U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]              QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

        FOR THE QUARTERLY PERIOD ENDED:          MARCH 31, 2004
                                              --------------------


[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934


COMMISSION FILE NUMBER:     0-24675
                           ---------


                       STATE OF FRANKLIN BANCSHARES, INC.
                   ------------------------------------------
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

          TENNESSEE                                       62-1749121
---------------------------------               --------------------------------
    (STATE OF INCORPORATION)                           (I.R.S.  EMPLOYER
                                                        IDENTIFICATION NO.)


             1907 NORTH ROAN
          JOHNSON CITY, TENNESSEE                                  37601
         --------------------------                                -----
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)


                                 (423) 926-3300
                   ------------------------------------------
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)


                                      NONE
                   ------------------------------------------
      (FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)


INDICATE BY CHECK MARK WHETHER THE ISSUER: (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15 (D) OF THE  SECURITIES  EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                                    YES   X       NO
                                         ----

                                    1,465,512
                   ------------------------------------------
      (OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF MAY 10, 2004)


           TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):

                                    YES           NO    X
                                                       ----



<PAGE>


                        STATE OF FRANKLIN BANCSHARES, INC

                                      INDEX
                                      -----

PART I. FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS                                          PAGE
                                                                         -------
             CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
               MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003 (AUDITED)      3

             CONSOLIDATED STATEMENTS OF INCOME
               THREE MONTHS ENDED MARCH 31, 2004
               (UNAUDITED) AND 2003 (UNAUDITED)                                4

             CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
               THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
               AND YEAR ENDED DECEMBER 31, 2003 (AUDITED)                      5

             CONSOLIDATED STATEMENTS OF CASH FLOWS
               THREE MONTHS ENDED MARCH 31, 2004
               (UNAUDITED) AND 2003 (UNAUDITED)                                6

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)            7


     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS                                      13

     ITEM 3. CONTROLS AND PROCEDURES                                          15


PART II. OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS                                                16

     ITEM 2. CHANGES IN SECURITIES                                            16

     ITEM 3. DEFAULT UPON SENIOR SECURITIES                                   16

     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS              16

     ITEM 5. OTHER INFORMATION                                                16

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                 16














                                        2

<PAGE>


PART 1  -  FINANCIAL INFORMATION

         ITEM 1.   FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                       STATE OF FRANKLIN BANCSHARES, INC.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                                  MARCH 31,         DECEMBER 31,
                             ASSETS                           2004 - UNAUDITED     2003 - AUDITED
-------------------------------------------------------------------------------------------------
<S>                                                              <C>                <C>
Cash and Due from Banks                                          $   4,570,558          3,764,363
Federal Funds Sold                                                  30,475,000         25,040,000
Short-Term Interest Bearing Deposits                                 3,024,523          3,336,670
-------------------------------------------------------------------------------------------------
   Total Cash and Cash Equivalents                                  38,070,081         32,141,033
-------------------------------------------------------------------------------------------------
Investments - HTM
   (Estimated Market 2004 - $46,113,852 and 2003 - $34,274,290)     45,709,476         34,031,676
Investments - AFS                                                   63,189,106         63,375,496
Loans Held for Sale                                                  1,395,241            413,179
Loans and Leases Receivable                                        151,213,425        150,646,605
   Less: Allowance for Loan and Lease Losses                      (  1,871,073)      (  1,870,279)
-------------------------------------------------------------------------------------------------
   Loans and Leases Receivable, Net                                149,342,352        148,776,326
-------------------------------------------------------------------------------------------------
Accrued Interest Receivable, Net                                     1,482,971          1,366,640
Land, Buildings & Equip at Cost Less Accum Depr
   of $2,235,698 in 2004 and $2,091,874 in 2003                      6,756,817          6,218,358
Prepaid Expense and Accounts Receivable                                175,994            108,260
Deferred Tax Assets                                                    888,231          1,141,342
FHLB Stock                                                           2,378,200          2,354,800
Investment in Service Bureau at Cost                                   815,009            815,009
Other Real Estate Owned                                              1,060,856          1,152,919
Other Assets                                                           154,669            159,000
-------------------------------------------------------------------------------------------------
  TOTAL ASSETS                                                   $ 311,419,003        292,054,038
=================================================================================================
             LIABILITIES AND STOCKHOLDERS' EQUITY
=================================================================================================
LIABILITIES:
Interest-Free Deposits                                           $  14,756,560         12,114,590
Interest-Bearing Deposits                                          214,862,054        209,877,896
Advances to Borrowers for Taxes and Insurance                          179,922            103,632
Accrued Interest on Deposits                                           136,538            141,757
Accrued State and Federal Taxes                                    (    30,485)       (   133,129)
Other Accounts Payable and Accrued Expenses                            582,324            537,849
Repurchase Agreements                                                1,095,583            536,419
FHLB Long-Term Advances                                             46,202,712         36,210,071
Deferred Credits on REO                                                199,779            173,996
-------------------------------------------------------------------------------------------------
       TOTAL LIABILITIES                                         $ 277,984,987        259,563,081
-------------------------------------------------------------------------------------------------

Guaranteed Preferred Beneficial Interest in
   Subordinated Debentures                                           8,000,000          8,000,000

STOCKHOLDERS' EQUITY:
Common Stock, $1.00 Par Value                                        1,465,512          1,465,512
Paid-in Capital                                                     14,251,461         14,251,461
Accumulated Other Comprehensive Income                             (   441,856)       (   797,592)
Retained Earnings                                                   10,909,004         10,356,571
  Less: Employee Stock Ownership                                   (   750,105)       (   784,995)
-------------------------------------------------------------------------------------------------
       TOTAL STOCKHOLDERS' EQUITY                                $  25,434,016         24,490,957
-------------------------------------------------------------------------------------------------
       TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 311,419,003        292,054,038
=================================================================================================
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


