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As filed with the Securities and Exchange Commission on May 13, 2003

Registration No. 333-103961

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 2

TO THE

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

JEFFERSON BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

120 Evans Avenue

Morristown, Tennessee 37814

(423) 586-8421

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Anderson L. Smith

President and Chief Executive Officer

Jefferson Bancshares, Inc.

120 Evans Avenue

Morristown, Tennessee 37814

(423) 586-8421

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:

Paul M. Aguggia, Esquire

Aaron M. Kaslow, Esquire

Muldoon Murphy & Faucette LLP

5101 Wisconsin Avenue, N.W.

Washington, D.C. 20016

(202) 362-0840

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

Calculation of Registration Fee

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

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Prospectus Supplement

INTERESTS IN

JEFFERSON FEDERAL SAVINGS AND LOAN ASSOCIATION OF MORRISTOWN

EMPLOYEES’ SAVINGS & PROFIT SHARING PLAN AND TRUST

AND

OFFERING OF 147,000 SHARES OF

JEFFERSON BANCSHARES, INC.

COMMON STOCK ($.01 PAR VALUE)

This prospectus supplement relates to the offer and sale to participants in the Jefferson Federal Savings and Loan Association of Morristown Employees’ Savings & Profit Sharing Plan and Trust of participation interests and shares of common stock of Jefferson Bancshares, Inc.

The Board of Directors of Jefferson Federal has adopted a plan that will convert Jefferson Federal from the mutual holding company form of organization to stock form. As part of the conversion, Jefferson Bancshares, Inc. has been established to offer its common stock to the public under certain purchase priorities in the plan of conversion. Savings Plan participants are now permitted to direct the trustee of the Savings Plan to use their current account balances to subscribe for and purchase shares of Jefferson Bancshares, Inc. common stock through the Jefferson Bancshares, Inc. Stock Fund. Based upon the value of the Savings Plan assets as of December 31, 2002, the trustee of the Savings Plan could purchase up to 147,000 shares of Jefferson Bancshares, Inc. common stock, assuming a purchase price of $10.00 per share. This prospectus supplement relates to the election of Savings Plan participants to direct the trustee of the Savings Plan to invest all or a portion of their Savings Plan accounts in Jefferson Bancshares, Inc. common stock.

The prospectus dated             , 2003 of Jefferson Bancshares, Inc., which we have attached to this prospectus supplement, includes detailed information regarding the conversion of Jefferson Federal from the mutual holding company form to the stock form, and the financial condition, results of operations and business of Jefferson Federal. This prospectus supplement provides information regarding the Savings Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

Please refer to “Risk Factors” beginning on page          of the prospectus.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, nor any other state or federal agency or any state securities commission, has approved or disapproved these securities. Any representation to the contrary is a criminal offense.

These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

This prospectus supplement may be used only in connection with offers and sales by Jefferson Bancshares, Inc. of interests or shares of common stock under the Savings Plan to employees of Jefferson Federal. No one may use this prospectus supplement to reoffer or resell interests or shares of common stock acquired through the Savings Plan.

You should rely only on the information contained in this prospectus supplement and the attached prospectus. Jefferson Bancshares, Inc., Jefferson Federal and the Savings Plan have not authorized anyone to provide you with information that is different.

This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock shall under any circumstances imply that there has been no change in the affairs of Jefferson Federal or the Savings Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

The date of this Prospectus Supplement is             , 2003.

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THE OFFERING

Securities Offered

The securities offered in connection with this prospectus supplement are participation interests in the Savings Plan. Assuming a purchase price of $10.00 per share, the trustee may acquire up to 147,000 shares of Jefferson Bancshares, Inc. common stock for the Jefferson Bancshares, Inc. Stock Fund. The interests offered under this prospectus supplement are conditioned on the completion of the conversion of Jefferson Federal. Your investment in the Jefferson Bancshares, Inc. Stock Fund in connection with the conversion of Jefferson Federal is also governed by the purchase priorities contained in the plan of conversion. See the “Limitations on Purchases of Shares” section of the prospectus attached to this prospectus supplement for a discussion of the purchase priorities contained in the plan of conversion.

