<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-Q
              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended:
      September 30, 2000                       Commission file number:  33-42286


                      HENDERSON CITIZENS BANCSHARES, INC.
            (Exact name of registrant as specified in its charter)

             Texas                          6712                 75-2371232
----------------------------    ---------------------------- ------------------
(State or other jurisdiction    (Primary Standard Industrial   (IRS Employer
     of incorporation or              Commission Code        Identification No.)
        organization)                      Number)


                      201 West Main Street, P.O. Box 1009
                          Henderson, Texas 75653-1009
                                (903) 657-8521
         (Address, including ZIP code, and telephone number, including
            area code, of registrant's principal executive offices)





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.

                               X        Yes               No
                          -----------         ----------


 At October 31, 2000, 1,996,116 shares of Common Stock, $5.00 par value, were
outstanding.

                                       1
<PAGE>


                      HENDERSON CITIZENS BANCSHARES, INC.
                       QUARTER ENDED SEPTEMBER 30, 2000


                               Table of Contents



PART I - FINANCIAL INFORMATION

ITEM 1 - Financial Statements                                             Page
                                                                          ----

Consolidated Balance Sheets................................................  3

Consolidated Statements of Income..........................................  4

Consolidated Statements of Changes in Stockholders' Equity.................  5

Condensed Consolidated Statements of Cash Flows............................  6

Notes to the Consolidated Financial Statements.............................  7

ITEM 2 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations......................................... 10

ITEM 3 - Quantitative and Qualitative Disclosure About Market Risk......... 16

PART II - OTHER INFORMATION................................................ 17

SIGNATURES................................................................. 18

                                       2
<PAGE>

Part I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                      HENDERSON CITIZENS BANCSHARES, INC.

                          Consolidated Balance Sheets
                  (dollars in thousands, except share amounts)
<TABLE>
<CAPTION>

                                                                           September 30,                 December 31,
                                                                               2000                         1999
                              Assets                                        (unaudited)
                              ------                                  ---------------------         -------------------
<S>                                                                   <C>                           <C>
Cash and due from banks                                               $               8,989                      24,041
Interest-bearing deposits with other financial institutions                          12,118                       5,357
Federal funds sold                                                                    6,095                       9,285
                                                                      ---------------------         -------------------
                     Total cash and cash equivalents                                 27,202                      38,683

Securities available for sale, at fair value                                        148,027                     131,675
Securities held to maturity, estimated fair value of $51,885
     in 2000 and $58,248 in 1999                                                     53,046                      60,579

Loans, net                                                                          159,812                     144,197
Premises and equipment, net                                                           8,315                       7,374
Accrued interest receivable                                                           3,247                       3,664
Intangible assets                                                                     4,124                       3,883
Other assets                                                                          3,117                       3,391
                                                                      ---------------------         -------------------
                                                                      $             406,890                     393,446
                                                                      =====================         ===================
              Liabilities and Stockholders' Equity
              ------------------------------------
Deposits:
   Demand - non interest-bearing                                      $              49,205                      44,807
   Interest-bearing transaction accounts                                             69,838                      79,371
   Money market and savings                                                          55,926                      47,876
   Certificates of deposit and other time deposits                                  190,473                     183,369
                                                                      ---------------------         -------------------
                      Total deposits                                                365,442                     355,423

Accrued interest payable                                                              1,532                       1,177
Notes payable-Treasury Tax and Loan option                                            1,737                          --
Other liabilities                                                                       888                       1,075
                                                                      ---------------------         -------------------
                                                                                    369,599                     357,675
Stockholders' equity:
   Preferred stock, $5 par value; 2,000,000 shares authorized
     none issued or outstanding                                                          --                          --
   Common stock, $5 par value; 10,000,000 shares authorized,
     2,160,000 issued                                                                10,800                      10,800
   Surplus                                                                            5,400                       5,400
   Treasury stock, 161,566 shares in 2000
        and 148,000 shares in 1999, at cost                                          (2,340)                     (2,119)
   Undivided profits                                                                 25,361                      23,628
   Accumulated other comprehensive loss                                              (1,930)                     (1,938)
                                                                      ---------------------         -------------------
                        Total stockholders' equity                                   37,291                      35,771
                                                                      ---------------------         -------------------

                                                                      $             406,890                     393,446
                                                                      =====================         ===================
See accompanying notes to consolidated financial statements.
</TABLE>

