<PAGE>   1



                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

                                   (MARK ONE)

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


For the quarterly period ended JUNE 30, 1997
                               ------------------------------------------------ 
                                       OR

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


For the transition period from                     to                          
                                ------------------    -------------------------
Commission file number 0-10849
                       -------  

                         SOUTHSIDE BANCSHARES CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

        MISSOURI                                        43-1262037
-------------------------------            -------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

3606 GRAVOIS AVENUE, ST. LOUIS, MISSOURI         63116
--------------------------------------------------------------------------------
(Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code   (314) 776-7000 
                                                     --------------

     Indicate by check mark whether the registrant (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 
    ---      ---
     At AUGUST 11, 1997   , the number of shares outstanding of the
        ---------------
registrant's common stock was 2,835,670.
                              ---------
<PAGE>   2

                           SOUTHSIDE BANCSHARES CORP.

                                     INDEX

  
                                                                            Page
                                                                            ----
Part I.  FINANCIAL INFORMATION

             Item 1.  Condensed Consolidated Financial Statements:

                      Condensed Consolidated Balance Sheets a
                       June 30, 1997 and December 31, 1996                    3

                      Condensed Consolidated Statements of Income for
                       the six months and three months ended
                       June 30, 1997 and June 30, 1996                        4

                      Condensed Consolidated Statements of Cash Flows for
                       the six months ended June 30, 1997
                       and June 30, 1996                                      5

                      Notes to Condensed Consolidated Financial Statements    6

             Item 2.  Management's Discussion and Analysis of
                       Financial Condition and Results of Operations          6

Part II.    OTHER INFORMATION

             Item 1.  Legal Proceedings                                      14

             Item 4.  Submission of Matters to a Vote of Security Holders    15

             Item 6.  Exhibits and Reports on Form 8-K                       15

                      Signatures                                             16

                                      2

<PAGE>   3



                  SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      JUNE 30, 1997 AND DECEMBER 31, 1996
                    (dollars in thousands except share data)
                                  (unaudited)



<TABLE>
<CAPTION>
                                                                                          JUNE 30,                December 31,
                                   ASSETS                                                  1997                     1996      
                                                                                    -----------------        -----------------
 <S>                                                                                       <C>                     <C>
 Cash and due from banks                                                                   $ 21,519                $ 17,156
 Federal funds sold                                                                          14,000                  13,500
 Investments in debt securities:
        Available-for-sale, at market value                                                  70,393                  66,650
        Held-to-maturity, at amortized cost
             (approximate market value of $109,256
             in 1997, and $121,377 in 1996)                                                 108,562                 120,644
                                                                                           --------                --------
                Total investments in debt securities                                        178,955                 187,294
                                                                                           --------                --------

 Loans, net of unearned discount                                                            311,166                 294,463
    Less allowance for possible loan losses                                                  (6,150)                 (5,602)
                                                                                           --------                -------- 
                Loans, net                                                                  305,016                 288,861
                                                                                           --------                --------
 Bank premises and equipment                                                                 11,017                  10,785
 Other assets                                                                                10,387                  10,311
                                                                                           --------                --------
                TOTAL ASSETS                                                               $540,894                $527,907
                                                                                           ========                ========

                    LIABILITIES AND SHAREHOLDERS' EQUITY
 Deposits:
    Noninterest-bearing demand                                                             $ 58,314                $ 58,046
    Interest-bearing demand and savings                                                     186,221                 185,589
    Time deposits                                                                           226,186                 223,641
                                                                                           --------                --------
                Total deposits                                                              470,721                 467,276

 Short-term borrowings                                                                        9,693                   1,623
 Debt of employee stock ownership plan                                                        1,581                   1,779
 Other liabilities                                                                            3,658                   4,388
                                                                                           --------                --------
                Total liabilities                                                           485,653                 475,066
                                                                                           --------                --------

 Commitments and contingent liabilities
 Shareholders' equity:
    Cumulative preferred stock, no par value, 1,000,000 shares
        authorized and unissued                                                                   -                       -
    Common stock, $1 par value, 5,000,000 shares authorized,
        2,859,010 shares issued and outstanding in 1997 and 1996                              2,859                   2,859
 Surplus                                                                                      5,910                   5,819
 Retained earnings                                                                           48,623                  46,448
 Unearned employee stock ownership plan shares                                               (1,482)                 (1,581)
 Treasury stock, 23,340 shares in 1997 and 22,340 shares in 1996                               (476)                   (450)
 Net unrealized losses on available-for-sale securities                                        (193)                   (254)
                                                                                           --------                -------- 
                  Total shareholders' equity                                                 55,241                  52,841
                                                                                           --------                --------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                           $540,894                $527,907
                                                                                           ========                ========
</TABLE>
 See accompanying notes to condensed consolidated financial statements.