This prospectus supplement contains information regarding the Savings Plan. The attached prospectus contains information regarding the conversion of Jefferson Federal and the financial condition, results of operations and business of Jefferson Federal. The address of the principal executive office of Jefferson Federal is 120 Evans Avenue, Morristown, Tennessee 37814. The telephone number of Jefferson Federal is 423-586-8421.

Election to Purchase Jefferson Bancshares, Inc. Common Stock in the Conversion

In connection with the conversion of Jefferson Federal, the Savings Plan will permit you to direct the trustee to transfer all or part of the funds which represent your current beneficial interest in the assets of the Savings Plan to the Jefferson Bancshares, Inc. Stock Fund. The trustee of the Savings Plan will subscribe for Jefferson Bancshares, Inc. common stock offered for sale in connection with the conversion in accordance with each participant’s direction. If there is not enough common stock in the conversion to fill all subscriptions, the common stock will be apportioned and the trustee for the Savings Plan may not be able to purchase all of the common stock you requested. In such case, the trustee will purchase shares in the open market, on your behalf, after the conversion to fulfill your initial request. Such purchases may be at prices higher than the initial public offering price.

All plan participants are eligible to direct a transfer of funds to the Jefferson Bancshares, Inc. Stock Fund. However, such directions are subject to the purchase priorities in the plan of conversion. Your order will be filled based on your status as an eligible account holder or supplemental eligible account holder in the conversion of Jefferson Federal. An eligible account holder is a depositor whose savings account(s) totaled $50.00 or more on December 31, 2001. A supplemental eligible account holder is a depositor whose savings account(s) totaled $50.00 or more on March 31, 2003. No eligible account holder or supplemental eligible account holder may purchase more than $500,000 of Jefferson Bancshares, Inc. common stock in the offering. If you fall into one of the above subscription offering categories, you have subscription rights to purchase shares of common stock in the offering and you may use funds in the Savings Plan account to pay for the shares of Jefferson Bancshares, Inc. common stock which you are eligible to purchase.

Value of Participation Interests

As of December 31, 2002, the market value of the assets of the Savings Plan equaled approximately $1,473,000. The plan administrator has informed each participant of the value of his or her beneficial interest in the Savings Plan as of                 , 2003. The value of Savings Plan assets represents past contributions to the Savings Plan on your behalf, plus or minus earnings or losses on the contributions, less previous withdrawals and loans.

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Method of Directing Transfer

The last two pages of this prospectus supplement contain a form for you to direct a transfer to the Jefferson Bancshares, Inc. Stock Fund (the “Change of Investment Allocation Form”). If you wish to transfer all, or part, in multiples of not less than 1%, of your beneficial interest in the assets of the Savings Plan to the Jefferson Bancshares, Inc. Stock Fund, you should complete the Change of Investment Allocation Form. If you do not wish to make such an election at this time, you do not need to take any action. The minimum investment in the Jefferson Bancshares, Inc. Stock Fund during the initial public offering is $250.

Time for Directing Transfer

The deadline for submitting a direction to transfer amounts to the Jefferson Bancshares, Inc. Stock Fund in connection with the conversion is                 , 2003. You should return the Change of Investment Allocation Form to JoEllen McDaniel by          p.m. on                         , 2003.

Irrevocability of Transfer Direction

Your direction to transfer amounts credited to your account in the Savings Plan to the Jefferson Bancshares, Inc. Stock Fund cannot be changed.

Purchase Price of Jefferson Bancshares, Inc. Common Stock

The trustee will use the funds transferred to the Jefferson Bancshares, Inc. Stock Fund to purchase shares of Jefferson Bancshares, Inc. common stock in the conversion. The trustee will pay the same price for shares of Jefferson Bancshares, Inc. common stock as all other persons who purchase shares of Jefferson Bancshares, Inc. common stock in the offering. If there is not enough common stock in the offering to fill all subscriptions, the common stock will be apportioned and the trustee for the Savings Plan may not be able to purchase all of the common stock you requested. In such case, the trustee will purchase shares in the open market, on your behalf, after the conversion to fulfill your initial request. Such purchases may be at prices higher or lower than the conversion offering price.

