FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



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

                       For the period ended March 31, 1997

                                       OR

     [ ] 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 0-24848


                       East Texas Financial Services, Inc.
             (Exact name of registrant as specified in its charter)

         Delaware                                         75-2559089
(State or other jurisdiction of                        (I.R.S. employer
incorporation or organization                        identification number)

                     1200 South Beckham, Tyler, Texas 75701
               (Address of principal executive offices) (Zip code)

                                 (903) 593-1767
              (Registrant's telephone number, including area code)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 of 15(d) of the  Securities  Exchange  Act of 1934 during the past 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.       [x] Yes [ ] No

         The number of shares of the registrant's  common stock ($.01 par value)
outstanding as of March 31, 1997, was 1,079,285.
<PAGE>
                       EAST TEXAS FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY

                                   FORM 10-QSB

                                 MARCH 31, 1997



                                      INDEX


Part I - Financial Information

     Item 1.  Financial Statements

         Consolidated   Statements  of  Financial  Condition,   March  31,  1997
         (Unaudited) and September 30, 1996

         Consolidated  Statements  of Income,  (Unaudited)  three months and six
         months ended March 31, 1997, and March 31, 1996

         Consolidated Statement of Changes in Stockholders' Equity,  (Unaudited)
         six months ended March 31, 1997

         Consolidated  Statements  of Cash Flows,  (Unaudited)  six months ended
         March 31, 1997, and March 31, 1996

         Notes to (Unaudited) Consolidated Financial Statements, March 31, 1997

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

Part II - Other Information

     Item 1.  Legal Proceedings.

     Item 2.  Changes In Securities

     Item 3.  Defaults Upon Senior Securities

     Item 4.  Submission  of  Matters To a Vote of  Security Holders 

     Item 5.  Other Information.

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

Signature Page 
<PAGE>
                       EAST TEXAS FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY

                                   FORM 10-QSB

                                 MARCH 31, 1997



PART I - FINANCIAL INFORMATION

     Item 1 - Financial Statements

East Texas Financial  Services,  Inc. (the "Company") was formed in September of
1994 for the  purpose  of  acquiring  all of the common  stock of First  Federal
Savings and Loan Association of Tyler (the  "Association"),  concurrent with its
conversion from the mutual to stock form of ownership. The Company completed its
initial public stock offering of 1,215,190 shares of $.01 par value common stock
on January 10,  1995.  The Company  utilized  approximately  one half of the net
stock  sale  proceeds  to  acquire  all  of  the  common  stock  issued  by  the
Association.  For additional  discussion of the Company's formation and intended
operations,  see the Form S-1 Registration  Statement (No.  33-83758) filed with
the Securities and Exchange  Commission and the Company's  annual report on Form
10-KSB  for the  fiscal  year  ended  September  30,  1996,  also filed with the
Commission.

The financial  statements presented in this Form 10-QSB reflect the consolidated
financial  condition  and  results of  operations  of the Company and its wholly
owned subsidiary, First Federal Savings and Loan Association of Tyler.
<PAGE>
<TABLE>
<CAPTION>

                                    EAST TEXAS FINANCIAL SERVICES, INC.
                              CONSOLIDATED STATEMENTS OF FINANCIAL CONDIITON

    ASSETS                                                           March 31, 1997    September 30, 1996
                                                                     --------------    ------------------
                                                                      (Unaudited)
<S>                                                                  <C>                 <C>
Cash and due from banks .......................................      $     497,869       $     704,615
Interest-bearing deposits with banks ..........................          7,031,396           4,995,032
Interest earning time deposits with financial
institutions ..................................................          1,663,573           1,663,573
Federal funds sold ............................................            309,230             480,285
Investment securities held-to-maturity (estimated market
     value of $25,992,393 at March 31, 1997, and
     $30,114,685 at September 30, 1996) .......................         26,108,843          30,138,744
Mortgage-backed securities held-to-maturity (estimated market
     value of $21,283,941at Marh 31, 1997,  and
     $25,383,579 at September 30, 1996) .......................         20,857,307          24,948,793
Loans receivable, net of allowance for credit
losses of $273,659 at March 31, 1997, and $289,120
     at September 30, 1996 ....................................         51,797,970          47,925,067
Accrued interest receivable ...................................            900,672             930,657
Federal Home Loan Bank stock, at cost .........................            976,100             948,500
Premises and equipment ........................................            943,086             970,184
Foreclosed real estate, net of allowances of $-0- .............             76,224                   0
Deferred income taxes .........................................            117,223             130,825
Mortgage servicing rights .....................................            130,327             119,845
Other assets ..................................................            279,570             416,816
                                                                     -------------       -------------

         Total Assets .........................................      $ 111,689,390       $ 114,372,936
                                                                     =============       =============

    LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
     Demand deposits ..........................................      $   1,686,177       $   2,889,861
     Savings and NOW deposits .................................         10,399,745          11,099,604
     Other time deposits ......................................         77,704,798          77,671,666
                                                                     -------------       -------------
         Total deposits .......................................         89,790,720          91,661,131


     Advances from borrowers for taxes and insurance ..........            387,053             917,222
     Federal income taxes
           Current ............................................             (3,854)              5,044
           Deferred ...........................................                  0                   0
     Accrued expenses and other liabilities ...................            265,572             858,926
                                                                     -------------       -------------

         Total Liabilities ....................................         90,439,491          93,442,323
                                                                     -------------       -------------
<PAGE>
<CAPTION>

                                    EAST TEXAS FINANCIAL SERVICES, INC.
                              CONSOLIDATED STATEMENTS OF FINANCIAL CONDIITON
                                               (Continued)

                                                                     March 31, 1997    September 30, 1996
                                                                     --------------    ------------------
                                                                      (Unaudited)
<S>                                                                  <C>                 <C>
Stockholders' equity:   
     Preferred stock, $0.01 par value, 500,000
     shares authorized, none outstanding
     Common stock, $.01 par value, 5,500,000 shares authorized,
     1,256,387 shares issued ..................................             12,564              12,564
     Additional paid-in capital ...............................         12,112,516          12,112,516
     Deferred compensation - RRP shares .......................           (387,938)           (446,129)
     Unearned employee stock ownership plan shares ............           (763,206)           (763,206)
     Retained earnings (substantially  restricted) ............         13,072,976          12,811,881
     Treasury stock, 177,102 shares at cost ...................         (2,797,013)         (2,797,013)
                                                                     -------------       -------------