                                      3
<PAGE>   4

                  SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
                    (dollars in thousands except share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED           THREE MONTHS ENDED
                                                                          JUNE 30,                    JUNE 30,
                                                                     1997         1996            1997         1996  
                                                                  ---------    ---------       ----------     ---------
<S>                                                              <C>            <C>            <C>             <C>           
INTEREST INCOME:                                                                                                             
  Interest and fees on loans                                    $   13,305      $  13,130      $    6,808      $    6,439    
  Interest on investments in debt securities:                                                                                
      Taxable                                                        4,901          4,242           2,458           2,257    
      Exempt from Federal income taxes                                 618            635             310             311    
  Interest on short-term investments                                   370            536             217             300    
                                                                ----------      ---------      ----------      ----------    
           TOTAL INTEREST INCOME                                    19,194         18,543           9,793           9,307    
                                                                ----------      ---------      ----------      ----------    
                                                                                                                             
INTEREST EXPENSE:                                                                                                            
  Interest on interest-bearing demand and savings deposits           2,856          2,773           1,446           1,413    
  Interest on time deposits                                          5,941          5,756           3,000           2,857    
  Interest on short-term borrowings                                     86             51              52              22    
  Interest on debt of employee stock ownership plan                     71             95              34              37    
                                                                ----------      ---------      ----------      ----------    
         TOTAL INTEREST EXPENSE                                      8,954          8,675           4,532           4,329    
                                                                ----------      ---------      ----------      ----------    
         NET INTEREST INCOME                                        10,240          9,868           5,261           4,978    
  Provision for possible loan losses                                    30             30              15              15    
                                                                ----------      ---------      ----------      ----------    
         NET INTEREST INCOME AFTER PROVISION                                                                                 
   FOR POSSIBLE LOAN LOSSES                                         10,210          9,838           5,246           4,963    
                                                                ----------      ---------      ----------      ----------    
                                                                                                                             
NONINTEREST INCOME:                                                                                                          
  Trust department                                                     505            457             268             240    
  Service charges on deposit accounts                                  650            625             329             319    
  Net losses on sale of other real estate                                                                                    
      owned and other foreclosed property                              (22)           (23)             (7)            (35)   
  Other                                                                256            244             117             110    
                                                                ----------      ---------      ----------      ----------    
         TOTAL NONINTEREST INCOME                                    1,389          1,303             707             634    
                                                                ----------      ---------      ----------      ----------    
                                                                                                                             
NONINTEREST EXPENSES:                                                                                                        
  Salaries and employee benefits                                     3,684          3,650           1,880           1,892    
  Net occupancy and equipment expense                                1,192          1,177             603             597    
  Data processing                                                      229            243             122             150    
  Other                                                              2,306          2,040           1,189           1,086    
                                                                ----------      ---------      ----------      ----------    
         TOTAL NONINTEREST EXPENSES                                  7,411          7,110           3,794           3,725    
                                                                ----------      ---------      ----------      ----------    
                                                                                                                             
         INCOME BEFORE FEDERAL INCOME TAX EXPENSE                    4,188          4,031           2,159           1,872    
Federal income tax expense                                           1,109          1,124             578             513    
                                                                ----------      ---------      ----------      ----------    
         NET INCOME                                             $    3,079      $   2,907      $    1,581      $    1,359    
                                                                ==========      =========      ==========      ==========    
                                                                                                                             
SHARE DATA:                                                                                                                  
        Earnings per common share                               $     1.13      $    1.08      $     0.58      $     0.50    
                                                                ==========      =========      ==========      ==========    
        Dividends paid per common share                         $     0.33      $    0.22      $     0.17      $     0.12    
                                                                ==========      =========      ==========      ==========    
        Average common shares outstanding                        2,738,799       2,691,667      2,739,926       2,739,985    
                                                                ==========      =========      ==========      ==========    
</TABLE> 

See accompanying notes to condensed consolidated financial statements.

                                      4
<PAGE>   5




                  SOUTHSIDE BANCSHARES CORP. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                             (dollars in thousands)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                         1997                         1996  
                                                                                      ---------                    ---------
 <S>                                                                                   <C>                         <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                          $ 3,079                     $  2,907
   Adjustments to reconcile net income to
      net cash provided by operating activities:
         Depreciation and amortization                                                     821                        1,041
         Provision for possible loan losses                                                 30                           30
         Other operating activities, net                                                (1,124)                        (764)
                                                                                       -------                     -------- 
           Total adjustments                                                              (273)                         307
                                                                                       -------                     --------
             NET CASH PROVIDED BY OPERATING ACTIVITIES                                   2,806                        3,214
                                                                                       -------                     --------

 CASH FLOWS FROM INVESTING ACTIVITIES:
         Net (increase) decrease in Federal funds sold                                    (500)                       4,450
         Proceeds from maturities of and principal payments on
             debt securities                                                            24,136                       22,068
         Purchases of debt securities                                                  (15,855)                     (36,102)
         Net (increase) decrease in loans                                              (16,821)                       8,375
         Recoveries of loans previously charged off                                        636                          443
         Proceeds from sales of other real estate owned and other
             foreclosed property                                                           165                          119
         Purchases of bank premises and equipment                                         (790)                        (269)
                                                                                       -------                     -------- 
             NET CASH USED IN INVESTING ACTIVITIES                                      (9,029)                        (916)
                                                                                       -------                     -------- 