                                        3

<PAGE>

<TABLE>
<CAPTION>
                       STATE OF FRANKLIN BANCSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                                                         THREE MONTHS ENDED MARCH 31,
                                                      ----------------------------------
INTEREST INCOME:                                      2004 - UNAUDITED  2003 - UNAUDITED
                                                      ----------------  ----------------
<S>                                                     <C>                    <C>
Interest and Fees on Loans                              $    2,443,632         2,816,728
Other Interest Income                                        1,143,814           931,224
----------------------------------------------------------------------------------------
       TOTAL INTEREST INCOME                                 3,587,446         3,747,952
----------------------------------------------------------------------------------------

INTEREST EXPENSE:
Interest on Deposits                                         1,059,974         1,099,008
Interest on Repurchase Agreements                                2,568             3,851
Interest on Short-Term Debt                                          -                21
Interest on Long-Term Debt                                     463,128           433,293
Interest on Subordinated Debentures                            108,287           108,394
----------------------------------------------------------------------------------------
       TOTAL INTEREST EXPENSE                                1,633,957         1,644,567
----------------------------------------------------------------------------------------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSS           1,953,489         2,103,385
PROVISION FOR LOAN LOSSES                                      (10,000)         (177,637)
----------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS            1,943,489         1,925,748
----------------------------------------------------------------------------------------

OTHER INCOME:
Other Fees and Service Charges                                 118,910           124,341
Net Gain on Loans Sold                                          72,349           174,220
Realized Gain on Securities                                          -               231
Real Estate Sales Commission Income                             55,281            69,389
Insurance Commission Income                                     11,324            19,875
Rental Income, Net                                              21,014            15,515
----------------------------------------------------------------------------------------
       TOTAL OTHER INCOME                                      278,878           403,571
----------------------------------------------------------------------------------------

OTHER EXPENSES:
Compensation and Related Benefits                              717,953           660,474
Occupancy Expenses                                              98,424            91,668
Furniture and Equipment Expense                                123,748            56,089
Advertising                                                     63,424            33,758
Data Processing Expense                                        162,115           109,273
Other Operating Expenses                                       327,506           253,167
----------------------------------------------------------------------------------------
       TOTAL OTHER EXPENSES                                  1,493,170         1,204,429
----------------------------------------------------------------------------------------
       INCOME BEFORE INCOME TAX                                729,197         1,124,890
PROVISION FOR INCOME TAXES                                    (176,766)         (293,648)
----------------------------------------------------------------------------------------
       NET INCOME                                       $      552,431           831,242
========================================================================================
EARNINGS PER SHARE:
  BASIC                                                 $         0.40              0.60
  DILUTED                                                         0.37              0.56
========================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING:
  BASIC                                                      1,395,814         1,382,339
  DILUTED                                                    1,512,433         1,476,464
========================================================================================
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.


                                          4

<PAGE>

<TABLE>
<CAPTION>


                                     STATE OF FRANKLIN BANCSHARES, INC.
                          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
         FOR THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 2003 (AUDITED)


                                                               Accumulated
                                                                  Other                 Employee
                                     Common        Paid-In    Comprehensive  Retained     Stock
                                     Stock         Capital        Income     Earnings   Ownership       Total
                                  --------------  ----------  ------------  ---------  -----------   ------------
<S>                                    <C>         <C>         <C>         <C>         <C>             <C>
Balance at December 31, 2002           1,465,512   14,251,461     252,106   7,711,128  (1,058,450)     22,621,757

ESOP Shares Allocated                         --           --          --          --     273,455         273,455

Comprehensive Income
  Other Comprehensive Income,
    Net of Tax:
    Unrealized Gains on Securities
      Available-For-Sale:
      Unrealized Holding Gains
        Arising During the Period
         (Net of $656,269 Income Tax Benefit) --           --  (1,057,399)         --          --      (1,057,399)
      Less: Reclassification Adjustment
         (Net of $4,780 Income Tax)           --           --       7,701          --          --           7,701
                                                                                                     ------------
                                                                                                       (1,049,698)

  Net Income                                  --           --          --   2,645,445          --       2,645,445
                                                                                                     ------------
        Total Comprehensive Income            --           --          --          --          --       1,595,747
                                    ------------   ----------   ---------  ----------   ---------    ------------
Balance at December 31, 2003           1,465,512   14,251,461  (  797,592) 10,356,573   ( 784,995)     24,490,959

ESOP Shares Allocated                         --           --          --          --      34,890          34,890

Comprehensive Income
  Other Comprehensive Income,
    Net of Tax:
    Unrealized Gains on Securities
      Available-For-Sale:
      Unrealized Holding Losses
        Arising During the Period
          (Net of $214,819 Income Tax)        --           --     346,122          --          --         346,122
      Less: Reclassification Adjustment
          (Net of $5,967 Tax Benefit)         --           --       9,614          --          --           9,614
                                                                                                     ------------
                                                                                                          355,736

  Net Income                                  --           --          --     552,431          --         552,431
                                                                                                     ------------
        Total Comprehensive Income            --           --          --          --          --         908,167
                                    ------------   ----------   ---------  ----------   ----------   ------------
Balance at March 31, 2004              1,465,512   14,251,461  (  441,856) 10,909,004   (  750,105)    25,434,016
                                    ============   ==========   =========  ==========   ==========   ============
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.