Nature of a Participant’s Interest in Jefferson Bancshares, Inc. Common Stock

The trustee will hold Jefferson Bancshares, Inc. common stock in the name of the Savings Plan. The trustee will credit shares of common stock acquired at your direction to your account under the Savings Plan. Therefore, earnings with respect to your account should not be affected by the investment designations of other participants in the Savings Plan.

Voting and Tender Rights of Jefferson Bancshares, Inc. Common Stock

The trustee generally will exercise voting and tender rights attributable to all Jefferson Bancshares, Inc. common stock held by the Jefferson Bancshares, Inc. Stock Fund as directed by participants with interests in the Jefferson Bancshares, Inc. Stock Fund. With respect to each matter as to which holders of Jefferson Bancshares, Inc. common stock have a right to vote, you will be given voting instruction rights reflecting your proportionate interest in the Jefferson Bancshares, Inc. Stock Fund. The number of shares of Jefferson Bancshares, Inc. common stock held in the Jefferson Bancshares, Inc. Stock Fund that are voted for and against on each matter will be proportionate to the number of voting

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instruction rights exercised in such manner. If there is a tender offer for Jefferson Bancshares, Inc. common stock, the Savings Plan provides that each participant will be allotted a number of tender instruction rights reflecting such participant’s proportionate interest in the Jefferson Bancshares, Inc. Stock Fund. The percentage of shares of Jefferson Bancshares, Inc. common stock held in the Jefferson Bancshares, Inc. Stock Fund that will be tendered will be the same as the percentage of the total number of tender instruction rights that are exercised in favor of the tender offer. The remaining shares of Jefferson Bancshares, Inc. common stock held in the Jefferson Bancshares, Inc. Stock Fund will not be tendered. The Savings Plan makes provisions for participants to exercise their voting instruction rights and tender instruction rights on a confidential basis.

DESCRIPTION OF THE SAVINGS PLAN

Introduction

Effective May 1, 2003, Jefferson Federal will amend its existing 401(k) Plan dated November 1, 1973, in its entirety into the Jefferson Federal Savings and Loan Association of Morristown Employees’ Savings & Profit Sharing Plan and Trust. Jefferson Federal intends for the Savings Plan to comply, in form and in operation, with all applicable provisions of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended, or “ERISA.” Jefferson Federal may change the Savings Plan from time to time in the future to ensure continued compliance with these laws. Jefferson Federal may also amend the Savings Plan from time to time in the future to add, modify, or eliminate certain features of the plan, as it sees fit. As a plan governed by ERISA, federal law provides you with various rights and protections as a plan participant. Although the Savings Plan is governed by many of the provisions of ERISA, your benefits under the plan are not guaranteed by the Pension Benefit Guaranty Corporation.

Reference to Full Text of the Plan. The following portions of this prospectus supplement provide an overview of the material provisions of the Savings Plan. Jefferson Federal qualifies this overview in its entirety by reference to the full text of the Savings Plan. You may obtain copies of the full Savings Plan document by sending a request to JoEllen McDaniel at Jefferson Federal. You should carefully read the full text of the Savings Plan document to understand your rights and obligations under the plan.

Eligibility and Participation

Any employee of Jefferson Federal who attains age 20½ may participate in the Savings Plan as of the first of the calendar month coinciding with or next following the date an employee completes 500 Hours of Service within a consecutive six-month period with Jefferson Federal.

As of December 31, 2002, 57 of the 57 employees of Jefferson Federal elected to participate in the Savings Plan.

Contributions Under the Savings Plan

Savings Plan Participant Contributions. Subject to certain IRS limitations, the Savings Plan permits each participant to make monthly contributions to the Savings Plan equal to 50% of the participant’s monthly salary. Participants may change their rate of contribution with respect to pre-tax deferrals once each calendar quarter.

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Jefferson Federal Contributions. The Savings Plan provides that Jefferson Federal may make profit-sharing contributions. Profit-sharing contributions are allocated to those participants who have completed 1,000 Hours of Service during the Plan Year and who are employed by Jefferson Federal on the last day of the Plan Year. In addition, participants who have retired, died or become totally and permanently disabled prior to the last day of the Plan Year will be credited with an employer contribution.