                                       3
<PAGE>

                      HENDERSON CITIZENS BANCSHARES, INC.
                       Consolidated Statements of Income
                                  (unaudited)
                (dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                         Three months               Nine months
                                                                      ended September 30,       ended September 30,
                                                                         2000         1999          2000         1999
                                                                  -------------  -----------  ------------  ---------
<S>                                                               <C>            <C>          <C>           <C>
Interest income:
   Loans                                                          $     3,363        2,819         9,554        8,208
   Securities:
        Taxable - available for sale                                    2,252        1,984         6,679        6,058
        Taxable - held to maturity                                        156          282           527          968
        Tax-exempt - held to maturity                                     506          554         1,547        1,676
   Federal funds sold                                                      28           26           198          131
   Interest-bearing deposits with other financial institutions            102           99           280          314
                                                                  -----------    ---------    ----------    ---------
          Total interest income                                         6,407        5,764        18,785       17,355
                                                                  -----------    ---------    ----------    ---------

Interest expense:
   Deposits:
        Transaction accounts                                              392          402         1,290        1,301
        Money market and savings                                          455          287         1,229          815
        Certificates of deposit and other time deposits                 2,701        2,169         7,553        6,455
   Other borrowed funds                                                    19            3            31           14
                                                                  -----------    ---------    ----------    ---------
          Total interest expense                                        3,567        2,861        10,103        8,585
                                                                  -----------    ---------    ----------    ---------

          Net interest income                                           2,840        2,903         8,682        8,770

Provision for loan losses                                                  90          (30)          280          270
                                                                  -----------    ---------    ----------    ---------
          Net interest income after provision for loan losses           2,750        2,933         8,402        8,500
                                                                  -----------    ---------    ----------    ---------

Other income:
        Service charges, commissions, and fees                          1,016          956         3,004        2,720
        Income from fiduciary activities                                  270          260           810          766
        Gains (losses) on securities transactions, net                     --           --            --          187
        Other                                                              39          129           504          291
                                                                  -----------    ---------    ----------    ---------
          Total other income                                            1,325        1,345         4,318        3,964
                                                                  -----------    ---------    ----------    ---------

Other expenses:
        Salaries and employee benefits                                  1,875        1,673         5,612        5,014
        Occupancy and equipment                                           451          418         1,318        1,162
        Other                                                             795          900         2,640        2,603
                                                                  -----------    ---------    ----------    ---------
          Total other expenses                                          3,121        2,991         9,570        8,779
                                                                  -----------    ---------    ----------    ---------

          Income before income tax expense                                954        1,287         3,150        3,685

Income tax expense                                                         86          221           396          608
                                                                  -----------    ---------    ----------    ---------
               Net income                                         $       868        1,066         2,754        3,077
                                                                  ===========    =========    ==========    =========

               Basic and diluted income per common share          $      0.43         0.53          1.38         1.53
                                                                  ===========    =========    ==========    =========

               Weighted average number of shares outstanding        1,999,162    2,014,796     2,001,496    2,015,552
                                                                  ===========    =========    ==========    =========

See accompanying notes to consolidated financial statements.
</TABLE>

                                       4
<PAGE>

                      HENDERSON CITIZENS BANCSHARES, INC.

                Consolidated Statements of Stockholders' Equity
                                  (unaudited)

                 Nine months ended September 30, 2000 and 1999
           (dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                                                     Accumulated
                                                                                        Other                        Total
                                    Preferred    Common               Undivided     Comprehensive   Treasury     Stockholders'
                                      Stock      Stock     Surplus     Profits      Income (Loss)     Stock          Equity
                                   ---------- ---------  ---------  ------------  --------------- ------------  --------------
<S>                                <C>        <C>        <C>        <C>           <C>             <C>           <C>
Balances at January 1, 1999        $       --    10,800      5,400       21,089               649     (2,027)           35,911

Comprehensive income:
     Net Income                            --        --         --        3,077                --         --             3,077
     Other comprehensive
      income:
        Change in net unrealized
         gain (loss) on securities
         available for sale
         arising during the period,
         net of tax of $(1,288)            --        --         --           --            (2,500)        --            (2,500)
                                                                                                                    ----------
Total Comprehensive Income                                                                                                 577

     Purchase of 4,374 shares
      of treasury stock                    --        --         --           --                --        (76)              (76)

     Cash dividends declared
      ($.51 per share)                     --        --         --       (1,027)               --         --            (1,027)
                                   ----------  --------   --------     --------        ----------   --------        ----------

Balances at September 30, 1999     $       --    10,800      5,400       23,139            (1,851)    (2,103)           35,385
                                   ==========  ========   ========     ========        ==========   ========        ==========


Balances at January 1, 2000        $       --    10,800      5,400       23,628            (1,938)    (2,119)           35,771

Comprehensive income:
     Net Income                            --        --         --        2,754                --         --             2,754
     Other comprehensive
      income:
        Change in net unrealized
         gain (loss) on securities
           available for sale,
           net of tax of $5                --        --         --           --                 8         --                 8
                                                                                                                    ----------
Total Comprehensive Income                                                                                               2,762

     Purchase of 12,666 shares             --        --         --           --                --       (221)             (221)
      of treasury stock

     Cash dividends declared
      ($.51 per share)                     --        --         --       (1,021)               --         --            (1,021)
                                   ----------  --------   --------     --------        ----------   --------        ----------

Balances at September 30, 2000     $       --    10,800      5,400       25,361            (1,930)    (2,340)           37,291
                                   ==========  ========   ========     ========        ==========   ========        ==========
</TABLE>

                                       5
<PAGE>

                      HENDERSON CITIZENS BANCSHARES, INC.