         Total stockholders' equity ...........................         21,249,899          20,930,613
                                                                     -------------       -------------

         Total liabilities and stockholders' equity ...........      $ 111,689,390       $ 114,372,936
                                                                     =============       =============

                 The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                      EAST TEXAS FINANCIAL SERVICES, INC.
                                       CONSOLIDATED STATEMENTS OF INCOME

                                                              Three Months                   Six Months
                                                             Ended March 31,              Ended March 31,
                                                              (Unaudited)                   (Unaudited)
                                                          1997           1996           1997           1996
                                                       ----------     ----------     ----------     ----------
<S>                                                    <C>            <C>            <C>            <C>
INTEREST INCOME
   Loans receivable:
        First mortgage loans .....................     $1,005,529     $  860,684     $1,973,167     $1,726,091
        Consumer and other loans .................         20,401         18,951         40,928         38,110
   Investment securities .........................        539,240        603,547      1,110,159      1,231,821
   Mortgage-backed securities ....................        389,152        523,206        810,586      1,085,052
                                                       ----------     ----------     ----------     ----------

          Total interest income ..................      1,954,322      2,006,388      3,934,840      4,081,074
                                                       ----------     ----------     ----------     ----------

INTEREST EXPENSE
   Deposits ......................................      1,094,930      1,131,328      2,204,602      2,274,192
                                                       ----------     ----------     ----------     ----------

          Total interest expense .................      1,094,930      1,131,328      2,204,602      2,274,192
                                                       ----------     ----------     ----------     ----------

          Net interest income before provision
            for loan losses ......................        859,392        875,060      1,730,238      1,806,882

   Provision for loan losses .....................              0              0          5,000              0
                                                       ----------     ----------     ----------     ----------

          Net interest income after provision
            for loan losses ......................        859,392        875,060      1,725,238      1,806,882
                                                       ----------     ----------     ----------     ----------

NONINTEREST INCOME
   Gain (loss) on sales of interest-earning assets         18,243         30,210         31,322         57,960
   Loan origination and commitment fees ..........         10,074         28,111         27,293         37,542
   Loan servicing fees ...........................         15,251         29,377         46,937         59,988
   Other .........................................         16,985          8,836         32,415         30,550
                                                       ----------     ----------     ----------     ----------

          Total noninterest income ...............         60,553         96,534        137,967        186,040
                                                       ----------     ----------     ----------     ----------
<PAGE>
<CAPTION>
                                      EAST TEXAS FINANCIAL SERVICES, INC.
                                       CONSOLIDATED STATEMENTS OF INCOME
                                                  (continued)

                                                              Three Months                   Six Months
                                                             Ended March 31,              Ended March 31,
                                                              (Unaudited)                   (Unaudited)
                                                          1997           1996           1997           1996
                                                       ----------     ----------     ----------     ----------
<S>                                                    <C>            <C>            <C>            <C>
NONINTEREST EXPENSE
   Compensation and benefits .....................        418,099        385,840        845,754        787,823
   Occupancy and equipment .......................         38,196         35,855         72,060         74,918
   SAIF deposit insurance premium ................          3,124         55,344         51,175        112,383
   (Gain) loss on foreclosed real estate .........          5,633          1,768          5,691          4,852
   Other .........................................        162,273        156,713        302,210        296,356
                                                       ----------     ----------     ----------     ----------

          Total noninterest expense ..............        627,325        635,520      1,276,890      1,276,332
                                                       ----------     ----------     ----------     ----------

Income (loss) before provision for income taxes ..        292,620        336,074        586,315        716,590

Income tax expense (benefit) .....................        106,827        122,612        217,292        260,801
                                                       ----------     ----------     ----------     ----------

NET INCOME (LOSS) ................................     $  185,793     $  213,462     $  369,023     $  455,789
                                                       ==========     ==========     ==========     ==========

Earnings per common share
                                                       $     0.19     $     0.19           0.37     $     0.40


                   The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                 EAST TEXAS FINANCIAL SERVICES, INC.
                                      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                                             (UNAUDITED)





SIX MONTHS ENDED
  March 31, 1997
                                    Common
                                   Stock and        Unearned        Unallocated                                         Total
                                    Paid in            RRP              ESOP          Retained        Treasury       Stockholders'
                                    Capital           Shares           Shares         Earnings          Stock           Equity
                                    -------           ------           ------         --------          -----           ------
<S>                              <C>             <C>              <C>              <C>              <C>              <C>
Balance October 1, 1996 .....    $ 12,125,080    $   (446,129)    $   (763,206)    $ 12,811,881     $ (2,797,013)    $ 20,930,613

Deferred compensation
     amortization
                                         --            58,191             --               --               --             58,191

Payment of cash dividends
                                         --              --               --           (104,634)            --           (104,634)

Accrued dividends - RRP stock
                                         --              --               --             (3,294)            --             (3,294)

Net income for the six
     months ended
     March 31, 1997
                                         --              --               --           (369,023)            --            369,023

Balance March 31, 1997 ......    $ 12,125,080    $   (387,938)    $   (763,206)    $ 13,072,976     $ (2,797,013)    $ 21,249,899
                                 ============    ============     ============     ============     ============     ============



                              The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                             EAST TEXAS FINANCIAL SERVICES, INC.
                            CONSOLIDATED STATEMENT OF CASH FLOWS
                                         (Unaudited)


