East Texas Financial Services, Inc. (the "Company"), (OTC Bulletin Board: ETFS), the holding company for First Federal Bank Texas ("Firstbank" or the "Bank"), Tyler, Texas, today announced that the Company has concluded its engagement with Commerce Street Capital ("Commerce"). The Company announced in November 2010 that it had engaged Commerce to provide strategic advice to the Company.

Company President and CEO, Derrell W. Chapman, CPA stated, "Over the last six months, our Board of Directors, with the assistance of Commerce and other advisors, has undergone a comprehensive process to evaluate the Company's near- and long-term prospects and opportunities. Among other factors, this process included consideration of the local and national economic environments, the status of the banking industry generally and in the east Texas area specifically, and merger and acquisition activity within the banking industry. The Board of Directors was advised that due primarily to these factors, current takeout pricing for banks, both nationally and within the east Texas market area, was below historical levels, and that takeout pricing for banks with levels of non-performing and classified assets similar to ours was significantly lower. This is consistent with the results of a market search of potential acquirers Commerce conducted at the direction of our Board to determine what, if any, price the Company could get for shareholders if it was sold. While we received a few indications of interest, all were below book value and even the highest was subject to further reduction based on resolution of certain classified assets. After undergoing the process described above, our Board of Directors concluded that it would be in the best interests of the Company and all shareholders to continue with our current strategy of reducing non-performing and classified assets, seeking opportunities within the Company's east Texas market area for commercial and commercial real estate lending, strengthening its one- to four-family lending program through strategic partnerships with local real estate agents, and seeking sources of funding that will improve our net interest income and margin."

The Company recently took several key steps to implement this strategy. First, we strengthened our credit administration and underwriting areas by establishing a credit department within the Bank. The credit team is being led by a recently hired chief credit officer with more than 20 years of credit experience at national banks. The team also includes an additional experienced credit analyst. CEO Chapman noted, "We are very excited about the new credit team we have assembled, and believe that they will make us much stronger in these areas. Our expectation is that they will ultimately be responsible for all credit underwriting, ongoing credit monitoring, loan review, loan processing and closing, and other credit functions for the entire Bank and will operate independent of the loan origination functions within the Bank."

In addition to the steps taken in the credit administration and underwriting areas, the Bank has developed a comprehensive plan of action to reduce the level of classified and non-performing assets. Key aspects of the plan include aggressive marketing efforts to sell a portfolio of one-to four-family residential rental properties acquired through foreclosure in 2010 and 2011. The portfolio consists of approximately 70 properties and totals $2.5 million, out of a total of $2.65 million in foreclosed and repossessed assets. The Bank recently completed the sale of $180,000 of the portfolio and is currently negotiating the sale of an additional $1.1 million. The Bank recorded a gain on the sale of approximately $50,000 and does not expect additional write downs upon the disposition of the remainder of the one-to four-family portfolio. The Bank is also currently negotiating the disposition of approximately $170,000 of the remaining repossessed assets. The Bank expects to sell the equipment through a direct sale or at auction. In addition to the foreclosed and repossessed assets discussed above, the Bank is taking legal action to resolve two additional non-performing assets totaling $1.5 million and $1.0 million respectively. The Bank is seeking arbitration with the lead bank on a participation purchased in the $1.5 million credit. The Bank is in disagreement with the collection efforts currently being undertaken by the lead bank and is seeking remedy under the arbitration provisions contained in the master loan participation agreement. The $1.0 million credit has been the subject of a lien dispute and ongoing court case for several months. The Bank is seeking to have the case dismissed and intends to seek foreclosure or purse its remedies through the title policy obtained at the inception of the loan.

As of March 31, 2011, Firstbank reported in its quarterly Thrift Financial Report filed with the Office of Thrift Supervision total assets of $216.3 million, total deposits of $120.6 million and total capital of $20.1 million. Firstbank also reported that total classified assets were $14.1 million, or 3.4% of total assets which included $7.4 million in non-performing loans and foreclosed or repossessed assets.

Firstbank reported a net loss of $118,000 for the quarter ended March 31, 2011. CEO Chapman stated, "A primary reason for the net loss reported for the quarter ended March 31, 2011 related to the disposition of one large commercial credit during the quarter. During the quarter ended December 31, 2010 the Bank foreclosed on commercial loans totaling $2.8 million comprising a single lending relationship. The Bank was able to sell the assets acquired in the foreclosure during the quarter ended March 31, 2011. The Bank provided financing to the purchaser of these assets through multiple loans on terms that were slightly more favorable to the purchaser than market terms. As a result, the Bank was required to establish a reserve for the present value of the difference between the expected future cash flows of the loans based on actual loan terms and the terms if they had been consistent with the current market. Even though the terms were only slightly less than market with respect to interest rate and slightly longer with respect to term, the sales price was discounted by $628,000 in the present value of the expected cash flows, which resulted in a $330,000 reduction in income for the quarter ended March 31, 2011. If the new borrower can generate sufficient cash flow to service the debt, the Bank will accrete the discount into earnings over the life of the loans as an adjustment to the yield on the loans."

As of March 31, 2011, the Bank reported a Tier 1 Capital ratio of 8.8%, a risk- based capital ratio of 14.3%, and a Tier 1 risk- based capital ratio of 13.1% and remained "well capitalized" under regulatory guidelines.

East Texas Financial Services, Inc. is the holding Company for First Federal Bank Texas, Tyler, Texas, which operates three full service locations in the Tyler area and one full service location in Gilmer, Texas. The Company's stock is traded under the symbol "ETFS" on the OTC Bulletin Board.

Forward-Looking Statements

When used in this press release, in other press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "could," "would," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the federal securities laws. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date such statements are made. These statements may relate to future financial performance, strategic plans or objectives, or other financial information. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following: (i) the credit risks of lending activities, including changes in the level of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; (ii) changes in the quality or composition of the Bank's loan and investment portfolios; (iii) competitive pressures among depository institutions; (iv) interest rate movements and their impact on customer behavior and net interest margin; (v) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (vi) the ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (vii) the ability to access cost-effective funding; (viii) changes in financial markets; (ix) changes in economic conditions in general and in the Company's market area in particular; (x) the costs, effects and outcomes of litigation; (xi) new legislation or regulatory changes and other governmental initiatives affecting the financial services industry; and (xii) changes in accounting principles, policies or guidelines.

The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

East Texas Financial Services, Inc.
Derrell W. Chapman, 903-593-1767
President, and CEO
www.ffbtx.com