Limitations on Contributions

Limitation on Employee Salary Deferral. Although the Savings Plan permits you to defer up to 50% of your compensation, by law your total deferrals under the Savings Plan, together with similar plans, may not exceed $12,000 for 2003. The Internal Revenue Service will periodically increase this annual limitation. Contributions in excess of this limitation, or excess deferrals, will be included in an affected participant’s gross income for federal income tax purposes in the year they are made. In addition, a participant will have to pay federal income taxes on any excess deferrals when distributed by the Savings Plan to the participant, unless the excess deferral and any related income allocable is distributed to the participant not later than the first April 15th following the close of the taxable year in which the excess deferral is made. Any income on the excess deferral that is distributed not later than such date shall be treated, for federal income tax purposes, as earned and received by the participant in the taxable year in which the distribution is made.

Limitations on Annual Additions and Benefits. Under the requirements of the Internal Revenue Code, the Savings Plan provides that the total amount of contributions and forfeitures (annual additions) credited to a participant during any year may not exceed the lesser of 100% of the participant’s compensation for that year, or $40,000.

Limitation on Plan Contributions for Highly Compensated Employees. Special provisions of the Internal Revenue Code limit the amount of salary deferrals and matching contributions that may be made to the Savings Plan in any year on behalf of highly compensated employees in relation to the amount of deferrals and matching contributions made by or on behalf of all other employees eligible to participate in the Savings Plan. If these limitations are exceeded, the level of deferrals by highly compensated employees must be adjusted.

In general, a highly compensated employee includes any employee who (1) was a five percent owner of the sponsoring employer at any time during the year or preceding year, or (2) had compensation for the preceding year in excess of $90,000 and, if the sponsoring employer so elects, was in the top 20% of employees by compensation for such year. The dollar amounts in the foregoing sentence are for 2003, but may be adjusted annually to reflect increases in the cost of living.

Top-Heavy Plan Requirements. If for any calendar year the Savings Plan is a Top-Heavy Plan, then Jefferson Federal may be required to make certain minimum contributions to the Savings Plan on behalf of non-key employees.

In general, the Savings Plan will be treated as a “Top-Heavy Plan” for any calendar year if, as of the last day of the preceding calendar year, the aggregate balance of the accounts of participants who are Key Employees exceeds 60% of the aggregate balance of the accounts of all participants. Key Employees generally include any employee who, at any time during the calendar year or any of the four preceding years, is:

(1) an officer of Jefferson Federal having annual compensation in excess of $130,000 who is in an administrative or policy-making capacity,

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(2) one of the ten employees having annual compensation in excess of $40,000 and owning, directly or indirectly, the largest interests in Jefferson Federal,

(3) a person who owns, directly or indirectly, more than 5% of the stock of Jefferson Bancshares, Inc., or stock possessing more than 5% of the total combined voting power of all stock of Jefferson Bancshares, Inc., or

(4) a person who owns directly or indirectly combined voting power of all stock and more than 1% of the total stock of Jefferson Bancshares, Inc. and has annual compensation in excess of $150,000.

The foregoing dollar amounts are for 2003.

Investment of Contributions

All amounts credited to participants’ accounts under the Savings Plan are held in trust. A trustee appointed by the board of directors of Jefferson Federal administers the trust.

The Savings Plan offers the following investment choices:

S&P500 Stock Fund. This stock fund invests in the stocks of a broad array of established U.S. companies. Its objective is long-term: to earn higher returns by investing in the largest companies in the U.S. economy.

Stable Value Fund. This fund invests primarily in Guaranteed Investment Contracts and Synthetic Guaranteed Investment Contracts. These contracts pay a steady rate of interest over a certain period of time, usually between three and five years. Its objective is short to intermediate-term: to achieve a stable return over short to intermediate periods of time while preserving the value of your investment.

S&P MidCap Stock Fund. This stock fund invests in the stocks of mid-sized U.S. companies, which are expected to grow faster than larger, more established companies. Its objective is long-term: to earn higher returns which reflect the growth potential of mid-sized companies.