                                                                   For The Six Months Ended
                                                                          March 31,
                                                                     1997            1996
                                                                 ------------    -----------
<S>                                                              <C>             <C>
Cash flows from operating activities:
  Net income ................................................    $   369,023     $   183,230
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Amortization of deferred loan origination fees ........         (1,194)            (69)
      Amortization of premiums and discounts on investment
            securities, mortgage-backed securities, and loans         54,068          34,002
      Amortization of deferred compensation .................         58,191          29,095
      Compensation charge related to release of ESOP shares .         46,350          28,994
      Depreciation ..........................................         33,801          16,875
      Deferred income taxes .................................         13,602           4,567
      Stock dividends on FHLB stock .........................        (27,600)        (13,900)
      Amortization of mortgage servicing rights..............         13,307               0 
      Net (gain) loss on sale of:
        Securities held to maturity .........................              0              0
        Foreclosed real estate ..............................              0               0
        Net loss on disposal of fixed assets ................              0               0
        Other Assets ........................................              0               0
        Loans ...............................................        (31,321)         (4,925)
        Loans held for sale .................................              0               0
      Proceeds from loan sales ..............................      1,950,639       1,184,950
      Originations of loans held for sale ...................              0               0
      (Increase) decrease in:
        Accrued interest receivable .........................         29,985         (59,325)
        Other assets ........................................        292,289         136,571
        Accrued loan loss reserve ...........................          5,000           5,000
      Increase (decrease) in:
        Federal income tax payable ..........................         (8,898)        100,854
        Accrued expenses and other liabilities ..............       (639,709)       (655,252)
      Capitalized interest on time deposits .................              0               0
                                                                 -----------     -----------

Net cash provided (used) by operating activities ............      2,157,533         990,667
                                                                 -----------     -----------



          The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                           EAST TEXAS FINANCIAL SERVICES, INC.
                           CONSOLIDATED STATEMENT OF CASH FLOWS
                                       (Unaudited)


                                                                For the Six Months Ended
                                                                        March 31,
                                                                   1997           1996
                                                              ------------    -----------
<S>                                                           <C>             <C>
Cash flows from investing activities:
  Purchases of interest earning time deposits ............    $   (98,000)    $         0
  Net decrease (increase) in fed funds sold ..............        171,055      (2,074,079)
  Purchases of obligations - U.S. Govt. and agencies
      held-to-maturity ...................................     (3,513,046)       (997,578)
  Proceeds from maturity of time deposits ................         98,000          98,000
  Proceeds from sale of securities held-to-maturity ......              0               0
  Proceeds from maturity of securities held-to-maturity ..              0               0
  Proceeds from maturities of obligations - U.S. Govt. and
      agencies held-to-maturity ..........................      7,500,000       3,000,000
  Purchases of mortgage-backed securities
      held-to-maturity ...................................              0               0
  Principal payments on mortgage-backed securities
      held-to-maturity ...................................      4,080,367       1,628,759
  Net originations and principal collections on loans ....     (6,225,858)     (3,721,670)
  Acquisition cost related to foreclosed real estate .....         (9,489)         (5,252)
  Proceeds from sale of foreclosed real estate ...........        184,269          58,300
  Expenditures for premises and equipment ................         (6,703)              0
                                                              -----------     -----------

Net cash provided (used) by investing activities .........      2,180,595      (2,013,520)
                                                              -----------     -----------

Cash flows from financing activities:
  Net increase (decrease) in:
    Non-interest bearing deposits, savings, and NOW
      accounts ...........................................     (1,903,542)        352,830
   Time deposits .........................................         33,131        (154,908)
   Advances from borrowers for taxes and insurance .......       (530,169)       (768,788)
Dividends paid to stockholders ...........................       (107,930)        (53,965)
Purchase of treasury stock ...............................              0               0
                                                              -----------     -----------

Net cash provided (used) by financing activities .........     (2,508,510)       (624,831)
                                                              -----------     -----------

Net increase (decrease) in cash and cash equivalents .....      1,829,618      (1,647,684)

Cash and cash equivalents at beginning of the period .....      5,699,647       5,699,647
                                                              -----------     -----------

Cash and cash equivalents at end of the period ...........    $ 7,529,265     $ 4,051,963
                                                              ===========     ===========

<PAGE>
<CAPTION>
                           EAST TEXAS FINANCIAL SERVICES, INC.
                           CONSOLIDATED STATEMENT OF CASH FLOWS
                                       (Unaudited)
                                       (continued)


                                                                For the Six Months Ended
                                                                        March 31,
                                                                   1997           1996
                                                              ------------    -----------
<S>                                                           <C>             <C>
Supplemental disclosure:
Cash paid for:
  Interest on deposits ...................................    $ 1,115,923     $   559,672
  Income taxes ...........................................    $   212,701     $     5,157

Transfers from loans to real estate
  acquired through foreclosures ..........................    $   419,527     $   197,595

Loan losses charged to valuation allowance ...............    $    54,083     $     1,185

Recoveries credited to loan loss reserve .................    $    33,622     $         0



The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
                       EAST TEXAS FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY

             NOTES TO (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1997



NOTE 1 - BASIS OF PRESENTATION

The  financial  statements  presented  in this report have been  prepared by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission for interim  reporting and include all adjustments  which are, in the
opinion  of  management,   necessary  for  fair  presentation.  These  financial
statements  have  not  been  audited  by  an  independent  accountant.   Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance with generally accepted  accounting  principles have been
condensed  or  omitted  pursuant  to such  rules  and  regulations  for  interim
reporting.  The Company  believes that the  disclosures are adequate to make the
information not misleading.  However,  these financial statements should be read
in conjunction  with the financial  statement and notes thereto  included in the
Company's  Annual  Report on Form 10-KSB for the year ended  September 30, 1996.
The financial data and results of operations for interim  periods  presented may
not necessarily reflect the results to be anticipated for the complete year.

NOTE 2 - EARNINGS PER SHARE

For purposes of  calculating  earnings per common share and as prescribed by the
American  Instituted of Certified Public Accountants  Statement of Position 93-6
("SOP 93-6")  Employers'  Accounting For Employees  Stock Ownership  Plans,  the
weighted average number of shares outstanding,  excluding  unallocated  Employee
Stock  Ownership  Plan ("ESOP")  shares,  was used. For the three months and six
months ended March 31, 1997, the weighted  average number of shares  outstanding
for earnings per share calculation purposes was 1,002,964.  (See Part II, Item 6
- Exhibits for a detailed presentation of the earnings per share calculation for
the three month and six month periods ended March 31, 1997.)