                Condensed Consolidated Statements of Cash Flows
                                  (unaudited)

                 Nine months ended September 30, 2000 and 1999
                             (dollars in thousands)
<TABLE>
                                                                                          2000                1999
                                                                                --------------       -------------
<S>                                                                             <C>                  <C>
Net cash provided by operating activities                                                4,788               1,682

Investing activities:
     Securities available for sale:
        Sales                                                                               --              31,124
        Purchases                                                                      (23,954)            (64,685)
        Maturities and repayments                                                        7,651              25,957
     Securities held to maturity:
        Purchases                                                                           --              (8,426)
        Maturities and repayments                                                        7,454              19,084
     Net change in loans                                                               (15,895)             (9,095)
     Proceeds from sale of premises and equipment
           and other real estate                                                           233                  --
     Purchases of bank premises, equipment and software                                 (1,930)               (759)
                                                                                --------------       -------------
                       Net cash from investing activities                              (26,441)             (6,800)
                                                                                --------------       -------------
 Financing activities:
     Net change in deposits                                                             10,019              (6,594)
     Net change in short-term borrowings                                                 1,737                  --
     Payment on notes payable                                                               --              (2,282)
     Cash dividends paid                                                                (1,363)             (1,027)
     Purchase of treasury stock                                                           (221)                (76)
                                                                                --------------       -------------
                       Net cash from financing activities                               10,172              (9,979)
                                                                                --------------       -------------

Change in cash and cash equivalents                                                    (11,481)            (15,097)
Cash and cash equivalents at beginning of period                                        38,683              36,897
                                                                                --------------       -------------

Cash and cash equivalents at end of period                                      $       27,202              21,800
                                                                                ==============       =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Income taxes paid, net of refunds                                               $          647                 695
                                                                                ==============       =============

Interest paid                                                                   $        9,748               8,812
                                                                                ==============       =============

See accompanying notes to consolidated financial statements.
</TABLE>

                                       6
<PAGE>

                      HENDERSON CITIZENS BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

                               September 30, 2000

(1) Basis of Presentation
    ---------------------

    The accompanying consolidated financial statements are unaudited, but
      include all adjustments, consisting of normal recurring accruals, which
      management considers necessary for a fair presentation of the financial
      position, results of operations, and cash flows.

    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 Securities and
      Exchange Commission rules and regulations. The consolidated financial
      statements and footnotes included herein should be read in conjunction
      with the Company's annual consolidated financial statements as of December
      31, 1999 and 1998, and for each of the years in the three year period
      ended December 31, 1999 included in the Company's 1999 Form 10-K.

    The accompanying consolidated financial statements of the Company include
      the accounts of its wholly owned subsidiary Citizens National Bank. The
      financial statements of the Citizens National Bank are consolidated with
      its wholly owned subsidiaries HCB Insurance Agency, Inc. and Community
      Development Corporation ("CDC"). Prior to the quarter ended June 30, 2000,
      these two subsidiaries were not part of the consolidated entity.

    Certain amounts in the prior financial statements have been reclassified to
      conform to the current presentation.

(2) Securities
    ----------

    The amortized cost and estimated fair values (carrying value) of securities
      available for sale at September 30, 2000 and December 31, 1999, are
      summarized as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                   September 30, 2000
                                     --------------------------------------------------------------------------------------
                                                                Gross                 Gross                 Estimated
                                       Amortized             Unrealized             Unrealized                 Fair
                                          Cost                  Gains                 Losses                  Value
                                     ----------------    -------------------    -----------------      --------------------
<S>                                  <C>                 <C>                    <C>                    <C>
U.S. Treasury                        $         18,023                      1                 (110)                   17,914
U.S. Government agencies                       63,411                     14               (1,331)                   62,094
State and municipal                                --                     --                   --                        --
Mortgage-backed securities and
     collateralized mortgage
     obligations                               69,023                     72               (1,570)                   67,525
Other securities                                  494                     --                   --                       494
                                     ----------------    -------------------    -----------------      --------------------
                                     $        150,951                     87               (3,011)                  148,027
                                     ================    ===================    =================      ====================