 CASH FLOWS FROM FINANCING ACTIVITIES:
         Net increase (decrease)in demand and savings deposits                             900                       (3,642)
         Net increase (decrease) in time deposits                                        2,545                          (64)
         Net increase in short-term borrowings                                           8,070                        1,604
         Payments to acquire treasury stock                                                (26)                         (53)
         Cash dividends paid                                                              (903)                        (602)
                                                                                       -------                     -------- 
             NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                        10,586                       (2,757)
                                                                                       -------                     -------- 
             NET DECREASE IN CASH AND CASH EQUIVALENTS                                   4,363                         (459)
 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                           17,156                       16,930
                                                                                       -------                     --------
 CASH AND CASH EQUIVALENTS, END OF QUARTER                                             $21,519                     $ 16,471
                                                                                       =======                     ========

 Supplemental disclosures of cash flow information:
    Cash paid during the year for:
       Interest on deposits and borrowings                                             $ 9,050                     $  8,700
       Income taxes                                                                      1,510                        1,570
                                                                                       =======                     ========

    Noncash transactions:
       Transfers to other real estate owned in settlement of loans
                                                                                       $   106                     $    370
                                                                                       =======                     ========
</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                      5
<PAGE>   6

                           SOUTHSIDE BANCSHARES CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1997 AND 1996
                                  (unaudited)
                
BASIS OF PRESENTATION

    The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form  10-Q and
Rule 10-01 of Regulation S-X.  They do not include all information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements.  In the opinion of management, all
adjustments, consisting of normal recurring accruals, considered necessary for
a fair presentation have been included.  For further information, refer to
Southside Bancshares Corp.'s (the Company) Annual Report on Form 10-K for the
year ended December 31, 1996.  Operating results for the six months ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997.

ITEM 2.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                    GENERAL

    This discussion is presented to provide an understanding of Southside
Bancshares Corp. and subsidiaries (the "Company" or "Registrant") consolidated
financial condition and the results of operations for the six months ended June
30, 1997 and 1996.

    The Company's net income is derived primarily from the net interest
income of its subsidiary banks.  Net interest income is the difference (or
spread) between the interest income the subsidiary banks receive from their
loan and investment portfolios and their cost of funds, consisting primarily of
the interest paid on deposits and borrowings.  Net income is also affected by
the levels of provisions for possible loan losses, noninterest income, and
noninterest expense.

    Statements contained in this Report and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made with the approval of an authorized
executive officer which are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities
Act of 1993, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended).  Such statements are based on management's beliefs, and
assumptions made by and information currently available to management and are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those currently anticipated or
projected.  When used in the Company's documents or oral presentations, the
words "anticipates," "believes," "estimates," "expects," "intends,"
"forecasts," "plan," "projects," and similar expressions are intended to
identify such forward-looking statements.  There can be no assurance that such
forward-looking statements will in fact transpire.  The following important
factors, risks and uncertainties, among others, could cause actual results to
differ materially from such forward-looking statements: (1) credit risk, (2)
interest rate risk, (3) competition, (4) changes in the regulatory environment
and (5) changes in general business and economic trends.  The foregoing list
should not be construed as exhaustive and the Company disclaims any obligation
to subsequently update or revise any forward-looking statements after the date  
of this Report.
        
                                      6
<PAGE>   7

Item 2. (continued)

                              FINANCIAL HIGHLIGHTS
                     COMPARISON OF SELECTED FINANCIAL DATA
                    (dollars in thousands except share data)

<TABLE>
<CAPTION>
                                                         SIX MONTHS ENDED        Twelve Months Ended         Six Months Ended
                                                          JUNE 30, 1997           December 31, 1996            June 30, 1996
                                                          -------------           -----------------            -------------
<S>                                                       <C>                        <C>                       <C>
 EARNINGS
    Total interest income                                 $   19,194                 $   37,868                $   18,543
    Total interest expense                                     8,954                     17,526                     8,675
                                                          ----------                 ----------                ----------
    Net interest income                                       10,240                     20,342                     9,868
    Provision for possible loan losses                            30                         60                        30
                                                          ----------                 ----------                ----------
    Net interest income after provision for
      possible loan losses                                $   10,210                 $   20,282                $    9,838
                                                          ==========                 ==========                ==========
    Net income                                            $    3,079                 $    6,158                $    2,907
                                                          ==========                 ==========                ==========
 SHARE DATA
    Net income                                            $     1.13                 $     2.27                $     1.08   
    Dividends paid                                               .33                        .50                       .22   
    Book value                                                 20.14                      19.30                     18.25   
    Tangible book value                                        20.04                      19.18                     18.12   
    Shares outstanding (period-end)                        2,743,014                  2,836,670                 2,847,150   

 FINANCIAL POSITION
    Total assets                                          $  540,894                 $  527,907                  $512,181
    Total deposits                                           470,721                    467,276                   453,861
    Total loans, net of unearned discount                    311,166                    294,463                   294,642
    Allowance for possible loan losses                         6,150                      5,602                     5,301
    Short-term borrowings                                      9,693                      1,623                     2,383
    Debt of employee stock ownership plan                      1,581                      1,779                     1,779
    Total shareholders' equity                                55,241                     52,841                    50,001
</TABLE>

                                SELECTED RATIOS

The table below summarizes various selected ratios as of the end of the periods
indicated.