NOTE 3 - SECURITIES

The  amortized  cost  and  estimated  market  values  of  investment  securities
held-to-maturity as of March 31, 1997, are as follows:
<TABLE>
<CAPTION>
                                                       Gross         Gross       Estimated
                                     Amortized      Unrealized    Unrealized        Market
                                        Cost           Gains         Losses         Value
                                    -----------    -----------    -----------    -----------
<S>                                 <C>            <C>            <C>            <C>         
Debt securities:
      U. S. Treasury ...........    $ 3,513,470    $     1,447    $    25,521    $ 3,489,397

      U. S. government agency
                                     22,595,373         47,177        139,553     22,502,997
                                    -----------    -----------    -----------    -----------

           Total debt securities    $26,108,843    $    48,624    $   165,074    $25,992,393
                                    -----------    -----------    -----------    -----------
</TABLE>
<PAGE>
NOTE 3 - Continued

The  amortized  cost  and  estimated  market  values  of  investment  securities
held-to-maturity as of March 31, 1997, by contractual maturity are shown below:
<TABLE>
<CAPTION>
                                                                      Estimated
                                                     Amortized          Market
                                                        Cost            Value
                                                    -----------      -----------
<S>                                                 <C>              <C>
Due in one year or less ......................      $12,515,653      $12,552,911

Due after one year through two  years ........        8,007,773        7,942,753

Due after two years through three years ......        4,581,431        4,518,739

Due after three years through five years .....        1,003,986          977,991
                                                    -----------      -----------

        Total debt securities ................      $26,108,843      $25,992,393
                                                    -----------      -----------
</TABLE>

As of March 31, 1997,  the weighted  average yield on the  Company's  investment
security   portfolio  was  approximately   6.15%  while  the  Company's  overall
investment portfolio, including securities held-to-maturity,  overnight deposits
and  interest  earning  time  deposits  with other  financial  institutions  was
approximately 6.00%.

The carrying values and estimated market values of  mortgage-backed  and related
securities held-to-maturity as of March 31, 1997, by issuer are as follows:
<TABLE>
<CAPTION>
                                                                                                    Estimated
                                         Principal    Unamortized     Unearned       Carrying         Market
                                          Balance       Premiums      Discounts        Value          Value
                                       -----------    -----------    -----------    -----------    -----------
<S>                                    <C>            <C>            <C>            <C>            <C>
FHLMC .............................    $16,891,934    $    92,308    $    39,500    $16,944,742    $17,255,317

FNMA ..............................      3,885,618         26,947            -0-      3,912,565      4,028,624
                                       -----------    -----------    -----------    -----------    -----------

                                       $20,777,552    $   119,255    $    39,500    $20,857,307    $21,283,941
                                       -----------    -----------    -----------    -----------    -----------
</TABLE>
<PAGE>
NOTE 3 - Continued

The carrying values and estimated market values of  mortgage-backed  and related
securities  held-to-maturity  as of March 31,  1997,  by type of security are as
follows:
<TABLE>
<CAPTION>
                                                                                Estimated
                     Principal     Unamortized      Unearned       Carrying       Market
                      Balance        Premiums      Discounts        Value         Value
                   -----------    -----------    -----------    -----------    -----------
<S>                <C>            <C>            <C>            <C>            <C>
Fixed Rate ....    $ 4,349,368    $         0    $    23,525    $ 4,325,843    $ 4,244,787

Adjustable Rate     16,428,184        119,256         19,156     16,531,464     17,039,154
                   -----------    -----------    -----------    -----------    -----------

                   $20,777,552    $   119,256    $    42,681    $20,857,307    $21,283,941
                   -----------    -----------    -----------    -----------    -----------
</TABLE>

Unrealized  gains  and  losses  on   mortgage-backed   and  related   securities
held-to-maturity as of March 31, 1997, are as follows:
<TABLE>
<CAPTION>

                  Fixed Rate           Adjustable Rate             Total
                  Unrealized             Unrealized              Unrealized
              Gains       Losses      Gains      Losses       Gains      Losses
            --------    --------    --------    --------    --------    --------
<S>         <C>         <C>         <C>         <C>         <C>         <C>
FHLMC ..    $    448    $ 81,504    $391,631    $      0    $392,079    $ 81,504

FNMA ...           0           0     116,059           0     116,059           0
            --------    --------    --------    --------    --------    --------

            $    448    $ 81,504    $507,690    $      0    $508,138    $ 81,504
            --------    --------    --------    --------    --------    --------
</TABLE>

The overall yield on the Company's  mortgage-backed  securities  portfolio as of
March 31, 1997, was approximately 7.32%.


NOTE 4 - CURRENT ACCOUNTING ISSUES

SFAS NO. 123 In October 1995 the  Financial  Accounting  Standards  Board issued
SFAS No. 123,  Accounting for Stock-Based  Compensation which established a fair
value  based  method  of  accounting  for  stock-based  compensation  plans.  It
encourages  entities  to adopt  that  method in place of the  provisions  of APB
Opinion No. 25,  Accounting for Stock Issued to Employees,  for all arrangements
under which employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based on the
price of its stock.  It permits  entities to continue to use the intrinsic value
method  included in APB No. 25, but regardless of the method used to account for
the  compensation  cost  associated  with stock  option and  similar  plans,  it
requires employers to show significant expanded  disclosures,  including the pro
forma amount of net income (and  earnings per share) as if the fair  value-based
method were used to account for stock-based compensation.
<PAGE>
NOTE 4 - CURRENT ACCOUNTING ISSUES - Continued

Beginning  October 1, 1996, the effective  date for the  Statement,  the Company
elected to continue using the accounting  and disclosure  methods  prescribed by
APB No. 25 for its current  plan and to continue  using the  accounting  methods
prescribed  by APB No. 25 but disclose in the  footnotes  information  on a fair
value basis for any future stock-based compensation plans.