Money Market Fund. This fund invests in a broad range of high-quality, short-term instruments issued by banks, corporations and the U.S. Government and its agencies. These instruments include certificates of deposit and U.S. Treasury bills. Its objective is short-term: to achieve competitive, short-term rates of return while preserving the value of your principal.

Government Bond Fund. This bond fund invests in U.S. Treasury bonds with a maturity of 20 years or more. Its objective is long-term: to earn a higher level of income along with the potential for capital appreciation.

International Stock Fund. This fund invests in over 1,000 foreign stocks in 20 countries, based in Europe, Australia, and the Far East. Its objective is long-term: to offer the potential return of investing in the stocks of established non-U.S. companies, as well as the potential risk-reduction of broad diversification.

Income Plus Asset Allocation Fund. This fund diversifies among a broad range of stable value securities to reduce short-term risk among a broad range of large U.S. and international companies to

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capture growth potential. The fund is structured to take advantage of market opportunities with a small flexible component. Its objective is intermediate-term: to preserve the value of your investment over short periods of time and to offer some potential for growth.

Growth and Income Asset Allocation Fund. This fund diversifies among U.S. and international stocks, U.S. bonds, and stable value investments to pursue long-term appreciation and short-term stability and takes advantage of market opportunities with a small flexible component. Its objective is intermediate-term: to provide a balance between the pursuit of growth and protection from risk.

Growth Asset Allocation Fund. This fund diversifies among a broad range of domestic and international stocks and takes advantage of market opportunities with a large flexible component. Its objective is long-term: to pursue high growth of your investment over time.

Russell 2000 Stock Fund. This fund seeks to emulate the performance of the Russell 2000 Index. The Russell 2000 Index is a subset of the Russell 3000 Index. The Russell 3000 Index is based on ranking of all U.S. publicly traded companies by market capitalization size. The Russell 2000 represents those 2000 companies ranked by size below the top 1000 companies. It is broadly diversified in terms of industries and economic sectors. This fund is intended for long-term investors seeking the potential high returns from investing in smaller U.S. companies.

S&P 500/Growth Stock Fund. This fund seeks to track the S&P/BARRA Growth Index by investing in many or all of the same stocks that make up the S&P/BARRA Growth Index. The fund maintains a low turnover of securities which results in low trading costs for investors. This fund is intended for long-term investors seeking a diversified portfolio of large-capitalization value stocks.

S&P 500/Value Stock Fund. This fund invests in most, or all of the stocks held in the S&P/BARRA Value Index. The index represents approximately 50% of the market capitalization of the S&P 500 Stock Index. This fund is intended for long-term investors seeking a diversified portfolio of large-capitalization value stocks.

NASDAQ 100. The Pentegra Nasdaq 100 Stock Fund invests in most or all of the same stocks held in the Nasdaq 100 Index. The Nasdaq 100 Index reflects Nasdaq’s largest non-financial companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology.

Jefferson Federal Certificate of Deposit Fund. This fund invests in certificates of deposit of Jefferson Federal with varying terms and interest rates.

The Savings Plan now provides the Jefferson Bancshares, Inc. Stock Fund as an additional choice to these investment alternatives. The Jefferson Bancshares, Inc. Stock Fund invests primarily in the common stock of Jefferson Bancshares, Inc. Participants in the Savings Plan may direct the trustee to invest all or a portion of their Savings Plan account balance in the Jefferson Bancshares, Inc. Stock Fund.

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The annual percentage return on the funds (net of fees) listed above for the prior three years was:

The Jefferson Bancshares, Inc. Stock Fund consists of investments in the common stock of Jefferson Bancshares, Inc. made on the effective date of the conversion. After the conversion of Jefferson Federal, the trustee of the Savings Plan will, to the extent practicable, use all amounts held by it in the Jefferson Bancshares, Inc. Stock Fund, including cash dividends paid on the common stock held in the fund, to purchase shares of common stock of Jefferson Bancshares, Inc. Savings Plan participants that invest in the Stock Fund will be permitted to direct the Stock Fund Trustee how to vote the shares of Jefferson Bancshares, Inc. common stock credited to their account.