<TABLE>
<CAPTION>
                                                         SIX MONTHS ENDED       Twelve Months Ended         Six Months Ended
                                                         JUNE 30, 1997(1)        December 31,1996            June 30, 1996(1)
                                                         ----------------        ------------------         ----------------   
 <S>                                                        <C>                        <C>                      <C>
    Loan-to-deposit ratio                                   66.10%                      63.02%                  64.92%
    Allowance for possible loan losses to total
       loans                                                 1.98                        1.90                    1.80
    Return on average assets                                 1.16                        1.20                    1.14
    Return on average shareholders' equity                  11.41                       12.27                   11.89
    Net interest margin on average interest-
       earning assets                                        4.27                        4.42                    4.30
    Average shareholders' equity to average total                                        
       assets                                               10.19                        9.75                    9.59
    Tier I leverage capital to adjusted total                                            
       consolidated assets less                             
       intangibles                                          10.34                       10.12                    9.83
    Tier I capital to risk-weighted assets                  16.54                       16.62                   16.49
    Total capital to risk-weighted assets                   17.80                       17.88                   17.75
</TABLE>

(1)  Statistical information is annualized where applicable.


                                      7
<PAGE>   8

Item 2. (continued)

                               FINANCIAL POSITION

         Total consolidated assets of the Company have increased approximately
$13,000,000 or 2.5% during 1997 to $540,894,000 at June 30, 1997 compared to
$527,907,000 at December 31, 1996.

LOAN PORTFOLIO
         The Company's loan portfolio consists of business loans to small and
medium size companies, commercial and residential real estate loans, and
consumer loans.  Traditionally, the majority of the loan portfolio has focused
on real estate as an integral component of a credit's underlying source of
repayment.  The  following table is a breakdown of the Company's loan portfolio
as of the end of the periods indicated.

<TABLE>
<CAPTION>
                                                                 (in thousands)
                                        JUNE 30, 1997            December 31, 1996         June 30, 1996
                                        -------------            -----------------         -------------
 <S>                                    <C>                      <C>                       <C>
Commercial, financial and agricultural   $ 63,094                 $ 62,016                  $ 64,874
Real estate-commercial                     86,552                   82,045                    84,638
Real estate-construction                   28,114                   26,067                    19,595
Real estate-residential                    97,005                   96,039                    97,256
Consumer                                   25,606                   17,304                    16,559
Industrial revenue bonds                    5,861                    6,373                     7,289
Other                                       4,934                    4,619                     4,431
                                         --------                 --------                  --------
                                         $311,166                 $294,463                  $294,642
                                         ========                 ========                  ========
</TABLE>

         The Company's loan portfolio totaled $311,166,000 at June 30, 1997.
This represents an increase of approximately $16.7 million since December 31,
1996.  Approximately $8.3 million of the increase is attributable to an
increase in consumer loans.  During the fourth quarter of 1996, the Company
began to focus on automobile financing.  Utilizing the services of a direct
marketing company, the Company's subsidiary banks identify recent purchasers of
new and used vehicles in their individual market territories and solicit
refinancing of the vehicles purchased.  The remainder of the increase was due
to increases in commercial and construction real estate loans.  The continued
stable economy and the recent wave of mergers and acquisitions in the local
banking environment, have resulted in strong loan demand in these two lending
categories.

                 SUMMARY OF ALLOWANCE FOR POSSIBLE LOAN LOSSES

<TABLE>
<CAPTION>
                                                                    (dollars in thousands)
                                           SIX MONTHS ENDED          Twelve Months Ended          Six Months Ended
                                             JUNE 30, 1997            December 31, 1996            June 30, 1996
                                             -------------            -----------------            -------------
<S>                                            <C>                      <C>                      <C>
BALANCE AT BEGINNING OF PERIOD                 $ 5,602                    $ 5,635                   $ 5,635
Provision charged to expense                        30                         60                        30
Loans charged off                                 (118)                    (1,219)                     (807)
Recoveries                                         636                      1,126                       443  
                                               -------                    -------                   -------  
BALANCE AT END OF PERIOD                       $ 6,150                    $ 5,602                   $ 5,301
                                               =======                    =======                   =======
</TABLE>
                                                                         

         The balance of the allowance for possible loan losses has increased by
$548,000 during the first six months of 1997, as recoveries have exceeded
charge-offs by $518,000, and the Company has recorded a provision for possible
loan losses during the first six months of $30,000.  Based upon the Company's
internal analysis of the adequacy of the allowance for possible loan losses,
management of the Company believes the level is adequate to cover actual and
potential losses in the loan portfolio under current conditions.  The ratio of
allowance for possible loan losses as a percentage of total loans increased to
1.98% as of June 30, 1997 compared to 1.90% and 1.80% at December 31, 1996 and
June 30, 1996, respectively, due to the aforementioned net recoveries during
the first six months of the year.  