SFAS NO. 125 Statement of Financial Accounting Standards No. 125, Accounting For
Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities,
provides consistent  standards for distinguishing  transfers of financial assets
that  are  sales  from  transfers  that  are  secured  borrowings  and  for  the
extinguishment  of  financial  liabilities.   It  is  based  on  the  consistent
application of the  financial-components  approach.  The Statement  requires the
recognition of financial  assets and servicing  assets that are controlled by an
entity, the derecognition of financial assets and servicing assets where control
is surrendered, and the derecognition of liabilities when they are extinguished.
The Statement is effective  for transfers and servicing of financial  assets and
extinguishment  of liabilities  occurring  after December 31, 1996, and shall be
applied prospectively. The Company adopted the Statement as required.
<PAGE>
                       EAST TEXAS FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY

                                   FORM 10-QSB

                                 MARCH 31, 1997



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

GENERAL

The principle business of the Company is that of a community-oriented  financial
institution  attracting deposits from the general public and using such deposits
to originate  one- to  four-family  residential  loans and, to a lesser  extent,
commercial  real estate,  one- to  four-family  construction,  multi-family  and
consumer  loans.  These  funds have also been used to  purchase  mortgage-backed
securities,  U. S.  government  and  agency  obligations  and other  permissible
securities.  The ability of the Company to attract  deposits is  influenced by a
number of  factors,  including  interest  rates paid on  competing  investments,
account maturities and levels of personal income and savings. The Company's cost
of funds is influenced by interest  rates on competing  investments  and general
market rates of interest.  Lending  activities  are influenced by the demand for
real  estate  loans and other types of loans,  which is in turn  affected by the
interest  rates at which  such  loans  are  made,  general  economic  conditions
affecting  loan  demand,  the  availability  of funds  for  lending  activities,
economic conditions and changes in real estate values.

The  Company's  results of operations  are  dependent  primarily on net interest
income,  which is the  difference  between  the  income  earned  on its loan and
investment portfolios and the interest paid on deposits and borrowings.  Results
of operations  are also affected by the Company's  provision for loan losses and
the net  gain(loss)  on sales of  interest  earning  assets and loan  fees.  The
Company's  results of  operations  are also  significantly  affected  by general
economic and  competitive  conditions,  particularly  changes in interest rates,
government policies and actions of regulatory authorities.

FINANCIAL CONDITION

Total  assets  were $111.7  million at March 31,  1997,  a $2.7  million or 2.3%
decrease from the $114.4  million  reported at the  Company's  fiscal year ended
September 30, 1996. The decrease was primarily  attributable  to an $8.1 million
decrease in investment  and  mortgage-backed  securities  held-to-maturity.  The
decrease  in  securities  was  partially  offset by a $2.0  million  increase in
interest-bearing  deposits  with  banks,  primarily  overnight  deposits  at the
Federal  Home  Loan  Bank  of  Dallas,  and a $3.9  million  increase  in  loans
receivable balances.

Total liabilities  decreased by $3.0 million to $90.4 million at March 31, 1997,
compared to $93.4 million at September 30, 1996.  The decrease was the result of
a $530,000  decline in advances from mortgage  borrowers for taxes and insurance
as year end taxes were paid on behalf of borrowers. Also, a $1.9 million decline
in total  deposits,  approximately  $1.5 million of which was also the result of
year end payments for mortgage  borrowers' taxes and insurance out of Fannie Mae
custodial accounts held at First Federal Savings and Loan Association, accounted
for the remainder of the decrease.
<PAGE>
Stockholders'  equity  increased by $319,000 to $21.2 million at March 31, 1997,
compared to $20.9 million at September 30, 1996, primarily the result of the net
income for the quarter.

Cash,  interest-bearing  deposits  with bank and federal funds sold totaled $7.8
million at March 31,  1997,  an increase of $1.6  million  from the $6.2 million
reported at September  30, 1996.  Balances in these  accounts  fluctuate as loan
payments and deposits are received from customers as well as with  maturities of
investment  securities and disbursement of loan proceeds,  deposit  withdrawals,
and payment of operating expenses.

Investment securities  held-to-maturity totaled $26.1 million at March 31, 1997,
compared to $30.1 million at September  30, 1996.  Balances in the portfolio are
determined by the Company's cash flow needs and will vary over time.

During  the six  months  ended  March 31,  1997,  cash  proceeds  from  maturing
investment  securities  were  redirected to fund loan  originations  and to fund
deposit withdrawals. At March 31, 1997, the portfolio contained $12.5 million in
securities  with  maturities of less than one year, $8.0 million with maturities
of one through two years,  $5.5 million  with  maturities  of two through  three
years and $1.0 million with maturities of three through four years.
At March 31, 1997, the yield on the portfolio was approximately 6.15%

The  Company's  mortgage-backed  securities  portfolio  totaled $20.9 million at
March 31, 1997,  compared to $24.9 million at September  30, 1996.  The decrease
was due to  principal  payments  received  on the  portfolio  during the period,
including  the  maturity  of a fixed rate  "balloon"  security  with a remaining
balance  of  approximately  $1.0  million.  The  weighted  average  yield on the
portfolio was approximately 7.32% at March 31, 1997.

Loans  receivable  totaled  $51.8 million at March 31, 1997, an increase of $3.9
million over the $47.9  million  reported at September  30, 1996.  The continued
growth in the loans receivable portfolio was a result of the Company's continued
aggressive  pricing of its fixed rate  fifteen  year term  mortgage  loans.  The
Company  has  continued  to price this  product  at levels  below the market but
higher than short term investment  alternatives.  At March 31, 1997, the fifteen
year loan portfolio totaled approximately $21.9 million, with a weighted average
yield of  approximately  7.44%.  For the six months  ended March 31,  1997,  the
Company reported total loan originations of $9.7 million.

Foreclosed real estate owned totaled $76,000 at March 31, 1997, compared to none
at September 30, 1996,  and down $43,000 from the $119,000  reported at December
31, 1996. The balance was comprised of two  single-family  dwellings  located in
Tyler,  Texas. The properties were recorded at their "fair value" and were being
marketed for sale. (See - "Asset Quality".)

Total  deposits  were $89.8  million at March 31, 1997, a $1.9 million  decrease
from the $91.7 million reported at September 30, 1996. The Association's average
funds cost was 4.92% at March 31, 1997, up thirteen  basis points from the 4.79%
reported at September 30, 1996.

Advances from borrowers for taxes and insurance  decreased  $530,000 to $387,000
at March 31, 1997,  compared to $917,000 at September 30, 1996. The decrease was
a result  of year  end tax  payments  made on the  Association's  mortgage  loan
servicing portfolio.
<PAGE>
Stockholders'  equity was $21.2  million at March 31, 1997, up $319,000 from the
$20.9 million  reported at September 30, 1996. The increase was  attributable to
the $369,000 net income for the six months ended March 31, 1997,  plus a $58,000
increase in Deferred  Compensation  - RRP shares,  resulting from the continuing
amortization of the cost of the shares, less $108,000 in cash dividends declared
and paid during the period.

