.

Report of the Audit Committee of the Board of Directors

The Audit Committee of the State of Franklin board of directors is
composed of four directors: Perry, Gross, Jeanes and Allen, Sr. Although the
common stock of State of Franklin is not traded on the National Association of
Securities Dealers Automated Quotation system (NASDAQ), we have adopted the
definition of an "independent director" provided in the NASDAQ listing
standards. Under this standard, all of the members of the Audit Committee are
independent directors except for Charles E. Allen, Sr., M.D., who is the father
of Charles E. Allen, Jr., our Chairman of the Board.

The functions of the Audit Committee include:

o recommending to the Board the appointment of independent auditors;

o approving the scope of audits and other services to be performed by
the independent and internal auditors; and

o reviewing the results of internal and external audits, the accounting
principles applied in financial reporting and the adequacy of
financial and operational controls.

The Audit Committee reviews State of Franklin's financial reporting
process on behalf of the Board. Management has the primary responsibility for
the financial statements and the reporting process, including the system of
internal controls.

In this context, the Audit Committee has met and held discussions with
management and the independent auditors for the year ended December 31, 2001,
Baylor and Backus. Management represented to the Audit Committee that State of
Franklin's financial statements were prepared in accordance with generally
accepted accounting principles, and the Audit Committee has reviewed and
discussed the financial statements with management and with the independent
auditors. The Audit Committee also discussed with the independent auditors
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees).

In addition, the Audit Committee has discussed with Baylor and Backus
the auditor's independence from State of Franklin and its management, including
matters in the written disclosures and letters provided by Baylor and Backus to
the Audit Committee as required by the Independence Standards Board Standard No.
1 (Independence Discussions With Audit Committees).

The Audit Committee has also discussed with the internal and
independent auditors the overall scope and plans for their respective audits.
The Audit Committee has met with the internal and independent auditors, with and
without management present, to discuss the results of their examinations, the
evaluations of the State of Franklin's internal controls, and the overall
quality of State of Franklin's financial reporting.

The Committee has determined that the fees paid to Baylor and Backus
by State of Franklin do not interfere with the independence of Baylor and
Backus. Further, in reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board, and the Board has approved, that
the audited financial statements be included in our Annual Report on Form 10-KSB
for the year ended December 31, 2001, for filing with the SEC. The Committee and
the Board also have recommended, subject to shareholder approval, the selection
of Baylor and Backus as our independent auditors for the upcoming year.

Members of the Audit Committee:
Charles E. Allen, Sr., M.D.
Stephen K. Gross
Donald R. Jeanes
Cameron E. Perry

Audit Fees

For services rendered in 2001 by Baylor and Backus, our principal
independent auditors, we incurred the following fees:

o Audit Fees (for the audit of the 2001 financial statements):
$38,000.

o Financial Information Systems Design and Implementation Fees:
$-0-.

o All Other Fees (consisting primarily of tax services): $4,000.

Section 16(a) Beneficial Ownership Reporting Compliance

The federal securities laws require State of Franklin's directors and
executive officers, and persons who beneficially own more than 10% of a
registered class of State of Franklin's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of any
securities of State of Franklin. To State of Franklin's knowledge, based solely
on review of the copies of these reports furnished to State of Franklin and
representations by reporting persons, all of State of Franklin's officers,
directors and greater than 10% beneficial owners made all filings required in a
timely manner.

Transactions with Executive Officers, Directors and Others

State of Franklin has had and expects to have in the future banking
and other business transactions in the ordinary course of our banking business
with directors, officers, and 10% beneficial owners of State of Franklin and
their affiliates, including members of their families, or corporations,
partnerships, or other organizations in which the officers or directors have a
controlling interest, on substantially the same terms (including price, or
interest rates and collateral) as those prevailing at the time for comparable
transactions with unrelated parties. Any such banking transactions will not
involve more than the normal risk of collectability nor present other
unfavorable features to State of Franklin or the Savings Bank.