As of the date of this prospectus supplement, none of the shares of Jefferson Bancshares, Inc. common stock have been issued or are outstanding and there is no established market for the Jefferson Bancshares, Inc. common stock. Accordingly, there is no record of the historical performance of the Jefferson Bancshares, Inc. Stock Fund. Performance of the Jefferson Bancshares, Inc. Stock Fund depends on a number of factors, including the financial condition and profitability of Jefferson Bancshares, Inc. and Jefferson Federal and market conditions for Jefferson Bancshares, Inc. common stock generally.

Benefits Under the Savings Plan

Vesting. Participants are 100% vested in their contributions. All profit-sharing contributions vest at a rate of 20% per year over a five year period.

Withdrawals and Distributions From the Savings Plan

Withdrawals Before Termination of Employment. You may receive in-service distributions from the Savings Plan under limited circumstances in the form of hardship distributions and loans. In order to qualify for a hardship withdrawal, you must have an immediate and substantial need to meet certain expenses and have no other reasonably available resources to meet the financial need. If you qualify for a hardship distribution, the trustee will make the distribution proportionately from the investment funds in which you have invested your account balances. Participants and beneficiaries are eligible for Savings Plan loans. The minimum loan amount is $1,000 calculated solely using a Participant’s vested interest in his or her account.

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Distribution Upon Retirement or Disability. Upon retirement or disability, you may receive a partial lump sum payment, a full lump sum payment, or installment payments from the Savings Plan equal to the value of your account.

Distribution Upon Death. If you die before your benefits are paid from the Savings Plan, your benefits will be paid to your surviving spouse or beneficiary under one or more of the forms available under the Savings Plan.

Distribution Upon Termination for Any Other Reason. If you terminate employment for any reason other than retirement, disability or death and your account balance exceeds $500, the trustee will make your distribution on your normal retirement date, unless you request otherwise. If your account balances do not exceed $500, the trustee will generally distribute your benefits to you as soon as administratively practicable following termination of employment.

Nonalienation of Benefits. Except with respect to federal income tax withholding and as provided with respect to a qualified domestic relations order, benefits payable under the Savings Plan will not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to benefits payable under the Savings Plan will be void.

Applicable federal tax law requires the Savings Plan to impose substantial restrictions on your right to withdraw amounts held under the plan before your termination of employment with Jefferson Federal. Federal law may also impose an excise tax on withdrawals made from the Savings Plan before you attain 59½ years of age regardless of whether the withdrawal occurs during your employment with Jefferson Federal or after termination of employment.

Administration of the Savings Plan

The trustee with respect to the Savings Plan is the named fiduciary of the Savings Plan for purposes of ERISA.

Trustees. The board of directors of Jefferson Federal appoints the trustee to serve at its pleasure. The board of directors has appointed Bank of New York as trustee of the Jefferson Bancshares, Inc. Stock Fund.

The trustee receives, holds and invests the contributions to the Savings Plan in trust and distributes them to participants and beneficiaries in accordance with the terms of the Savings Plan and the directions of the plan administrator. The trustee is responsible for investment of the assets of the trust.

Reports to Savings Plan Participants

The plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses.

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Plan Administrator

The current plan administrator of the Savings Plan is Jefferson Federal. The plan administrator is responsible for the administration of the Savings Plan, interpretation of the provisions of the plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the plan, maintenance of plan records, books of account and all other data necessary for the proper administration of the plan, and preparation and filing of all returns and reports relating to the plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under the Employee Retirement Income Security Act of 1974, as amended.

Amendment and Termination

Jefferson Federal intends to continue the Savings Plan indefinitely. Nevertheless, Jefferson Federal may terminate the Savings Plan at any time. If Jefferson Federal terminates the Savings Plan in whole or in part, then regardless of other provisions in the plan, all affected participants will become fully vested in their accounts. Jefferson Federal reserves the right to make, from time to time, changes which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Jefferson Federal may amend the plan as it determines necessary or desirable, with or without retroactive effect, to comply with the Employee Retirement Income Security Act of 1974, as amended, or the Internal Revenue Code.