                                                                      December 31, 1999
                                     --------------------------------------------------------------------------------------
                                                                Gross                 Gross                 Estimated
                                       Amortized             Unrealized            Unrealized                  Fair
                                          Cost                  Gains                Losses                   Value
                                     ----------------    -------------------    -----------------      --------------------
U.S. Treasury                        $         18,049                      2                 (135)                   17,916
U.S. Government agencies                       50,432                     --               (1,500)                   48,932
State and municipal                                --                     --                   --                        --
Mortgage-backed securities and
     collateralized mortgage
     obligations                               65,638                    101               (1,405)                   64,334
Other securities                                  493                     --                   --                       493
                                     ----------------    -------------------    -----------------      --------------------
                                     $        134,612                    103               (3,040)                  131,675
                                     ================    ===================    =================      ====================
</TABLE>

                                       7
<PAGE>

                      HENDERSON CITIZENS BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

                               September 30, 2000


    The amortized cost and estimated fair values (carrying value) of securities
      held-to-maturity at September 30, 2000 and December 31, 1999, are
      summarized as follows (in thousands of dollars):


<TABLE>
<CAPTION>
                                                                                September 30, 2000
                                           --------------------------------------------------------------------------------------
                                                                         Gross                  Gross             Estimated
                                                 Amortized             Unrealized             Unrealized            Fair
                                                    Cost                 Gains                  Losses             Value
                                           --------------------    ------------------   --------------------   ----------------
<S>                                        <C>                          <C>                   <C>                   <C>
State and municipal                        $             43,322                   220                 (1,154)            42,388
Mortgage-backed securities and
     collateralized mortgage
     obligations                                          7,455                    --                   (170)             7,285
Corporate                                                 2,052                    --                    (52)             2,000
Other securities                                            217                    --                     (5)               212
                                           --------------------    ------------------   --------------------   ----------------
                                           $             53,046                   220                 (1,381)            51,885
                                           ====================    ==================   ====================   ================

                                                                                December 31, 1999
                                           ------------------------------------------------------------------------------------
                                                                         Gross                  Gross                 Estimated
                                                 Amortized             Unrealized            Unrealized                  Fair
                                                    Cost                 Gains                 Losses                   Value
                                           --------------------    ------------------   --------------------   ----------------
State and municipal                        $             46,895                   132                 (2,197)            44,830
Mortgage-backed securities and
    collateralized mortgage
    obligations                                          11,388                    --                   (193)            11,195
Corporate                                                 2,068                    --                    (68)             2,000
Other securities                                            228                    --                     (5)               223
                                           --------------------    ------------------   --------------------   ----------------
                                           $             60,579                   132                 (2,463)            58,248
                                           ====================    ==================   ====================   ================
</TABLE>

                                       8
<PAGE>

                      HENDERSON CITIZENS BANCSHARES, INC.

                   Notes to Consolidated Financial Statements

                               September 30, 2000

(3)  Loans and Allowance for Loan Losses
     -----------------------------------

    The composition of the Company's loan portfolio is as follows (in thousands
      of dollars)

<TABLE>
<CAPTION>

                                                                   September 30,          December 31,
                                                                      2000                   1999
                                                                 ---------------    ---------------------
<S>                                                              <C>                 <C>
               Real estate mortgage                              $        86,072                   77,935
               Commercial and industrial                                  42,885                   37,639
               Installment and other                                      33,230                   30,955
                                                                 ---------------    ---------------------
                         Gross loans                                     162,187                  146,529

               Less:
                  Allowance for loan losses                               (2,368)                  (2,200)
                  Unearned discount                                           (7)                    (132)
                                                                 ---------------    ---------------------

                         Loans, net                              $       159,812                  144,197
                                                                 ===============    =====================



</TABLE>

    Changes in the allowance for loan losses for the three months and nine
      months ended September 30, 2000 and 1999 summarized as follows (in
      thousands of dollars):

<TABLE>
<CAPTION>
                                                           Three months ended                    Nine months ended
                                                              September 30,                        September 30,
                                                    ----------------------------------     -------------------------------
                                                          2000                1999            2000               1999
                                                    -------------        -------------     ------------     --------------
<S>                                                 <C>                  <C>               <C>              <C>
     Balance, beginning of period                   $       2,352               1,916      $    2,200              1,701
     Provision charged to operating expense                    90                 (30)            280                270
     Adjustment for consolidation of CDC                       --                  --               9                 --
     Charge offs:
          Commercial, financial, and agriculture               (6)               (299)            (39)              (303)
          Real estate-mortgage                                 --                 (18)            (19)               (27)
          Installment loans to individuals                   (142)               (173)           (330)              (414)
     Recoveries:
          Commercial, financial, and agriculture               17                 693             102                735
          Real estate-mortgage                                 --                  11              --                 11
          Installment loans to individuals                     57                  61             165                188
                                                    -------------     ---------------      ----------     --------------
      Balance, September 30                         $       2,368               2,161      $    2,368              2,161
                                                    =============     ===============      ==========     ==============
</TABLE>

                                       9
<PAGE>

Item 2.