RESULTS OF OPERATIONS

The Company's net income is dependent  primarily upon net interest  income,  the
difference or spread  between the average yield earned on loans and  investments
and the average rate paid on deposits,  as well as the relative  amounts of such
assets and liabilities.  The Company,  like other financial  intermediaries,  is
subject  to  interest  rate  risk  to  the  degree  that  its   interest-bearing
liabilities  mature or reprice at different times, or on a different basis, than
its interest earning assets.

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997
         AND MARCH 31, 1996

General.  Net income for the three months ended March 31, 1997,  was $186,000 or
$.19 per share,  compared to  $213,000  or $.19 per share for the quarter  ended
March 31,  1996, a $27,000 or 13.0%  decline in net income.  The decrease in net
income  was  attributable  to a $36,000  decline  in  non-interest  income and a
$15,000 decline in net interest income after provisions for loan losses, both of
which were partially offset by an $8,000 decrease in noninterest  expenses and a
$16,000 decrease in income tax expenses.

Net Interest  Income.  For the three  months ended March 31, 1997,  net interest
income before provisions for loan losses totaled $859,000,  down $15,000 or 1.8%
from the $875,000 reported for the quarter ended March 31, 1996. For the quarter
ended March 31, 1997, total interest income was $2.0 million, unchanged from the
quarter ended March 31, 1996. As a percentage of interest earning assets,  total
interest income was approximately 7.14% for the quarter ended March 31, 1997, up
three basis points from 7.11% for the same quarter in 1996.

Interest income on loans  receivable  totaled $1.0 million for the quarter ended
March 31, 1997, an increase of $146,000 or 16.6% over the $880,000  reported for
the same quarter in 1996.  As a  percentage  of $51.0  million of average  loans
receivable balances,  interest income from loans receivable equaled 8.04%, on an
annualized  basis,  for the  current  quarter,  compared  to 8.18% on an average
balance of $43.0  million for the prior year.  The increase in average  balances
outstanding and a decrease in the overall yield in the portfolio was a result of
the  Company's  continued  emphasis  of its  fifteen  year  fixed  term and rate
portfolio  lending  program.  Loans were  originated  at  interest  rates  below
competition but greater than comparable investment alternatives. For the quarter
ended  March  31,  1997,   the  Company   originated   $4.3  million  in  loans.
Approximately  $681,000 were sold into the secondary market, while the remainder
were placed into the loan portfolio.

Interest  income from the investment  securities and overnight  funds  portfolio
totaled $539,000 for the three months ended March 31, 1997, compared to $604,000
for the same period in 1996, a $65,000 or 10.7% decrease.  The decrease resulted
from a $3.4 million decline in average balances outstanding in the portfolio for
the quarter  ended March 31,  1997,  compared  to the same  quarter in 1996,  as
balances  in  maturing  securities  were  redirected  to the  Company's  lending
operations.  Also, the average yield in the portfolio  declined to 6.08% for the
quarter ended March 31, 1997, from 6.21% for the same quarter in 1996, as higher
yielding securities matured during the past 12 months.
<PAGE>
Interest income from the Company's mortgage-backed securities portfolio declined
to $389,000 for the three months ended March 31, 1997,  compared to $523,000 for
the three months ended March 31,  1996, a $134,000 or 25.6%  decline.  Continued
prepayments  on the  adjustable  rate  securities  in the  portfolio  caused the
average balance outstanding in the portfolio to decline to $22.1 million for the
quarter ended March 31, 1997, from $30.0 million for the quarter ended March 31,
1996. The company redirected the resulting cash flows into its portfolio lending
operations.  Despite a slight  increase in the average yield of the portfolio to
7.05% for the quarter  ended march 31,  1997,  from 6.98% for the quarter  ended
March 31, 1996, the declining balances accounted for the significant  decline in
interest income in the portfolio.

Interest paid to depositors totaled $1.1 million for the quarter ended March 31,
1997,  unchanged  from the $1.1  million  reported for the same quarter in 1996.
Average deposit balances outstanding decreased $1.9 million to $90.0 million for
the current year quarter  from $92.7  million for the same quarter in 1996.  The
Company's average funds cost was approximately 4.92% at March 31, 1997, compared
to 4.78% at March 31, 1996.

For the quarter ended March 31, 1997,  the  Company's  net interest  income as a
percentage of average  interest  earning assets was 3.14%,  up four basis points
from the 3.10% reported for the quarter ended March 31, 1996.

Provision for Loan Losses. The Company made no provision for loan losses for the
quarter ended March 31, 1997,  or for the quarter  ended March 31, 1996.  (See -
"Asset Quality".)

Non-Interest  Income.  Non-interest  income decreased to $61,000 for the quarter
ended March 31,  1997,  from $97,000 for the quarter  ended March 31, 1996.  The
decrease was attributable to a $12,000 decrease in gains on sales of assets,  an
$18,000  decrease in loan origination and commitment fees and a $14,000 decrease
in loan servicing fees. The decrease in all of these categories was attributable
to the Company's portfolio lending program.

Over the last  several  quarters,  the  Company  has  placed  more of its  loans
originated into portfolio than were sold. The result was that fewer gains on the
sale of loans were reported  under the accounting  requirements  of Statement of
Financial  Accounting  Standards  ("SFAS")  No.  122,  Accounting  For  Mortgage
Servicing  Rights - An Amendment of SFAS No. 65. Also, the market for fixed rate
and term loans of the type the Company is originating and placing into portfolio
has been less receptive to origination and commitment fees.

Non-Interest  Expense.  Total non-interest expense decreased to $627,000 for the
three months ended March 31,  1997,  from  $636,000 for the same period in 1996.
The  decrease  was  primarily  attributable  to a  $52,000  decline  in  deposit
insurance  premiums as a result of the reduction in on-going SAIF premiums after
the  special  one-time  contribution  made  by  the  Company  in  1996  to  help
recapitalize  the SAIF. The reduction in SAIF premiums was partially offset by a
$32,000   increase  in  compensation   and  benefits   expense.   The  increased
compensation and benefits  expense was directly  related to additional  expenses
related to the Company's Employee Stock Ownership Plan as the value of the stock
scheduled to be released to  participants  in the current  fiscal year increased
and was recognized as additional expense. In addition, the Company increased its
accrual in anticipation of increased funding on its defined benefit pension plan
for the fiscal year.  Increases  in employee  salaries for the current year also
contributed to the increase.
<PAGE>
Provision For Income Taxes.  The Company  incurred federal income tax expense of
$107,000 or 36.5% of pre-tax  income for the three  months ended March 31, 1997,
compared to $123,000 or 36.5% of pre-tax income for the same period in 1996.