Merger, Consolidation or Transfer

If the Savings Plan merges or consolidates with another plan or transfers the trust assets to another plan, and if either the Savings Plan or the other plan is then terminated, the Savings Plan requires that you would receive a benefit immediately after the merger, consolidation or transfer. The benefit would be equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer if the Savings Plan had then terminated.

Federal Income Tax Consequences

The following is only a brief summary of the material federal income tax aspects of the Savings Plan. You should not rely on this survey as a complete or definitive description of the material federal income tax consequences relating to the Savings Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. You are urged to consult your tax advisor with respect to any distribution from the Savings Plan and transactions involving the Savings Plan.

As a “qualified retirement plan,” the Code affords the Savings Plan special tax treatment, including:

(1) The sponsoring employer is allowed an immediate tax deduction for the amount contributed to the plan each year;

(2) participants pay no current income tax on amounts contributed by the employer on their behalf; and

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(3) earnings of the plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

Jefferson Federal will administer the Savings Plan to comply in operation with the requirements of the Internal Revenue Code as of the applicable effective date of any change in the law. If Jefferson Federal receives an adverse determination letter regarding its tax exempt status from the Internal Revenue Service, all participants would generally recognize income equal to their vested interest in the Savings Plan, the participants would not be permitted to transfer amounts distributed from the Savings Plan to an Individual Retirement Account or to another qualified retirement plan, and Jefferson Federal may be denied certain deductions taken with respect to the Savings Plan.

Lump Sum Distribution. A distribution from the Savings Plan to a participant or the beneficiary of a participant will qualify as a lump sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59 ¹/2; and consists of the balance credited to the participant under this plan and all other profit sharing plans, if any, maintained by Jefferson Federal. The portion of any lump sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump sum distribution less the amount of after-tax contributions, if any, you have made to any other profit sharing plans maintained by Jefferson Federal which is included in the distribution.

Jefferson Bancshares, Inc. Common Stock Included in Lump Sum Distribution. If a lump sum distribution includes Jefferson Bancshares, Inc. common stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount will be reduced by the amount of any net unrealized appreciation with respect to Jefferson Bancshares, Inc. common stock, that is, the excess of the value of Jefferson Bancshares, Inc. common stock at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of Jefferson Bancshares, Inc. common stock for purposes of computing gain or loss on its subsequent sale equals the value of Jefferson Bancshares, Inc. common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Jefferson Bancshares, Inc. common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain regardless of how long the Jefferson Bancshares, Inc. common stock, is held, or the “holding period.” Any gain on a subsequent sale or other taxable disposition of Jefferson Bancshares, Inc. common stock in excess of the amount of net unrealized appreciation at the time of distribution will be considered long-term capital gain regardless of the holding period of Jefferson Bancshares, Inc. common stock. Any gain on a subsequent sale or other taxable disposition of Jefferson Bancshares, Inc. common stock in excess of the amount of net unrealized appreciation at the time of distribution will be considered either short-term or long-term capital gain, depending upon the length of the holding period of Jefferson Bancshares, Inc. common stock. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by the regulations to be issued by the IRS.

Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the Savings Plan to another qualified retirement plan or to an individual retirement account.

We have provided you with a brief description of the material federal income tax aspects of the Savings Plan which are of general application under the Code. It is not intended to be a complete or definitive description of the federal income tax consequences of participating in or receiving distributions from the Savings Plan. Accordingly, you are urged to consult a tax advisor

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concerning the federal, state and local tax consequences of participating in and receiving distributions from the Savings Plan.

Restrictions on Resale

Any person receiving a distribution of shares of common stock under the Savings Plan who is an “affiliate” of Jefferson Bancshares, Inc. under Rules 144 and 405 under the Securities Act of 1933, as amended, may reoffer or resell such shares only under a registration statement filed under the Securities Act of 1933, as amended, assuming the availability of a registration statement, or under Rule 144 or some other exemption of the registration requirements of the Securities Act of 1933, as amended. Directors, officers and substantial shareholders of Jefferson Bancshares, Inc. are generally considered “affiliates.” Any person who may be an “affiliate” of Jefferson Federal may wish to consult with counsel before transferring any common stock they ow