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS OF HENDERSON CITIZENS BANCSHARES, INC.
     FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999


The following discussion and analysis of the consolidated financial condition
and results of operations of the Company should be read in conjunction with the
consolidated financial statements and the notes thereto, and other financial and
statistical information appearing elsewhere in this report.

Recent Developments
-------------------

On March 14, 2000, the Comptroller of Currency approved the establishment of a
branch location for the Citizens National Bank located at 739 E. Tyler Street in
Athens, Texas.

On April 5, 2000, HCB Insurance Agency, Inc., a wholly owned subsidiary of
Citizens National Bank, completed the purchase of the Preston Insurance Agency
in Henderson, Texas, for the purchase price of $650,000.

Results of Operations
---------------------

Net income for the first nine months of 2000 decreased to $2,754,000 compared to
$3,077,000 for the same period in 1999. Net interest income for the nine months
ended September 30, 2000 was $8,682,000 compared to $8,770,000 for the same
period in 1999.  The Company made a provision of $280,000 to the allowance for
loan losses during the first nine months of 2000.  A provision of $270,000 was
made for loan losses during the same period in 1999. The Company experienced no
net gain or loss on securities transactions in the first nine months of 2000
compared to a net gain of $187,000 in the first nine months of 1999.  Other
income, excluding net gains on securities transactions, for the first nine
months of 2000 was $4,292,000 compared to $3,777,000 for the same period in
1999.  Total other expenses for the first nine months of 2000 were $9,544,000
compared to $8,779,000 for the same period in 1999.  Income tax expense for the
first nine months of 2000 and 1999 was $396,000 and $608,000, respectively.

        Net Interest Income.  For the nine months ended September 30, 2000, net
        -------------------
interest income was $8,682,000 compared to $8,770,000 for the first nine months
of 1999. Interest income was up $1,430,000 during the nine months ended
September 30, 2000, primarily due to interest on loans as average loan balances
were up 12.5% compared to the same period in 1999.  The increase is largely the
result of continued loan growth combined with growth in loans as a result of the
opening of the Marshall branch in December 1999.  Interest expense increased
$1,518,000 due mostly to average rates paid that were approximately 59 basis
points higher in the first nine months of 2000 as compared to the same period in
1999.

Net interest income for the three-month period ended September 30, 2000 was
$2,840,000 compared to $2,903,000 in 1999.  The decrease is a result of the
increase in average rates paid on deposits was greater than the increase of the
average rates earned on interest-earning assets.

        Provision for Loan Losses.  The provision for loan losses was $280,000
        -------------------------
for the first nine months of 2000 compared to $270,000 for the first nine months
of 1999.  See "Management's Discussion and Analysis of the Financial Condition
and Results of Operations of the Company--Allowance for Loan Losses" for more
detailed discussion relative to the provision for loan losses.

For the three-month period ended September 30, 2000, the Company increased its
allowance through a provision of $90,000.  The Company decreased it allowance
for loan losses during the same period in 1999 by a provision of $30,000
primarily as a result of a net recovery of $275,000 during the period.

        Other Income.  Non-interest income, excluding securities gains/losses,
        ------------
was $4,318,000 for the first nine months of 2000 as compared to $3,777,000 in
the first nine months of 1999. This increase is due to increases in service
charges primarily through an increase in fees collected for insufficient funds,
and increases in trust fee income.  The acquisition of the Preston Insurance
Agency in April of 2000 had little effect in non-interest income as the income
is being accounted for net of expenses. The insurance subsidiary is currently
operating at a breakeven level.   The Company experienced no net gains or losses
on securities transactions for the first nine months of 2000 compared to a net
gain on securities transactions for the first nine months of 1999 of $187,000.

                                       10
<PAGE>

For the three months ended September 30, 2000, non-interest income, excluding
security gains was $1,325,000 compared to $1,345,000 for the same period in
1999, with the majority of the decrease due to two settlements totaling $58,000
that were received in the third quarter of 1999.  The Company experienced no net
gain/loss on securities for the three months ended September 30, 2000 or during
the same period in 1999.

        Other Expenses.  Other expenses for the nine-month period ended
        --------------
September 30, 2000 were $9,570,000 compared to $8,779,000 during the same period
in 1999. The increase in other expenses is due to the increase in salary and
related benefits expense resulting from normal year-end salary increases in the
current year combined with the opening of the Marshall branch in December of
1999 and the acquisition of the Preston Insurance Agency in April of 2000.
Occupancy expenses continue to increase with the addition of new facilities and
the remodeling of existing properties.