                                        5




<PAGE>
                       STATE OF FRANKLIN BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS ENDED MARCH 31,
                                                                               ----------------------------------
                                                                               2004 - UNAUDITED  2003 - UNAUDITED
                                                                               ----------------  ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                               <C>                <C>
  Net Income                                                                      $     552,431          831,242
  Items Not Affecting Cash:
    Depreciation                                                                        144,488           57,107
    (Increase) Decrease in Accrued Interest                                            (116,331)          13,056
    Deferred Income Taxes (Benefit)                                                      24,716          (52,450)
    Provision for Loan and Lease Losses                                                  10,000          177,637
    (Increase) Decrease in Prepaid Expenses and Accounts Receivable                     (67,734)         135,941
    Increase (Decrease) in Interest Payable                                              (5,219)           4,728
    Increase in State and Federal Taxes Payable                                         102,644                -
    Increase (Decrease) in Other Accounts Payable and Accrued Expenses                   44,475         (236,079)
    Increase (Decrease) in Deferred Loan Fees, Net                                       (5,898)          28,943
    Realized (Gain) on Securities                                                             -             (231)
    Discount Accretion                                                                  (48,389)         (59,073)
    Premium Amortization                                                                141,098          120,055
    Increase in Deferred Gain on Sale of REO                                             25,783                -
    Earned ESOP Shares                                                                   34,890           86,663
    FHLB Stock Dividends                                                                (23,400)         (22,300)
    Net (Increase) in Loans Held for Sale                                              (982,062)      (1,445,008)
-----------------------------------------------------------------------------------------------------------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                                        (168,508)        (359,769)
-----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of Held-to-Maturity Investments                                          (17,103,992)               -
  Purchase of Available-for-Sale Investments                                                  -       (4,625,899)
  Proceeds from Maturities of Held-to-Maturity Investments                            4,405,000        2,495,000
  Proceeds from Maturities of Available-for-Sale Investments                            130,000        2,274,532
  Principal Payments on Mortgage-backed Securities - HTM                                959,790        3,217,121
  Principal Payments on Mortgage-backed Securities - AFS                                613,547          501,254
  (Increase) Decrease in Loans Receivable, Net                                         (478,065)       1,169,235
  Purchases of Premises and Equipment                                                  (682,947)        (261,709)
-----------------------------------------------------------------------------------------------------------------
    NET CASH (USED) BY INVESTING ACTIVITIES                                         (12,156,667)       4,769,534
-----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net Increase in Deposits                                                            7,626,128        5,088,179
  Net Increase in Advances by Borrowers for Taxes and Insurance                          76,290           86,924
  Net Increase in Repurchase Agreements                                                 559,164           68,953
  Repayment of FHLB Advances                                                             (7,359)          (7,089)
  Proceeds from FHLB Advances                                                        10,000,000                -
-----------------------------------------------------------------------------------------------------------------
    NET CASH PROVIDED BY FINANCING ACTIVITIES                                        18,254,223        5,236,967
-----------------------------------------------------------------------------------------------------------------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            5,929,048        9,646,732
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD                                        32,141,033       19,822,269
-----------------------------------------------------------------------------------------------------------------
      CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $  38,070,081       29,469,001
=================================================================================================================

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Increase (Decrease) in Unrealized Gain (Loss) on Securities Available-For-Sale,
  Net of Deferred Tax Liability                                                   $     355,736          440,218
Acquisition of Real Estate Property through Foreclosure of Related Loans          $   1,060,856        1,147,276
=================================================================================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash Paid During the Period for:
    Income Taxes                                                                  $      99,525          725,300
    Interest                                                                      $   1,639,176        1,639,839
=================================================================================================================
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.





                                        6



<PAGE>
STATE OF FRANKLIN BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

NOTE 1  INCORPORATION AND OPERATIONS
------ ------------------------------

     State of Franklin  Bancshares,  Inc.  (Company) was incorporated  under the
     laws of the State of  Tennessee  for the  purpose of  becoming  the holding
     company of State of franklin  Savings Bank (Savings Bank). The stockholders
     of the Savings Bank  exchanged  their shares for the shares of the Company,
     whereby the Savings Bank became a wholly owned  subsidiary  of the Company.
     State of Franklin Leasing Corporation (Leasing Corp) was incorporated under
     the laws of the State of  Tennessee  for the  purpose  of lease  financing.
     State of Franklin Real Estate,  Inc. (Real Estate Company) was incorporated
     for the purpose of selling  real estate.  The Real Estate  Company and John
     Sevier Title services,  Inc. (Title Company) are wholly owned  subsidiaries
     of the Savings Bank.  The leasing Corp is a wholly owned  subsidiary of the
     Company.


NOTE 2   BASIS OF PREPARATION
------  ----------------------

     The accompanying  consolidated financial statements include the accounts of
     the Company and its subsidiaries. All significant intercompany accounts and
     transactions have been eliminated. These financial statements were prepared
     in accordance  with generally  accepted  accounting  principles for interim
     financial  information  and in accordance  with the  instructions  for Form
     10-QSB.  Accordingly,  they do not include all disclosures  necessary for a
     complete   presentation  of  the   consolidated   statements  of  financial
     condition,  income,  cash  flows,  and changes in  stockholders'  equity in
     conformity with generally  accepted  accounting  principles.  However,  all
     adjustments which are, in the opinion of management, necessary for the fair
     presentation of the interim  financial  statements have been included.  All
     such adjustments are of a normal recurring nature.  The statement of income
     for the three months ended March 31, 2004 is not necessarily  indicative of
     the results which may be expected for the entire year.

     These consolidated  financial statements should be read in conjunction with
     the audited  consolidated  financial  statements  and notes thereto for the
     Company for the year ended December 31, 2003.


NOTE 3  RECLASSIFICATIONS
------  -----------------

     In instances where required,  amounts reported in prior period's  financial
     statements  included  herein  have  been  reclassified  to  put  them  on a
     comparable basis to the amounts reported in the March 31, 2004 consolidated
     financial statements.