                                      8

<PAGE>   9
Item 2. (continued)   
                              NONPERFORMING ASSETS

<TABLE>
<CAPTION>
                                                                               (dollars in thousands)
                                                           JUNE 30, 1997     December 31, 1996        June 30, 1996
                                                           -------------     -----------------        -------------
<S>                                                       <C>                  <C>                    <C>
Nonaccrual loans                                           $ 1,385               $ 1,037               $ 2,718
Loans past due 90 days or more and still                                  
    accruing interest                                           95                   146                 2,067
       TOTAL NONPERFORMING LOANS                             1,480                                       4,785
Other real estate owned                                        976                   860                   769
                                                            ------               -------               -------
       TOTAL NONPERFORMING ASSETS                           $2,456               $ 2,043               $ 5,554
                                                            ======               =======               =======
RATIOS:                                                                              

Total nonperforming loans as % of total loans                0.48%                 0.40%                 1.62% 
Nonperforming assets as % of total loans and                                         
  other real estate owned                                    0.79                  0.69                  1.88  
Nonperforming assets as % of total assets                    0.45                  0.39                  1.08  
</TABLE>
                                               
         Nonperforming assets totaled $2,456,000 or 0.45% of total assets at
June 30, 1997 compared to $2,043,000 or 0.39% and $5,554,000 or 1.08% at
December 31, 1996 and June 30, 1996, respectively.  Slight fluctuations in the
level of nonperforming assets are a normal part of the Company's business.
However, management is cognizant of the need to continually ensure that
nonperforming assets remain at acceptably low levels.

          Any loans classified for regulatory purposes, but not included above
in nonperforming loans, do not represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the borrower's ability to comply with the loan repayment terms or
which management reasonably expects will materially impact future operating
results or capital resources.  As of June 30, 1997, there were no
concentrations of loans exceeding 10% of total loans which were not disclosed
as a category of loans detailed on page 8.

INVESTMENTS IN DEBT SECURITIES
         Investments in debt securities have decreased approximately $8.3
million since December 31, 1996 due in large part, to the increase in the loan
portfolio.  The investment portfolio contains a mixture of debt securities in
terms of the types of securities, interest rates, and maturity distribution.
Management believes this diversity, as well as its conservative philosophy
towards risk management, has resulted in a stable investment portfolio.

DEPOSITS
         Total deposits increased approximately $3.4 million during the first
six months of 1997.  The majority of the increase was in time deposits, as
noninterest bearing demand deposits and savings accounts increased only
slightly.  The increase in time deposits was largely due to additional public
funds the subsidiary banks were able to obtain at competitive prices.

SHORT-TERM BORROWINGS
         Short-term borrowings consist of securities sold under agreements to
repurchase.  The $8,070,000 increase was largely due to a daily "repo sweep"
account introduced by the Company during the third quarter of 1996.  This cash
management product allows commercial customers to more effectively invest their
operating funds within the subsidiary banks.


                                      9
<PAGE>   10

Item 2. (continued)

ASSET/LIABILITY MANAGEMENT
         As reflected on the Repricing and Interest Rate Sensitivity Analysis
below, the Company has a reasonably well-balanced interest rate sensitivity
position.  The Company's current one-year cumulative gap is .96x.  Generally, a
one-year cumulative gap ratio in a range of 0.80x - 1.20x indicates an entity
is not subject to undue interest rate risk.  A one-year cumulative gap ratio of
1.00x indicates that an institution has an equal amount of assets and
liabilities repricing within twelve months.  A ratio in excess of 1.00x
indicates more assets than liabilities will be repriced during the period
indicated, and a ratio less than 1.00x indicates more liabilities than assets
will be repriced during the period indicated.  However, actual experience may
differ because of the assumptions used in the allocation of deposits and other
factors which are beyond management's control. Additionally, the following
analysis includes the available-for-sale securities spread throughout their
respective repricing and/or maturity horizons, even though such securities are
available for immediate liquidity should the need arise in any particular time
horizon.

                REPRICING AND INTEREST RATE SENSITIVITY ANALYSIS
                             (dollars in thousands)
                                 JUNE 30, 1997

<TABLE>
<CAPTION>
                                                                  Over                Over
                                                                  3 months            1 year
                                                    3 months      through             through         Over
                                                     or less      12 months           5 years         5 years          Total
                                                     -------       ---------          -------         -------          -----
 <S>                                                 <C>         <C>                  <C>            <C>              <C>
 Interest-earning assets:
     Federal funds sold                              $ 14,000       $   -             $   -          $   -            $ 14,000
     Investments available-for-sale                    14,178         12,495            37,566          6,154           70,393
     Investments held-to-maturity                       5,996         14,332            68,849         19,385          108,562
     Loans, net of unearned discount (1)              153,806         49,713            87,481         20,166          311,166
                                                     --------       --------           -------       --------         --------
         Total interest-earning assets                187,980         76,540           193,896         45,705          504,121
                                                     --------       --------          --------       --------         --------

 Cumulative interest-earning assets                   187,980        264,520           458,416        504,121          504,121
                                                     --------       --------          --------       --------         --------