For the three-month period ended September 30, 2000, other expenses were
$3,121,000 compared to $2,991,000 during the same period in 1999.  The increase
is a result of the same activities noted in the previous paragraph for the first
nine months of 2000 and 1999.

        Income Taxes.  Income tax expense for the first nine months of 2000 was
        ------------
$396,000, compared to $608,000 in the same period in 1999. The effective tax
rates for the first nine months of 2000 and 1999 were 12.6% and 16.5%.  The
effective rates are less than the statutory rate of 34% primarily because of
tax-free income provided from state and municipal bonds, leases and obligations.

Income taxes for the three-month periods ended September 30, 2000 and September
30, 1999 were $86,000 and $221,000 respectively.  The effective tax rates for
the three-month periods ended September 30, 2000 and September 30, 1999 were
9.0% and 17.2%.

Financial Condition
-------------------

The Company's total assets at September 30, 2000 of $406,890,000 increased from
the total assets at December 31, 1999 of $393,446,000. The Company's loan
portfolio grew 10.8% to $159,812,000 at September 30, 2000, up from $144,197,000
at December 31, 1999. Total deposits were $365,442,000 at September 30, 2000,
compared to the December 31, 1999 total of $355,423,000.

Deposits and Other Borrowings
-----------------------------

Total deposits at September 30, 2000 increased from the December 31, 1999
balances by $10,019,000.  The Marshall branch, which opened in December 1999,
accounted for approximately $9,000,000 of this increase.  There was also a shift
from interest-bearing transaction accounts to money market and savings accounts
as customers took advantage of the tiered money market account that is indexed
to the three-month Treasury bill.

In the three months ended September 30, 2000, the Company changed from the
Treasury Tax and Loan Daily Remittance Option to the Treasury Tax and Loan Note
Option, which allows the Company to keep on deposit customer tax payments for
short periods of time until withdrawn by the Treasury.  At September 30, 2000,
amounts payable under this note totaled $1,737,000.

Liquidity
---------

Liquidity is the ability of the company to fund customers' needs for borrowing
and deposit withdrawals.  The purpose of liquidity management is to assure
sufficient cash flow to meet all of the financial commitments and to capitalize
on opportunities for business expansion.  This ability depends on the
institution's financial strength, asset quality and types of deposit and
investment instruments offered by the Company to its customers.  The Company's
principal sources of funds are deposits, loan and securities repayments,
maturities of securities, sales of securities available for sale and other funds
provided by operations.  The Company also has various federal funds sources from
correspondent banks.   While scheduled loan repayments and maturing investments
are relatively predictable, deposit flows and early loan and mortgage-backed
security prepayments are more influenced by interest rates, general economic
conditions and competition.  The Company maintains investments in liquid assets
based upon management's assessment of (1) need for funds, (2) expected deposit
flows, (3) yields available on short-term liquid assets and (4) objectives of
the asset/liability management program.

Cash and cash equivalents decreased $11,481,000, or 29.7%, from $38,683,000 at
December 31, 1999 to $27,202,000 at September 30, 2000.  Cash and cash
equivalents represented 6.7% of total assets at September 30, 2000 compared to
9.8% of total assets at December 31, 1999. This decrease was due to the
investment of excess liquidity built up prior to year-end in anticipation of Y2K
withdrawals as well as funds used to finance new loans.  The Company has the
ability to borrow federal funds from various correspondent banks should the
Company need to supplement its future liquidity needs in order to meet deposit
flows, loan demand or

                                       11
<PAGE>

to fund investment opportunities. Management believes the Company's liquidity
position is strong based on its level of cash and cash equivalents, core
deposits, the stability of its other funding sources and the support provided by
its capital base.

As summarized in the Consolidated Statements of Cash Flows, the most significant
transactions that affected the Company's level of cash and cash equivalents,
cash flows and liquidity during the first nine months of 2000 were the net
increase in loans of $15,895,000, securities purchases of $23,954,000 and
securities maturities and repayments of $15,105,000.

Capital Resources
-----------------

At September 30, 2000, stockholders' equity totaled $37,291,000, or 9.2% of
total assets, compared to $35,771,000, or 9.1% of total assets, at December 31,
1999.  The increase in stockholders' equity is the result of earnings retained
net of treasury stock purchases of $221,000.