COMPARISON OF THE SIX MONTHS ENDED MARCH 31, 1997
         AND MARCH 31, 1996

General.  For the six months  ended March 31,  1997,  the Company  reported  net
income of $369,000 or $.37 per share, compared to $456,000 or $.40 per share for
the six months ended March 31, 1996,  an $87,000 or 19.1% decline in net income.
The decrease was attributable to an $82,000 decline in net interest income after
provisions for loan losses and a $48,000 decline in non-interest  income,  which
were partially offset by a $44,000 decrease in income tax expenses.

Net  Interest  Income.  For the six months  ended March 31,  1997,  net interest
income after provision for loan losses totaled $1.7 million,  an $82,000 or 4.5%
decrease  from the $1.8  million  reported  for the same  period in 1996.  Total
interest income was $3.9 million,  or 7.16% of average  interest  earning assets
for the six month period ended March 31, 1997, compared to $4.1 million or 7.23%
of average interest earning assets for the same period in 1996.

Interest income on loans receivable  increased $250,000 or 14.2% to $2.0 million
for the six months  ended March 31,  1997,  from $1.7 million for the six months
ended March 31, 1996.  The increase in income on loans  receivable was primarily
attributable  to a $7.0 million  increase in average loans  receivable  balances
outstanding  during the six months  ended March 31,  1997,  compared to the same
period in 1996. For the 1997 period,  interest income on loans receivable,  as a
percentage of average loans  receivable  balances,  was 8.08%,  a decrease of 15
basis  points  from the 8.23%  reported  for the 1996  period.  The  increase in
average   balances  and   corresponding   decrease  in  the  average  yield  was
attributable  to  the  Company's  emphasis,   as  an  alternative  to  available
investment  security yields, in portfolio lending of fifteen year fixed and term
rate loans.

Interest  income on investment  securities and overnight  funds was $1.1 million
for the six months  ended March 31,  1997,  compared to $1.2 million for the six
months ended March 31, 1996.  The decrease in income was the result of a decline
in the  overall  yield on the  portfolio  from  approximately  6.50% for the six
months ended March 31,  1996,  to 6.13% for the six months ended March 31, 1997,
as higher yielding  investment  securities  matured and were redirected into the
Company's  portfolio  lending  operation or were reinvested at lower yields.  In
addition,  the average balance in the portfolio declined to $36.2 million during
the six months ended March 31, 1997, from $37.9 million for the six months ended
March 31, 1996.

Interest  income on  mortgage-backed  securities was $811,000 for the six months
ended March 31,  1997,  compared to $1.1  million for the six months ended March
31, 1996. The decline in earnings was a result of a decrease in average balances
outstanding  in the portfolio  from $31.2 million for the six months ended March
31, 1996, to $22.9 million for the six months ended March 31, 1997, as cash flow
from the portfolio was redirected to the Company's lending operations.

Interest  expense was $2.2  million for the six months  ended March 31,  1997, a
decrease of $70,000  from the $2.3  million  reported  for the six months  ended
March 31, 1996.  A $1.3 million  decline in average  balances  outstanding  from
$92.1  million  during the six months ended March 31, 1996, to $90.7 million for
the six months ended March 31, 1997, accounted for the decrease in expense.
<PAGE>
Non-Interest  Income.  Non-interest income was $138,000 for the six months ended
March 31, 1997,  compared to $186,000 for the six months ended March 31, 1996, a
$48,000 or 25.8% decrease. The decrease in income was directly attributable to a
decline  in fees  from  the  Company's  lending  operations.  Gains  on sales of
interest  earning  assets  were down  $27,000  as more loans  were  placed  into
portfolio than were sold, loan  origination  fees were down $10,000 as the local
market  demanded  loans without  origination  fees, and loan servicing fees were
down  $13,000 as the Company  amortized  originated  mortgage  servicing  rights
recorded in prior periods.

Non-Interest  Expense.  Non-interest  expense was  virtually  unchanged  at $1.3
million for both six month periods ended March 31, 1997, and March 31, 1996.

SAIF  deposit  insurance  premiums  were  $51,000 for the six month period ended
March 31, 1997, down $61,000 from the $112,000 reported for the six months ended
March 31,  1996.  The  decrease  was a result of a reduction  in  on-going  SAIF
insurance premiums afford to thrift institutions after the 1996 one-time special
assessment charged to all SAIF insured institutions to recapitalize the fund.

The decrease in SAIF  premiums  was  partially  offset by a $58,000  increase in
compensation and benefits expense that resulted from additional expenses related
to the  Company's  ESOP and defined  benefit  pension  plans,  as well as salary
increases for the current year.

Provision For Income Taxes.  The Company incurred federal income tax expenses of
$217,000 or 37.1% of pre-tax  income for the six months  ended  March 31,  1997,
compared to $261,000 or 36.4% of pre-tax income for the same period in 1996.

ASSET QUALITY

At March 31, 1997, the Company's  non-performing assets totaled $274,000 or .25%
of total  assets,  compared to $450,000 or .39% of total assets at September 30,
1996.  The decrease was primarily the result of the  foreclosure  and subsequent
sale of four single family  residences,  all of which secured one loan. The loan
was  considered  non-performing  at  September  30,  1996,  and had a balance of
approximately $197,000 at that time. All four of the properties were sold during
the six month period ended March 31, 1997, and a loss of  approximately  $19,000
was charged to the Company's general loss reserve.

At March 31,  1997,  non-performing  assets  was  comprised  of seven (7) loans,
totaling approximately $198,000 and the largest of which was $56,000, secured by
single  family  dwellings  and  $76,000  of  foreclosed  real  estate  which was
comprised of two (2) single family  dwellings  located in Tyler,  Texas. The two
properties were being marketed for sale.

The $198,000 in  non-performing  loans at March 31, 1997,  equaled .38% of loans
receivable,  compared to $450,000 or .94% of loans  receivable  at September 30,
1996.

Classified  assets  totaled  $906,000 or .81% of total assets at March 31, 1997,
compared to $999,000 or .87% of total assets at September 30, 1996.