NOTE 4  LAND BUILDINGS AND EQUIPMENT
-----  -----------------------------

     Fixed assets at March 31, 2004,  and  December 31, 2003 are  summarized  as
     follows:

                                                         2004          2003
                                                     -----------   -----------
     Land                                             1,580,000     1,580,000
     Buildings and Leasehold Improvements             4,339,071     4,030,608
     Furniture, Fixtures and Equipment                3,073,444     2,699,624
                                                     -----------   -----------
                                                      8,992,515     8,310,232
     Less:  Accumulated Depreciation                  2,235,698     2,091,874
                                                     -----------   -----------
                                                      6,756,817     6,218,358
                                                     ===========   ===========



                                        7

<PAGE>

NOTE 5    LOANS RECEIVABLE
-------   ------------------

Loans  receivable  at March 31,  2004 and  December  31,  2003,  consist  of the
following:

                                                    2004             2003
                                              --------------   --------------
  First Mortgage Loans                           48,688,897       49,702,608
  Construction Loans                             21,636,425       21,817,058
  Consumer Loans                                 13,412,121       13,070,617
  Participation Loans, Net                          452,204          458,452
  Commercial Loans                               64,539,592       63,208,012
  Credit Line Advances                            1,347,751        1,185,167
  Lease Finance                                   1,530,897        1,550,376
                                             ---------------  ---------------

    Gross Loans and Leases Receivable           151,607,887      150,992,290
                                             ---------------  ---------------

  Less:
    Undisbursed Portion of Loans in Process     (   156,550)     (   101,875)
    Net Deferred Loan Origination Fees          (   237,912)     (   243,810)
    Accumulated General Loan Loss Allowance     ( 1,871,073)     ( 1,870,279)
                                             ---------------  ---------------
                                                ( 2,265,535)     ( 2,215,964)
                                             ---------------  ---------------

  Loans and Leases Receivable, Net              149,342,352      148,776,326
                                             ===============  ===============


An analysis  of the  allowance  for loan and lease  losses at March 31, 2004 and
December 31, 2003 is as follows:

                                                    2004             2003
                                              --------------   --------------
    Balance - Beginning of Period                 1,870,279        1,563,320
    Provision for Loan and Lease Losses              10,000          444,548
    Loans and Leases Charged-Off                 (    9,206)      (  137,609)
    Charged-Off Loan and Lease Recoveries                 -               20
                                              --------------   --------------

    Balance - End of Period                       1,871,073        1,870,279
                                              ==============   ==============

The gross amount of  participation  loans serviced by State of Franklin  Savings
Bank was $904,388 at March 31, 2004 and $916,883 at December 31, 2003.

At March  31,  2004 the  Company  had  non-accrual  loans  and  leases  totaling
$2,810,000  which included  $121,000 in impaired loans compared with  $3,213,000
and $121,000, respectively, at December 31, 2003. A loan is impaired when, based
on current  information  and  events,  it is probable  that the Company  will be
unable to collect all amounts due according to the  contractual  agreement.  The
total allowance for loan losses allocated to impaired loans was $66,000 at March
31,  2004 and  December  31,  2003.  No interest  income on  impaired  loans was
recognized  for the periods  ending March 31, 2004 and  December  31, 2003.  The
Company had no loans or leases 90 days or more past due and still  accruing  and
no restructured loans at March 31, 2004.




                                        8

<PAGE>
NOTE  6     FEDERAL REGULATION
-------     ------------------

The capital ratios for State of Franklin Savings Bank are as follows:

                                                            For Capital
                                                             Adequacy
                                                             Purposes
                                                          And To Be Well
                                                         Capitalized Under
                                                         Prompt Corrective
                                         Actual          Action Provision
                                     ----------------    ----------------
In Thousands  (Reviewed)             Amount    Ratio     Amount    Ratio
---------------------------          ----------------    ----------------
As of March 31, 2004:
  Total Risk-Based Capital
    (to Risk-Weighted Assets)        23,933    12.24%    >=19,548   10.0%

  Tier 1 Capital
    (to Risk-Weighted Assets)        22,363    11.44%    >=11,729    6.0%

  Tier 1 Capital
    (to Adjusted Total Assets)       22,363     7.58%    >=14,747    5.0%

As of December 31, 2003:
  Total Risk-Based Capital
    (to Risk-Weighted Assets)        23,498    12.35%    >=19,021   10.0%

  Tier 1 Capital
    (to Risk-Weighted Assets)        21,923    11.53%    >=11,413    6.0%

  Tier 1 Capital
    (to Adjusted Total Assets)       21,923     7.48%    >=14,649    5.0%


The capital ratios for State of Franklin Bancshares, Inc. are as follows:

                                                           For Capital
                                                            Adequacy
                                                            Purposes
                                                         And To Be Well
                                                        Capitalized Under
                                                        Prompt Corrective
                                          Actual        Action Provision
                                     -----------------  -----------------
In Thousands  (Reviewed)             Amount    Ratio    Amount    Ratio
---------------------------          -----------------  -----------------
As of March 31, 2004:
  Total Risk-Based Capital
    (to Risk-Weighted Assets)        33,799     17.25%   >=19,592    10.0%

  Tier 1 Capital
    (to Risk-Weighted Assets)        31,800     16.23%   >=11,755     6.0%

  Tier 1 Capital
    (to Adjusted Total Assets)       31,800     10.71%   >=14,843     5.0%

As of December 31, 2003:
  Total Risk-Based Capital
    (to Risk-Weighted Assets)        33,361     17.52%   >=19,066    10.0%

  Tier 1 Capital
    (to Risk-Weighted Assets)        31,351     16.46%   >=11,440     6.0%

  Tier 1 Capital
    (to Adjusted Total Assets)       31,351     10.63%   >=14,744     5.0%



                                        9

<PAGE>
NOTE 7     EMPLOYEE AND DIRECTOR BENEFIT PLANS
------    ------------------------------------

EMPLOYEE STOCK OWNERSHIP PLAN

The  company  has an  employee  stock  ownership  plan  (the  "ESOP")  for those
employees  who meet  the  eligibility  requirements  of the  plan.  The ESOP was
established  in 1997.  The ESOP  currently  has two  loans  established  for the
purpose of purchasing shares in the Company for the plan.