 Interest-bearing liabilities:
     Interest-bearing demand deposits                  44,858         25,633            32,041         25,633          128,165
     Savings deposits                                  20,320         11,611            14,514         11,611           58,056
     Time deposits under $100,000                      39,451         72,626            61,167           -             173,244
     Time deposits $100,000 and over                   12,992         36,481             3,469           -              52,942
     Short-term borrowings                              9,693           -                 -              -               9,693
     Debt of employee stock ownership plan              1,581           -                 -              -               1,581
                                                     --------       --------          --------       --------         --------
         Total interest-bearing liabilities           128,895        146,351           111,191         37,244          423,681
                                                     --------       --------          --------       --------         --------
                                                                                                                     
 Cumulative interest-bearing liabilities              128,895        275,246           386,437        423,681          423,681
                                                     --------       --------          --------       --------         --------
 Gap analysis:                                                
     Interest sensitivity gap                        $ 59,085       $(69,811)         $ 82,705       $  8,461         $ 80,440
                                                     ========       ========          ========       ========         ========
     Cumulative interest                                                                                              
         sensitivity gap                             $ 59,085       $(10,726)         $ 71,979       $ 80,440         $ 80,440
                                                     ========       ========          ========       ========         ========
 Cumulative gap ratio of interest-
     earning assets to interest-bearing
     liabilities                                       1.46x           0.96x             1.19x           1.19x           1.19x
                                                       =====           =====             =====           =====           =====
</TABLE>

(1)  Nonaccrual loans are reported in the "Over 1 year through 5 years" column.


                                      10
<PAGE>   11

Item 2. (continued)

CAPITAL RESOURCES
         The regulatory capital guidelines require banking organizations to
maintain a minimum total capital ratio of 8% of risk-weighted assets (of which
at least 4% must be Tier I capital).  The Company's total capital ratios under
the risk-weighted guidelines were 17.80%, 17.88% and 17.75% as of June 30,
1997, December 31, 1996, and June 30, 1996, respectively, which included Tier I
capital ratios of 16.54%, 16.62%, and 16.49%, respectively.  These ratios are
well above the minimum risk-weighted capital requirements.

         In addition, the Company and its subsidiary banks must maintain a
minimum Tier I leverage ratio (Tier I capital to total adjusted consolidated
assets) of at least 3%.  Capital, as defined under these guidelines, is total
shareholders' equity less goodwill and excluding unrealized holding gains and
losses on available-for-sale securities of the Company.  The Company's Tier I
leverage ratios were 10.34%, 10.12%, and 9.83% at June 30, 1997, December 31,
1996, and June 30, 1996, respectively.

                             RESULTS OF OPERATIONS
EARNINGS SUMMARY
         Net income was $3,079,000 for the six months ended June 30, 1997
compared to $2,907,000 for the six months ended June 30, 1996, which represents
a $172,000 or 6% increase over the prior year.  The increase was largely due to
the net effect of increases in net interest income and noninterest income,
partially offset by an increase in noninterest expense.  Net income for the
second quarter of 1997 was $1,581,000 compared to $1,359,000 in the second
quarter of 1996.  This increase in second quarter earnings was attributable to
the same factors that affected the year-to-date earnings.

         Earnings per common share were $1.13 for the first half of 1997
compared to $1.08 for the first half of 1996, and the earnings per common share
were $0.58 and $0.50 for the second quarter of 1997 and 1996, respectively.
Net income for the first six months of 1997 resulted in an annualized return on
average assets (ROA) of 1.16% compared to 1.20% in the prior year, and an
annualized return on average shareholders' equity (ROE) of 11.41% compared to
12.27% in the prior year.  ROE continues to be negatively impacted by the
Company's strong equity position.

NET INTEREST INCOME
         As reflected in the Selected Statistical Information table on the
following page, net interest income on a tax-equivalent basis increased
$336,000 in the first six months of 1997 when compared to the first six months
of 1996; however, the net interest margin declined from 4.30% in 1996 to 4.27%
in 1997.  The increase in net interest income was due to an increase in average
interest-earning assets and a decrease in the Company's cost of funds.  The
decrease in the net interest margin was due to the combined effects of a
decline in the yield on the Company's loan portfolio and an increase in average
interest-bearing liabilities.  Business and retail customers continue to become
more sophisticated in their approach towards cash management.  They are
continually seeking ways to reduce the level of idle cash and to maximize the
yield on the funds they have available.  Management is constantly evaluating
the cost effectiveness of new products and services which will satisfy our
customer needs.  Management will also monitor the effects of this issue on the
net interest margin and overall Company earnings, to ensure the Company is able
to sustain acceptable earnings levels.


                                      11

<PAGE>   12
                        SELECTED STATISTICAL INFORMATION

The following is selected statistical information for Southside Bancshares
Corp. and subsidiaries.