The Company and its Bank subsidiary, Citizens National Bank, are subject to
regulatory capital requirements administered by federal banking agencies.  Bank
regulators monitor capital adequacy very closely and consider it an important
factor in ensuring the safety of depositors' accounts.  As a result, bank
regulators have established standard risk based capital ratios that measure the
amount of an institutions capital n relation to the degree of risk contained in
the balance sheet, as well as off-balance sheet exposure.  Federal law requires
each federal banking regulatory agency to take prompt corrective action to
resolve problems of insured depository institutions including, but not limited
to, those that fall below one or more prescribed capital ratios.  According to
the regulations, institutions whose Tier 1 and total capital ratios meet or
exceed 6.0% and 10.0% of risk-weighted assets, respectively, are considered
"well capitalized."  Tier 1 capital is shareholders' equity excluding the
unrealized gain or loss on securities classified as available for sale and
intangible assets.  Tier 2 capital, or total capital, includes Tier 1 capital
plus the allowance for loan losses not to exceed 1.25% of risk weighted assets.
Risk weighted assets are the Company's total assets after such assets are
assessed for risk and assigned a weighting factor based on their inherent risk.
In addition to the risk-weighted ratios, all institutions are required to
maintain Tier 1 leverage ratios of at least 5.0% to be considered "well
capitalized" and 4.0% to be considered "adequately capitalized."  The leverage
ratio is defined as Tier 1 capital divided by adjusted average assets for the
most recent quarter.

The tables below set forth the Consolidated and Citizens Bank only capital
ratios as of September 30, 2000 and December 31, 1999.


                                                    Consolidated   Bank Only
                                                    ------------  ---------
September 30, 2000
------------------
Tier 1 capital to risk-weighted assets ratio            17.8%       17.6%
Total capital to risk-weighted assets ratio             19.0        18.8
Leverage ratio                                           9.0         8.9

December 31, 1999
-----------------
Tier 1 capital to risk-weighted assets ratio            18.4%       18.8%
Total capital to risk-weighted assets ratio             19.6        19.8
Leverage ratio                                           9.0         8.3


As of September 30, 2000 and December 31, 1999, the Company and its Bank
subsidiary, Citizens National Bank, met the level of capital required to be
categorized as well capitalized under prompt corrective action regulations.
Management is not aware of any conditions subsequent to September 30, 2000 and
December 31, 1999 that would change the Company's or the Citizen National Bank's
capital categories.

                                       12
<PAGE>

Loans
-----

The Company's loan portfolio consists primarily of real estate, commercial and
industrial, and consumer loans.  Gross loans were $162,187,000 at September 30,
2000 compared to $146,529,000 at December 31, 1999.

As can be seen in the table in Note 3 above, a strong increase of approximately
13.9% in commercial and industrial loans, an increase of approximately 10.4% in
real estate loans, and an increase of 7.3% in installment loans occurred during
the first nine months of 2000.  The overall increase during the nine months
ended September 30, 2000 is largely the result of strong market demand for home
loans and commercial properties, including leases.  The opening of the Marshall
branch in December 1999 has contributed to an increase in total loans of
approximately $5,014,000 while the consolidation of the Bank with its
subsidiary, CDC, increased total loans by approximately $841,000 during the
first nine months of 2000.

Allowance for Loan Losses
-------------------------

The allowance for loan losses at September 30, 2000 and December 31, 1999 was
1.46% and 1.50% of outstanding loans, respectively. By its nature, the process
through which management determines the appropriate level of the allowance
requires considerable judgment.  The determination of the necessary allowance,
and correspondingly the provision for loan losses, involves assumptions about
projections of national and local economic conditions, the composition of the
loan portfolio, and prior loss experience, in addition to other considerations.
As a result, no assurance can be given that future losses will not vary from the
current estimates.  However, the allowance at September 30, 2000 represents
management's best estimate of probable losses that have been incurred within the
existing portfolio of loans.  A migration analysis and an internal
classification system for loans also help identify potential problems, if any,
which are not identified otherwise.  From these analyses, management determines
which loans are potential candidates for nonaccrual status, including impaired
loan status, or charge-off.  Management continually reviews loans and classifies
them consistent with the guidelines established by the Office of the Comptroller
of Currency to help ensure that an adequate allowance is maintained.

The provision for loan losses is determined by management as the amount to be
added to the allowance for loan losses after net charge-offs have been deducted
to bring the allowance to a level which is considered adequate to absorb losses
inherent in the loan portfolio.  The amount of the provision is based on
management's review of the loan portfolio.  The consideration of such factors as
historical loss experience, general prevailing economic conditions, changes in
the size and composition of the loan portfolio and specific borrower
considerations, including the ability of the borrower to repay the loan and the
estimated value of the underlying collateral.

The provision for loan losses for the three and nine months ended September 30,
2000 totaled $90,000 and $280,000 compared to $(30,000) and $270,000 for the
three and nine months ended September 30, 1999.  For the three month period
ended September 30, 1999, the Company's allowance decreased by $30,000 primarily
as a result of a net recovery situation during the period of $275,000.  The
Company had a significant recovery on one customer amounting to approximately
$680,000.  Management anticipates it will continue its provisions to the
allowance for loan losses at current levels for the near future, providing the
volume of nonperforming loans remains insignificant, to compensate for loan
growth, particularly higher risk commercial and installment loans.