In November 2001, the ESOP loans were  consolidated  into a seven year term loan
from the  Company  in the amount of  $1,071,093  with a fixed  interest  rate of
6.00%.  Note payments are $15,218 per month for 83 months plus a final principal
payment of $24,092. The note balance outstanding at March 31, 2004 was $750,105.
In November 2001, the Company also granted a $300,000 line of credit to the ESOP
for the  purchase  of  additional  shares of stock in the  Company as it becomes
available.  The interest rate for balances  outstanding on the line of credit is
6% with a five year term.  Interest is paid monthly with principal payments made
as funds are  available.  At March 31, 2004,  no balances were  outstanding  for
advances on the line of credit.

Shares  owned by the ESOP at March 31,  2004  totaled  175,148.  ESOP shares are
maintained in a suspense  account until released and allocated to  participants'
accounts.  The  release  of shares  from the  suspense  account  is based on the
principal  paid in the  year in  proportion  to the  total of  current  year and
remaining  outstanding  debt.  Allocation  of released  shares to  participants'
accounts is done as of December 31.  Shares  allocated and remaining in suspense
were as follows:

                                                       March 31,    December 31,
                                                          2004          2003
                                                     ------------- -------------
      Number of Shares
        Released and Allocated since Inception              77,857        77,857
        Suspense                                            68,873        70,811

      Fair Value
        Released and Allocated since Inception           1,557,140     1,557,140
        Suspense                                         1,377,460     1,416,220

The expense  recorded by the  Company is based on cash  contributed  to the ESOP
during the year in amounts determined by the Board of Directors, plus the excess
of fair value of shares  released  and  allocated  over the ESOP's cost of those
shares. The Company's contributions to the ESOP are as follows:

                                                        March 31,   December 31,
                                                            2004           2003
                                                     -------------  ------------
      Compensation Expense                                 111,000       408,370
      Contributions                                        111,000       408,370

No dividends have been declared on the Company's  stock.  If dividends are paid,
the ESOP  administrators  will  determine  whether  dividends on  allocated  and
unallocated shares will be used for debt service.  Any allocated  dividends used
will be replaced with common stock of equal value.  For the purpose of computing
earnings per share,  all ESOP shares  committed  to be released  are  considered
outstanding.

The  released  Company  stock  will be  allocated  to  employees  based on their
salaries.  Generally,  all  employees who work over 1,000 hours are eligible for
the plan after one year of service.  Employees  will be vested after seven years
of service. This plan includes a 401(k) feature that began in 1998, which allows
employees to defer up to 15% of their salary and is matched by the Company up to
6%. In addition, the Company may make a discretionary contribution to the ESOP.

STOCK OPTION PLANS
<TABLE>
<CAPTION>
                                                                                            Weighted
                                                                                            Average
                                                                      Awarded               Exercise
                                                                        And                  Price
                                                                    Unexercised   Vested      Per
                                                                      Options     Options    Share
                                                 --------------------------------------------------
     <S>                                         <C>                   <C>       <C>         <C>
     Options Granted - Outside Directors         January 1, 2004        90,014    82,833     $12.47
                                                 During 2004                --        --
     Options Granted - Management                January 1, 2004       238,211   172,935     $13.05
                                                 During 2004                --        --
                                                                       -------   -------
     Options Outstanding - March 31, 2004                              328,225   255,768     $12.89
                                                                       =======   =======
</TABLE>

                                       10


<PAGE>

NOTE 8     DEPOSITS
-------   ----------

     Deposit balances are summarized as follows:

<TABLE>
<CAPTION>
                                            March 31, 2004              December 31, 2003
                                    -----------------------------  -----------------------------
                                      Rate      Amount    Percent    Rate     Amount     Percent
                                    ------- -----------  --------  ------- -----------  --------
<S>                                    <C>  <C>            <C>        <C>  <C>            <C>
     Passbook                          1.73  89,097,324     38.80     1.75  84,622,380     38.12
     Interest-Free Checking              --  14,756,560      6.43       --  12,114,590      5.46
     NOW                               1.08  19,536,233      8.51     1.17  18,753,775      8.45
     Money Market Deposit              1.47  25,248,290     10.99     1.47  26,308,635     11.85
                                            -----------  --------          -----------  --------
                                            148,638,407     64.73          141,799,380     63.88
                                            -----------  --------          -----------  --------
     Fixed Term Certificate Accounts
      Balances $100,000 or greater     2.76  21,174,959      9.22     2.84  20,284,510      9.14
      Balances less than $100,000      2.61  59,805,248     26.05     2.66  59,908,596     26.98
                                            -----------  --------          -----------  --------
                                             80,980,207     35.27           80,193,106     36.12
                                            -----------  --------          -----------  --------
                                            229,618,614    100.00          221,992,486    100.00
                                            ===========  ========          ===========  ========
</TABLE>

The contractual  maturity of certificate accounts at March 31, 2004 and December
31, 2003, is as follows:

           Period Ending March 31, 2004            Year Ending December 31, 2003
         --------------------------------          -----------------------------
            2004             37,490,354              2004            45,642,644
            2005             28,904,925              2005            21,464,822
            2006              6,827,328              2006             6,379,826
            2007              2,910,015              2007             2,937,998
            2008 and After    4,847,585              2008 and After   3,767,816
                             ----------                              ----------
                             80,980,207                              80,193,106
                             ==========                              ==========

NOTE 9     FEDERAL HOME LOAN BANK ADVANCES
-------    -------------------------------

The contractual maturity of FHLB advances at March 31, 2004 is as follows:

         2004       27,278          2009                33,654
         2005       30,280          2010             8,034,555
         2006       31,091          2011            19,035,481
         2007       31,923          2012             5,036,431
         2008    3,032,777          2013 and after  10,909,242


Convertible  fixed  rate  advances  were  $45,000,000  at  March  31,  2004  and
35,000,000  at December 31, 2003.  The  convertible  fixed rate advances have an
original  maturity  of 10 years  with an  option  held by FHLB to  convert  to a
variable  rate tied to 3-month  LIBOR  beginning 1 to 3 years from the  original
issue date. If converted to a variable rate the bank maintains the option to pay
off the advance or continue at the variable  rate over the original  contractual
maturity of the  advance.  CRA mortgage  match  advances  are  amortized  over a
30-year  period and  totaled  $1,202,712  at March 31,  2004 and  $1,210,071  at
December 31, 2003.  The average rate on FHLB advances was 4.85% at both December
31, 2003 and 2002.