I.       DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
         RATES AND INTEREST DIFFERENTIAL

    CONDENSED CONSOLIDATED AVERAGE BALANCE SHEET AND AVERAGE INTEREST RATES
                             (dollars in thousands)


<TABLE>
<CAPTION>

                                                     SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------------------------------------------------------------------------
                                                                 1997                                    1996
---------------------------------------------------------------------------------------------------------------------------------

                                                                            AVERAGE                                  Average
                                                               INTEREST      RATES                      Interest      Rates
                                                  AVERAGE       INCOME\      EARNED\       Average      Income\      Earned\
                                                  BALANCE       EXPENSE      PAID(3)       Balance      Expense     Paid(3) 
                                                  -------       -------     --------       -------      -------     --------
 <S>                                            <C>            <C>           <C>          <C>           <C>           <C>
                   ASSETS
 Loans, net of unearned discount (1) (2) (3)     $301,515       $13,416      8.90%        $295,367      $13,267       8.98%
 Investments in debt securities:                 
    Taxable(4)                                    160,966         4,901      6.09          143,262        4,242       5.92
    Exempt from Federal income tax (3) (4)         22,390           944      8.44           22,643          971       8.58
 Short-term investments                            14,996           370      4.93           20,088          536       5.34 
                                                  -------       -------                   --------      -------
       Total interest-earning assets/interest  
        income/overall yield (3)                  499,867        19,631      7.85          481,360       19,016       7.90 
 Allowance for possible loan losses                (5,855)      =======     =====           (5,583)      ======       ====
 Cash and due from banks                           14,607                                   15,562                          
 Other assets                                      20,997                                   18,485                          
                                                 --------                                 --------      
          TOTAL ASSETS                           $529,616                                 $509,824                          
                                                 ========                                 ========                          
                                                                                           
     LIABILITIES AND SHAREHOLDERS' EQUITY                                                                             
 Interest-bearing demand and savings deposits    $187,022         2,856      3.05%        $182,193         2,773       3.04%  
 Time deposits                                    224,640         5,941      5.29          214,721         5,756       5.36   
 Short-term borrowings                              3,907            86      4.40            1,912            51       5.33   
 Debt of employee stock ownership plan              1,690            71      8.40            2,304            95       8.25   
                                                 --------       -------                   ---------        -----
          Total interest-bearing                                  
             liabilities/interest-                                
             expense/overall rate                 417,259         8,954      4.29          401,130         8,675       4.33 
 Noninterest-bearing demand deposits               53,807       -------      ====           54,999         -----       ====         
 Other liabilities                                  4,571                                    4,803                          
 Shareholders' equity                              53,979                                   48,892                          
                                                 --------                                 --------                  
  TOTAL LIABILITIES AND 
   SHAREHOLDERS' EQUITY                          $529,616                                 $509,824         
                                                 ========                                 ========        

 NET INTEREST INCOME                                            $10,677                    $10,341 
                                                                =======                   ========
 NET INTEREST MARGIN ON AVERAGE
 INTEREST-EARNING ASSETS                                                     4.27%                                     4.30%
                                                                             =====                                     =====
</TABLE>



(1)  Interest income includes loan origination fees.
(2)  Average balance includes nonaccrual loans.
(3)  Interest yields are presented on a tax-equivalent basis. Nontaxable
     income has been adjusted upward by the amount of Federal income tax
     that would have been paid if the income tax had been taxable at a rate
     of 34%, adjusted downward by the disallowance of the interest cost to
     carry nontaxable loans and securities subsequent to December 31, 1982.
(4)  Includes investments available-for-sale.

                                      12

<PAGE>   13


Item 2. (continued)

PROVISION FOR POSSIBLE LOAN LOSSES
         The provision for possible loan losses remained at a relatively low
level of $30,000 during the first six months of 1997.  Due to the net
recoveries of $518,000 during the six months of 1997 and the Company's analysis
of the adequacy of the allowance for possible loan losses, management
determined it was not necessary to record significant provisions for possible
loan losses during the first six months of the year.  Management continues to
assess the adequacy of the allowance for possible loan losses on a regular
basis throughout the year.

NONINTEREST INCOME
         Noninterest income increased in both the first half and second quarter
of 1997 when compared to the comparable periods from the prior year.  Both
increases were largely due to an increase in Trust department earnings, which
has benefited from the record-breaking performance of the stock market during
1997.

NONINTEREST EXPENSE
         Noninterest expense for the first six months of 1997 increased
$301,000 when compared to the first six months of the prior year, and the
increase was largely attributable to increases in other real estate owned
(OREO) expense, which increased $103,000, attorney fees which increased
$54,000, and amortization of the Company's investments in low-income housing
projects, which increased $76,000.  The OREO expenses relate to a sixty-one
unit mobile home park, on which the Company's lead bank foreclosed in October
1996.  The past nine months have been spent renovating the units, and
management expects to have a majority of the units rented by the end of the
year.  Once the project is near full occupancy it will be nearly self
sufficient.  The investments in low-income housing projects are amortized in
direct proportion to the amount of tax credits utilized, and management has
found these low-income housing projects to be a valuable tool in fulfilling our
commitment to community reinvestment, yet still allowing the Company to fulfill
its commitment to its shareholders.

INCOME TAXES
         Federal income tax expense for the first six months of 1997 was
$1,109,000 compared to $1,124,000 in the first six months of 1996.  The
effective tax rate decreased to 26.48% in 1997 from 27.88% in 1996  This
decrease was due to aforementioned tax credits associated with the Company's
investment in low-income housing projects.

EFFECT OF NEW ACCOUNTING STANDARDS
         In June 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 125, Accounting for Transfers
and Servicing Financial Assets and Extinguishment of Liabilities (SFAS 125).
SFAS 125 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities based on
consistent applications of a financial-components approach that focuses on
control.  It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.