The Savings Bank leases office space from a partnership, Allen and
Allen. Charles E. Allen, Jr., the Chairman of the Board of State of Franklin and
Charles E. Allen, Sr., M.D., a director of State of Franklin, are principals in
Allen and Allen. The 2,625 square foot building houses the Savings Bank's Browns
Mill Road branch. The annual rent is $13. 41 per square foot or $35,190. This
amount includes taxes, insurance and maintenance.

Other Matters

The board of directors, at the time of the preparation of this proxy
statement, knows of no business to come before the annual meeting other than
that referred to herein. If any other business should come before the annual
meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies in accordance with their best judgment.

Upon the written request of any record holder or beneficial owner of
common stock entitled to vote at the annual meeting, State of Franklin, without
charge, will provide a copy of our Annual Report on Form 10-KSB for the Year
Ended December 31, 2001 as filed with the SEC. Requests should be directed to
Becky Mominee, Secretary, State of Franklin Bancshares, Inc., 1907 North Roan
Street, Johnson City, Tennessee 37601, telephone (423) 926-3600.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Becky Mominee
-----------------
BECKY MOMINEE
Secretary

Johnson City, Tennessee
April 15, 2002

STATE OF FRANKLIN BANCSHARES, INC.

1907 North Roan Street
Johnson City, Tennessee 37601

Please complete both sides of the Proxy Card, detach and return in the enclosed
postage-prepaid envelope.

DETACH PROXY CARD HERE

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS. The undersigned hereby acknowledges receipt of the
notice of the Annual Meeting and the Related Proxy Statement.

Dated__________________________________

_______________________________________

_______________________________________
(PLEASE SIGN HERE)

Shareholder should sign here exactly as shown on the label affixed hereto.
Administrator, Trustee, or Guardian, please give full title. If more than one
Trustee, all should sign. All Joint Owners should sign.

DETACH ATTENDANCE CARD HERE AND
MAIL WITH PROXY CARD

STATE OF FRANKLIN
BANCSHARES, INC.

If you plan to personally attend the Annual Meeting of Shareholders, please
check the box below and list names of attendees on reverse side.

Return this stub in the enclosed envelope with your completed proxy card.

[ ] I do plan to attend the 2002 meeting.

NAMES OF PERSONS ATTENDING

___________________________________________

Proxy State of Franklin Bancshares, Inc.

The undersigned appoints each of Charles E. Allen, Jr., Randal R. Greene and
Becky Mominee, or any of them, with full power of substitution and revocation as
Proxy to vote all shares of stock standing in my name on the books of State of
Franklin Bancshares, Inc. (the "Company") at the close of business on March 31,
2002, which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Shareholders of the Company to be held at 1907 North Roan
Street, Johnson City, Tennessee, on May 20, 2002, at 11:00 a.m., Eastern Time,
and at any and all adjournments, upon the matters set forth in the Notice of the
meeting. The Proxy is further authorized to vote in his or her discretion as to
any other matters which may come before the meeting. At the time of preparation
of the Proxy Statement, the Board of Directors knows of no business to come
before the meeting other than that referred to in the Proxy Statement.

THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN BELOW AND WHEN NO INSTRUCTIONS ARE GIVEN WILL BE VOTED FOR
THE PROPOSALS DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT AND ON THIS PROXY.

1. Election of four directors to serve a three-year term and one
director to serve a one-year term or until their successors have
been fully elected and qualified.

[ ] FOR all nominees listed below (except as indicated to the contrary below)

[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.

Three-Year Term: Randal R. Greene, Kenneth E. Cutshall, M.D., Cameron E. Perry,
Henry J. Williams, M.D.

One-Year Term: Alan R. Hubbard

INSTRUCTIONS: To withhold authority to vote for any included nominee, write such
nominee's name in the space provided below.

- --------------------------------------------------------------------------------
2. Ratification of the appointment of Baylor & Backus as the
Company's independent accountants and auditors for 2002.

FOR _____ AGAINST _____ ABSTAIN _____