The Savings Bank pledges as collateral for these borrowings  selected qualifying
mortgage  loans and  securities  (as defined)  under an agreement with the FHLB.
Loans and  securities  pledged  at March  31,  2004  totaled  $66.9  million  in
residential  mortgage loans and $2 million in  securities.  At December 31, 2003
there were  approximately  $54.3  million in  mortgage  loans and no  securities
pledged for FHLB borrowings.


NOTE 10     INVESTMENT SECURITIES
-------     ---------------------

The amortized cost and fair value of investment securities  held-to-maturity and
available-for-sale at March 31, 2004, by contractual  maturity,  are as follows.
Expected maturities will differ from contractual  maturities because issuers may
have  the  right  to call  or  prepay  obligations  without  call or  prepayment
penalties.


                                       11

<PAGE>

<TABLE>
<CAPTION>
                                                             Gross       Gross      Estimated
                                             Amortized     Unrealized  Unrealized     Market
                                                Cost         Gains       Losses       Value
                                             ----------   ---------    ---------  -----------
<S>                                          <C>          <C>          <C>          <C>
     Available-for-Sale:
          United States Government
            Agency Securities Maturing:
                Within one year               2,013,355       3,595           --     2,016,950
                After one year
                 but within five years        1,017,383       8,994           --     1,026,377

          Mortgage Backed Securities:
               After one year
                 but within five years          314,986       1,740           --       316,726
               After five years
                 but within ten years         1,042,885      24,730           --     1,067,615
               After ten years
                 but within fifteen years     1,214,455      15,963           --     1,230,418
               After 20 years                   784,118       6,480           --       790,598

              Municipal Securities Maturing:
               Within one year                  135,000       4,427           --       139,427
               After one year
                 but within five years        1,423,874      96,216           --     1,520,090
               After five years
                 but within ten years         5,146,665     443,972           --     5,590,637
               After ten years
                 but within fifteen years     9,662,127     927,305           --    10,589,432
               After fifteen years
                 but within twenty years      2,674,350     204,119           --     2,878,469
               After 20 years                 2,026,132      85,298       28,304     2,083,126

         Corporate Securities Maturing:
               After one year
                 but within five years        1,357,550      36,432           --     1,393,982
               After five years
                 but within ten years         4,471,335     151,935           --     4,623,270
               After ten years
                 but within fifteen years     2,100,000     102,404           --     2,202,404
               After twenty years             1,730,103     148,864           --     1,878,967

          Equity Securities
                Callable within one year     21,058,517      36,717    3,338,934    17,756,300
                Callable after one year
                  but within five years       4,414,150     240,000       14,081     4,640,069
                Callable after five years
                  but within ten years        1,000,000      90,000           --     1,090,000

          Other
               After 20 years                   318,155      36,094           --       354,249
                                             ----------   ---------    ---------   -----------
                  Total Available-for-Sale   63,905,140   2,665,285    3,381,319    63,189,106
                                             ==========   =========    =========   ===========

Held-to-Maturity:
          United States Government
            Agency Securities Maturing:
                After one year
                 but within five years        7,064,805      28,236           11     7,093,030
                After five years
                 but within ten years         1,978,936          --       38,246     1,940,690
               After fifteen years
                 but within twenty years        261,819          --        7,089       254,730

          Mortgage Backed Securities:
                After one year
                 but within five years        2,650,156      18,040           --     2,668,196
               After five years
                 but within ten years         5,982,535      20,694        4,324     5,998,905
               After ten years
                 but within fifteen years     1,831,859      12,360        2,140     1,842,079
               After twenty years            16,361,543      12,377      156,231    16,217,689

</TABLE>


                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                             Gross       Gross      Estimated
                                              Amortized  Unrealized    Unrealized     Market
                                                 Cost        Gains       Losses       Value
                                             ----------     -------    ----------  -----------
          <S>                                <C>            <C>          <C>        <C>

          Municipal Securities Maturing:
                After one year
                 but within five years        1,288,947       7,486           --     1,296,433
               After ten years
                 but within fifteen years       429,980      20,613           --       450,593
               After fifteen years
                 but within twenty years        319,645       1,942           --       321,587
               After twenty years               455,431          --        4,501       450,930

          Corporate Securities Maturing:
               After one year
                 but within five years        2,307,165      57,865           --     2,365,030
               After five years
                 but within ten years         1,075,138      41,942        8,385     1,108,695
               After twenty years             3,701,517     420,749       17,001     4,105,265
                                             ----------     -------    ---------   -----------
                  Total Held-to-Maturity     45,709,476     642,304      237,928    46,113,852
                                             ==========     =======    =========   ===========
</TABLE>





Securities  sold under  agreement to repurchase  are offered to cash  management
customers  as an  automated,  collateralized  investment  account.  Under  these
transactions,  securities are delivered to the  counterparty's  custody account.
Securities  held in custody  accounts  at March 31, 2004 and  December  31, 2003
totaled $2,013,355 and $2,030,774, respectively.