         SFAS 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively.  Earlier or retroactive application was not
permitted.

         The implementation of SFAS 125 did not have a material effect on the
Company's consolidated financial position, results of operations, or liquidity.


                                      13

<PAGE>   14


Item 2. (continued)

         In February 1997, the FASB issued SFAS No. 128, "Earnings per Share"
(SFAS 128).  SFAS 128 establishes standards for computing and presenting
earnings per share (EPS).  SFAS 128 simplifies existing standards for computing
EPS and makes them comparable to international standards.  It replaces the
presentation of primary EPS with a presentation of basic EPS.  It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the components of basic and diluted EPS.  Basic EPS excludes dilution and is
computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period.  Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings of
the Company.  SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods, and requires
restatement of all prior-period EPS data presented.  The Company does not
believe the adoption of SFAS 128 will have a material effect on its financial
condition or results of operations.


                   COMMON STOCK - MARKET PRICE AND DIVIDENDS

         The table below sets forth the high, low and closing bid prices of the
Company's common stock for the periods presented.  The Company's common stock
is traded on the National Association of Securities Dealers Automated Quotation
System/Small-Cap Market System ("NASDAQ/SCM") under the symbol SBCO.
Accordingly, information included below represents the high and low bid prices
of the common stock reported on NASDAQ/SCM.
<TABLE>
<CAPTION>
                                                                       Book                      Dividends Paid Per
                              High Bid      Low Bid     Close          Value      Market/Book       Common Share
                              --------      -------    -------        -------     -----------       ------------
<S>                            <C>          <C>        <C>            <C>         <C>                  <C>
2nd Quarter - 1997              $37.00       $21.50     $37.00         $20.14      183.71%              $ 0.17
1st Quarter - 1997               25.00        22.75      24.50          19.60      125.00                 0.16

4th  Quarter - 1996              22.75        20.50      22.75          19.30      117.88                 0.15
3rd  Quarter - 1996              20.50        20.25      20.50          18.84      108.81                 0.13
2nd Quarter - 1996               20.00        19.00      20.00          18.25      109.59                 0.12
1st  Quarter - 1996              21.00        19.00      19.00          18.00      105.56                 0.10
</TABLE>

PART II.   OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         In the normal course of business, the Company had certain routine
lawsuits pending at June 30, 1997.  In the opinion of management, after
consultation with legal counsel, none of these lawsuits will have a material
adverse effect on the consolidated financial condition of the Company.

                                      14

<PAGE>   15




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

         The Company's regular Annual Meeting of Shareholders was held on April
24, 1997.  Proxies for the meeting were solicited pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended.

         At the meeting, shareholders (i) elected three Class II Directors,
each to serve for a term of three years, and (ii) ratified the appointment by
the Board of Directors, KPMG Peat Marwick LLP as the firm of independent
certified public accountants to audit the accounts of the Company for the
fiscal year ended December 31, 1997.

         Management's Director nominees were: Joseph W. Beetz, Ralph Crancer,
Jr., and Howard F. Etling.

         The Directors elected at the meeting were:  Joseph W. Beetz, Ralph
Crancer, Jr., and Howard F. Etling.  The names of each of the Directors whose
term of office as a Director continued after the meeting is as follows:
Douglas P. Helein (term expiring 1998); Earle J.  Kennedy, Jr. (term expiring
1998); Daniel J. Queen (term expiring 1998); Norville K. McClain (term expiring
1999); Richard G. Schroeder, Sr.  (term expiring 1999);  Thomas M. Teschner
(term expiring 1999); Joseph W. Beetz (term expiring 2000); Ralph Crancer, Jr.
(term expiring 2000); and Howard F. Etling (term expiring 2000).

         The following is a tabulation of voting for Directors:

<TABLE>
<CAPTION>
                                                  Shares                Shares           Shares
                                                  Voted                  Voted           Voted
              Nominee                              For                  Against         Withheld 
      -----------------------                   ----------              ---------       ---------
      <S>                                       <C>                     <C>              <C> 
      Joseph W. Beetz                            2,555,653               1,036             5,621
      Ralph Crancer, Jr.                         2,554,653               2,036             5,621
      Howard F. Etling                           2,556,209                 480             5,621
</TABLE>

         With respect to the ratification of the appointment of KPMG Peat
Marwick LLP, there were 2,557,653 shares voted "For" and 1,577 shares voted
"Against", with 3,133 shares abstaining.

ITEM 6.  Exhibits and Reports on Form 8-K

         Exhibit 11 - Computation on Net Income Per Common Share

         Reports on Form 8-K
         None

                                      15

<PAGE>   16




                                   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.


                                        SOUTHSIDE BANCSHARES CORP.





August 11, 1997                         /s/  Thomas M. Teschner
                                        ---------------------------------------
                                        Thomas M. Teschner
                                        President
                                        (Principal Executive Officer)




August 11, 1997                         /s/  Joseph W. Pope
                                        ---------------------------------------
                                        Joseph W. Pope
                                        Senior Vice President and Chief
                                        Financial Officer (Principal Financial
                                        Officer, Controller, and Principal
                                        Accounting Officer)


                                      16