Classified assets and non-performing assets differ in that classified assets may
include loans less than ninety (90) days delinquent.  Also, assets guaranteed by
government agencies such as the Veterans  Administration and the Federal Housing
Administration  are not  included  in  classified  assets  but are  included  in
non-performing  assets.  All classified assets at March 31, 1997, were deemed to
be  "substandard".  No assets were  classified  "doubtful"  or "loss" as of such
date.
<PAGE>
The  Company's  allowance  for loan losses  totaled  $274,000 at March 31, 1997,
compared to $289,000 at September  30, 1996.  The decrease in the  allowance was
attributable  to the  approximate  $19,000  charged  against  the reserve on the
aforementioned  foreclosed  real  estate less the $5,000  addition  added to the
reserve and charged  against  provision for loan losses.  The allowance for loan
losses as a  percentage  of loans  receivable  equaled  .53% at March 31,  1997,
compared to .60% at September 30, 1996.


LIQUIDITY AND CAPITAL RESOURCES

The  Company's   principal   sources  of  funds  are  deposits  from  customers,
amortization  and  prepayment  of  loan  principal  (including   mortgage-backed
securities), maturities of securities, sales of loans and operations.

Current  Office of Thrift  Supervision  regulations  require the  Association to
maintain cash and eligible  investments  (liquid assets),  in an amount equal to
5.0% of net withdrawable  savings  deposits and borrowings  payable on demand or
within five years or less during the  preceding  month.  Liquid  assets  include
cash,  certain time  deposits,  U. S  Government  and agency  securities  having
maturities  of less than five years.  The  Association  maintains a liquid asset
ratio above the minimum required level of the Office of Thrift  Supervision.  At
March 31, 1997, the Association's liquid asset ratio equaled 43.7%.

The  Association  uses its liquidity and capital  resources  principally to meet
ongoing   commitments  to  fund  maturing   certificates  of  deposit  and  loan
commitments,  maintain liquidity and pay operating expenses.  At March 31, 1997,
the Association had outstanding  commitments to extend credit on $4.5 million of
real estate loans.

Management  believes that present levels of liquid assets are sufficient to meet
anticipated future loan commitments as well as deposit withdrawal demands.

Total stockholders'  equity equaled $21.2 million at March 31, 1997, an increase
of $319,000 from the $20.9 million  reported at September 30, 1996. The increase
was primarily a result of the $369,000 net income for the six months ended March
31, 1997, partially offset by cash dividends of $108,000 paid during the period.

As of March 31, 1997, the Company's  reported book value per share,  using total
stockholders'  equity of $21.2 million (net of the cost of unallocated  ESOP and
RRP shares) and 1,079,285  outstanding  shares of common stock (the total issued
shares including unallocated ESOP and RRP shares, less treasury shares), equaled
$19.69 per share.

Subsequent  to the quarter  ended March 31,  1997,  the  Company  announced  its
intention  to pay a cash  dividend  of  $.05  per  share  on May  28,  1997,  to
stockholders of record at May 14, 1997. The Company also,  subsequent to quarter
end,  announced and completed a stock repurchase program of 53,964 shares of its
stock at an average price of $17.625 per share.

Under the Financial  Institutions  Reform,  Recovery and Enforcement Act of 1989
("FIRREA"),  Congress  imposed  a three  part  capital  requirement  for  thrift
institutions.  At March 31, 1997, the Association's  actual and required capital
amounts under each of the three requirements were as follows:

- Tangible  Capital  (stockholders'  equity) was $18.1 million or 16.2% of total
assets, exceeding the minimum requirement of 1.5% by $16.4 million.
<PAGE>
- Core  Capital  (Tangible  capital plus  certain  intangible  assets) was $18.1
million or 16.2% of total assets,  exceeding the minimum  requirement of 3.0% by
$14.8 million.

- Risk-based  Capital (Core  capital plus general loan and valuation  allowances
less an adjustment for  capitalized  mortgage  servicing  rights)  equaled $18.4
million of 45.2% of risk weighted assets,  exceeding the minimum  requirement of
8.0% of risk weighted assets by $15.1 million.

At  March  31,  1997,  the  Association  was  considered  a  "well  capitalized"
institution  under the prompt  corrective  action  requirements  of the  Federal
Deposit Insurance Corporation Improvement Act of 1991.
<PAGE>
                       EAST TEXAS FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY

                                   FORM 10-QSB

                                 MARCH 31, 1997



                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

     There  are no  material  legal  proceedings  to which  the  Company  or the
     Association is a party or of which any of their  property is subject.  From
     time-to-time,  the  Association  is a party to  various  legal  proceedings
     incident to the conduct of its business.

Item 2.  Changes In Securities

     None

Item 3.  Defaults Upon Senior Securities

     None

Item 4.  Submissions Of Matters To A Vote Of Security Holders

     None.

Item 5.  Other Information.

     None

Item 6.  Exhibits and Reports on Form 8-K

     (a)  The following exhibits are filed herewith:

         Exhibit 11.0 - Computation of Earnings Per Share

         Exhibit 27.0 - Financial Data Schedule

     (b)  Reports on Form 8-K

         During the quarter ended March 31, 1997,  the Company filed a report on
         Form 8-K on January 22, 1997, to report the issuance of a press release
         dated January 22, 1997,  announcing the Company's  intention to pay, on
         February 26,  1997,  a cash  dividend of $.05 per share for the quarter
         ended  December 31,  1996,  to  stockholders  of record on February 12,
         1997.

         During the quarter ended March 31, 1997,  the Company filed a report on
         Form 8-K on January 17, 1997, to report the issuance of a press release
         dated  January 17,  1997,  announcing  the  Company's  earnings for the
         quarter ended December 31, 1996.
<PAGE>
                                   SIGNATURES

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


                                             East Texas Financial Services, Inc.


Date:  May 7, 1997                           /s/ Gerald W. Free
                                             ------------------
                                             Gerald W. Free
                                             Vice Chairman, President and CEO
                                             (Principal Executive Officer)


Date:  May 7, 1997                           /s/  Derrell W. Chapman
                                             -----------------------
                                             Derrell W. Chapman
                                             Vice President/COO/CFO
                                             (Principal Financial and 
                                             Accounting Officer)