NOTE 11     EARNINGS PER SHARE
-------     ------------------
Earnings per share for three months ended March 31, 2004, compared with the same
period in 2003, are as follows:

                                                          Three Months Ended
                                                               March 31,
                                                           2004        2003
                                                        ---------   ---------
Net Income                                                552,431     831,242

Average Basic Shares Outstanding                        1,395,814   1,382,339

Basic Earnings Per Share                                      .40         .60
                                                        =========   =========

Net Income                                                552,431     831,242

Average Basic Shares Outstanding                        1,395,814   1,382,339
Dilutive Effect Due to Stock Options                      116,619      94,125
                                                        ---------   ---------
Average Shares Outstanding, as Adjusted                 1,512,433   1,476,464

Diluted Earnings Per Share                                    .37        0.56
                                                        =========   =========

ITEM 2  MANAGEMENT'S DISCUSSION  AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
------  ------------------------------------------------------------------------

GENERAL
-------

The following discussion and analysis is intended to assist in understanding the
financial  condition  and the results of  operations  of the  Company.  State of
Franklin Savings Bank (Savings Bank) and State of Franklin  Leasing  Corporation
(Leasing  Corp)  represents  virtually  all of the  assets of State of  Franklin
Bancshares,  Inc.  (Company).  The Company  places an emphasis on an  integrated
approach to its balance sheet management.  Significant  balance sheet components
of  investment  securities,  loans  and  sources  of  funds  are  managed  in an
integrated  manner with the  management  of interest rate risk,  liquidity,  and
capital. These components are examined below.



                                       13


<PAGE>


BALANCE SHEET REVIEW
--------------------

At March 31, 2004,  assets of State of Franklin  Bancshares,  Inc.  totaled $311
million reflecting an increase of $19 million or 7% since December 31, 2003. The
growth in assets has been funded primarily by an $8 million increase in deposits
and a $10 million increase in FHLB advances.

LOANS
-----

Loans outstanding  totaled $151.6 million at March 31, 2004 compared with $151.0
million at December 31, 2003.  First  mortgage  loans  decreased  $1.0  million,
consumer  loans  increased  $504,000,  and  commercial  and  construction  loans
increased $1.1 million. The loan portfolio mix at March 31, 2004 consists of 33%
residential  mortgages,  43% commercial,  14% real estate construction,  and 10%
consumer loans.

INVESTMENT SECURITIES
---------------------

Investment  securities  totaled $108.9 million at March 31, 2004. The investment
portfolio at quarter end consisted of $12.3 million in debt securities issued by
the U. S  Government  or Federal  Agencies,  $30.2  million in  mortgage  backed
securities,   $25.3  million  in  securities   issued  by  state,   county,   or
municipalities,   $17.2  million  in  corporate  securities,  $23.5  million  in
preferred  stock  issued by  Federal  Agencies,  and  $354,000  in other  equity
securities.

At March 31, 2004, securities  categorized as  available-for-sale  totaled $63.2
million while the held-to-maturity  securities totaled $45.7 million compared to
$63.4 million in  available-for-sale  and $34.0 million in  held-to-maturity  at
December 31, 2003. At March 31, 2004, the  available-for-sale  portfolio had net
unrealized losses of $716,034 while our held-to-maturity securities had $404,376
in net unrealized gains.

NON-PERFORMING ASSETS
---------------------

At March 31,  2004 the  Company  had  nonaccrual  loans  totaling  $2.8  million
compared with $3.2 million at December 31, 2003.  The reserve for loan and lease
losses  was  $1,871,073  at  March  31,  2003,  or 1.24%  of  loans  and  leases
outstanding,  net of  unearned  income  and  loans  held for sale,  compared  to
$1,870,279 or 1.24% at December 31, 2003.  Management believes the allowance for
loan losses is adequate to provide for potential loan losses.

DEPOSITS
--------

Total  deposits at March 31, 2004 of $229.6  million,  reflected  an increase of
$7.6  million  or  a 3%  increase  from  $123  million  at  December  31,  2003.
Non-interest bearing demand deposits totaled $14.8 million at March 31, 2004, an
increase of $2.6 million  from  December 31,  2003.  Interest  bearing  deposits
increased $5.0 million to $214.9 million at March 31, 2004.

CAPITAL
-------

Tier 1 capital for the  Savings  Bank at March 31,  2004 was $22.4  million.  At
March 31, 2004, all capital  ratios were in excess of the  regulatory  minimums,
with the Savings Bank's Tier 1, total risk-based, and leverage ratios of 11.44%,
12.24% and 7.58%, respectively.

Tier 1 capital for the Company at March 31, 2004, was $31.8 million with Tier 1,
total  risk-based,   and  leverage  ratios  of  16.23%,   17.25%,   and  10.71%,
respectively.

LIQUIDITY
---------

The purpose of liquidity  management is to ensure that there is sufficient  cash
flow to satisfy  demands for credit,  deposit  withdrawals,  and other corporate
needs.  Traditional  sources of liquidity include asset maturities and growth in
core deposits.  Other sources of funds such as securities sold under  agreements
to repurchase,  negotiable  certificates  of deposit and other  liabilities  are
sources of liquidity  that the Company has not  significantly  used. The Company
had unused  sources of  liquidity in the form of unused  federal  funds lines of
credit  and an  unused  line of  credit  with  the  Federal  Home  Loan  Bank of
Cincinnati.

EARNINGS REVIEW
----------------

The Company had net income of $552,431  for the three  months  ending  March 31,
2004,  compared  with  $831,242  for the same period last year,  resulting  in a
decrease of 34%. Return on average assets and average equity was .75% and 8.90%,
respectively,  compared  with 1.27% and 14.77% for the three month  period ended
March 31,  2003.  For the three  months  ended  March 31,  2004,  net income per
diluted  share  was $.37  compared  to  earnings  per share of $.56 for the same
period in 2003.

Noninterest  income  decreased  $124,693,  or 31%, during the three months ended
March 31, 2004, compared to the same period last year as a result of declines in
other  fees  and  service  charges,  gains  on  loans  sold,  realized  gains on
securities,   real  estate  sales   commission,   and   insurance   commissions.
Contributing  significantly to the decline in noninterest  income were decreases
in net gains on loans sold and realestate sales commission income which declined
from the prior year as a result of  declines  in both  refinancing  of  existing
homes and decreased activity in the housing market.


                                       14

<PAGE>

Noninterest  expense was  $1,493,170 for the three months ending March 31, 2004,
an increase of $288,741,  or 24% over the 2003 period,  resulting from increases
in compensation and related benefits, occupancy expense, furniture and equipment
expense, advertising, data processing, and other operating expenses.

NET INTEREST INCOME
-------------------

Interest income and interest  expense both decreased from 2003 to 2004 primarily
resulting  from assets and  liabilities  repricing at lower rates.  Net interest
income of  $1,953,489  for the three  months  ended  March 31,  2004  reflects a
decrease of $149,896 or 7% under the same period last year. For the three months
ending March 31, 2004,  average  earning assets  increased  $28.6 million or 11%
while average interest bearing  liabilities  increased $26.4 million,  also 11%,
compared with the same period in 2003. The taxable  equivalent  yield on earning
assets  declined  92 basis  points to 5.34% for the first  three  months of 2004
compared  with the same  period  in 2003  while  the  cost on  interest  bearing
liabilities  declined  36 basis  points  to  2.01%.  Consequently,  the  taxable
equivalent  net interest  margin based on average  earning  assets  decreased to
2.89% for the three  months  ending March 31, 2004  compared  with 3.48% for the
same period in 2003.

PROVISION FOR LOAN LOSSES
-------------------------

During the three months ended March 31, 2004,  the  provision  for possible loan
losses was $10,000  compared with $177,637 for the same period last year.  There
were $9,206 in loan or lease  charge-offs net of recoveries for the three months
ended March 31, 2004, and no loan or lease charge-offs during the same period in
2003. The allowance for possible loan losses  represented  1.24% of total loans,
net of mortgage  loans  held-for-sale,  at March 31, 2004,  compared to 1.11% at
March  31,  2003.  Management  considers  the  allowance  for loan  losses to be
adequate to cover losses inherent in the loan portfolio.

PROVISION FOR INCOME TAXES
---------------------------

For the three months ended March 31, 2004,  the  provision for federal and state
income taxes were  $176,766,  a decrease of $293,648 from 2003.  The decrease is
due to the decline in taxable income compared to the same period in 2003.


NONINTEREST INCOME
-------------------

The  Company's  noninterest  income was  $278,878  during the three months ended
March 31, 2004, a decrease of $124,693 or 31% from the  comparable  2003 period.
During 2004,  other fees and service charges,  net gain on loans sold,  realized
gain on  securities,  real estate sales  commissions,  and insurance  commission
income declined $5,431, $101,871, $231, $14,108, and $8,551,  respectively.  Net
rental income increased $5,499.


NONINTEREST EXPENSE
--------------------

Noninterest  expense totaled  $1,493,170 for the three month period ending March
31, 2004,  an increase of $288,741,  or 24%,  over the same period in 2003.  The
increase was the result of increases in  compensation  and  benefits,  occupancy
expense,  furniture and equipment  expense,  advertising,  data processing,  and
other operating expenses of $57,479,  $6,756,  $67,659,  $29,666,  $52,842,  and
$74,339, respectively.


ITEM 3  CONTROLS AND PROCEDURES
------  -----------------------

(a) Evaluation of Disclosure  Controls and Procedures.  The Company's  President
and its Chief Executive  Officer have evaluated the  effectiveness of the design
and operation of the Company's disclosure controls and procedures (as defined in
Exchange Act Rule  13a-14(c))  as of a date within 90 days of the filing date of
this quarterly  report.  Based on that  evaluation,  the President and the Chief
Executive  Officer have  concluded  that the Company's  disclosure  controls and
procedures  are  effective to ensure that material  information  relating to the
Company  and the  Company's  consolidated  subsidiaries  is made  known  to such
officers by others within these  entities,  particularly  during the period this
quarterly  report was  prepared,  in order to allow timely  decisions  regarding
required disclosure.

(b) Changes in Internal Controls. There have not been any significant changes in
the Company's  internal  controls or in other  factors that could  significantly
affect these controls subsequent to the date of their evaluation.


                                       15
<PAGE>


PART II - OTHER INFORMATION


     ITEM 1. LEGAL PROCEEDINGS

             None


     ITEM 2. CHANGES IN SECURITIES

             None


     ITEM 3. DEFAULT UPON SENIOR SECURITIES

             None


     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

             None


     ITEM 5. OTHER INFORMATION

             None


     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          31.1 Certification of Randal R. Greene, President of State of Franklin
               Bancshares,  Inc.  pursuant to Section 301 of the  Sarbanes-Oxley
               Act of 2002.

          31.2 Certification of Charles E. Allen, Jr., the Chairman of the Board
               and Chief Executive Officer of State of Franklin Bancshares, Inc.
               pursuant to Section 301 of the Sarbanes-Oxley Act of 2002.

          32.1 Certification of Randal R. Greene, President of State of Franklin
               Bancshares,  Inc.  pursuant to Section 906 of the  Sarbanes-Oxley
               Act of 2002.

          32.2 Certification of Charles E. Allen, Jr., the Chairman of the Board
               and Chief Executive Officer of State of Franklin Bancshares, Inc.
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

     (b)  The  Company  did not file any  reports on Form 8-K during the quarter
          ended March 31, 2004






















                                       16


<PAGE>




                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                STATE OF FRANKLIN BANCSHARES, INC.
                                ----------------------------------
                                (Registrant)





      May 13, 2004                         /s/ Randal R. Greene
---------------------------                -------------------------------------
         (Date)                            Randal R. Greene, President





      May 13, 2004                         /s/ Charles E. Allen, Jr.
---------------------------                -------------------------------------
         (Date)                            Charles E. Allen, Jr., Chairman of
                                           the Board and Chief Executive Officer
                                           (Principal Executive, Financial and
                                           Accounting Officer)












                                       17