Non Accrual, Past Due and Restructured Loans
--------------------------------------------

The Company's policy is to discontinue the accrual of interest income on loans
whenever it is determined that reasonable doubt exists with respect to timely
collectibility of interest and principal.  Loans are placed on nonaccrual status
if either material deterioration occurs in the financial position of the
borrower, payment in full of interest or principal is not anticipated, payment
in full of interest or principal is past due 90 days or more unless well
secured, payment in full of interest or principal on a loan is past due 180 days
or more, regardless of collateral, or the loan in whole or in part is classified
as doubtful. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed on
nonaccrual status, interest is no longer accrued or included in interest income
and previously accrued income is reversed.

During the three months ended June 30, 2000, the Company restructured a single
loan relationship totaling $1,216,000.  The restructured loan is secured by
commercial real estate, a manufacturing company that was adversely affected by a
down turn in the oil and gas market.

                                       13
<PAGE>

The following is a summary of the Company's problem loans as of September 30,
2000 and December 31,1999.

<TABLE>
<CAPTION>
                                                                     September 30,         December 31,
                                                                        2000                   1999
                                                                   ----------------    -------------------
                                                                            (dollars in thousands)
<S>                                                                <C>                  <C>
Nonaccrual loans                                                   $            172                     --
Restructured loans                                                            1,216                     --
Other impaired loans                                                             --                     --
Loans past due 90+ days and still accruing                                       66                    183
                                                                   ----------------    -------------------
          Total non-performing loans                               $          1,454                    183
                                                                   ================    ===================

Other potential problem loans                                      $             --                     --
                                                                   ================    ===================

Other non-performing assets, other real estate owned               $            135                    150
                                                                   ================    ===================
</TABLE>


Concentration of Credit Risk
----------------------------

The Company grants real estate, commercial, and industrial loans to customers
primarily in Henderson, Texas, and surrounding areas of east Texas. Although the
Company has a diversified loan portfolio, a substantial portion (approximately
53.1% at September 30, 2000) of its loans are secured by real estate and its
ability to fully collect its loans is dependent upon the real estate market in
this region. The Company typically requires collateral sufficient in value to
cover the principal amount of the loan. Such collateral is evidenced by
mortgages on property held and readily accessible to the Company.  See
additional information related to the composition of the Company's loan
portfolio included in Note 3 to the consolidated financial statements.

Securities
----------

The Investment Committee, under the guidance of the Company's Investment Policy,
assesses the short and long-term needs of the Company after consideration of
loan demand, interest rate factors, and prevailing market conditions.
Recommendations for purchases and other transactions are then made considering
safety, liquidity, and maximization of return to the Company.  Management
determines the proper classification of securities at the time of purchase.
Securities that management does not intend to hold to maturity or that might be
sold under certain circumstances are classified as available for sale.  If
management has the intent and the Company has the ability at the time of
purchase to hold the securities until maturity, the securities will be
classified as held to maturity.

The management strategy for securities is to maintain a very high quality
portfolio with generally short duration.  The quality of the portfolio is
maintained with 79% of the total as of September 30, 2000 comprised of U.S.
Treasury, federal agency securities, and agency issued mortgage securities. The
collateralized mortgage obligations (CMOs) and mortgage backed securities (MBS)
held by the company are backed by agency collateral which consists of loans
issued by the Federal Home Loan Mortgage Corporation (FHLMC), Federal National
Mortgage Corporation (FNMA), and the Government National Mortgage Association
(GNMA) with a blend of fixed and floating rate coupons.

Credit risk is minimized through agency backing, however, there are other risks
associated with MBS and CMOs.  These other risks include prepayment, extension,
and interest rate risk.  MBS are securities that represent an undivided interest
in a pool of mortgage loans.  CMOs are structured obligations that are derived
from a pool of mortgage loans or agency mortgage backed securities.  CMOs in
general have widely varying degrees of risk, which results from the prepayment
risk on the underlying mortgage loans and its effect on the cash flows of the
security.

Prepayment risk is the risk of borrowers paying off their loans sooner than
expected in a falling rate environment by either refinancing or curtailment.
Extension risk is the risk that the underlying pool of loans will not exhibit
the expected prepayment speeds thus resulting in a longer average life and
slower cash flows than anticipated at purchase.  Interest rate risk is based on
the sensitivity of yields on assets that change in a different time period or in
a different proportion from that of current market interest rates.  Changes in
average life due to prepayments and changes in interest rates in general will
cause the market value of MBS and CMOs to fluctuate.

                                       14
<PAGE>

The Company's MBS portfolio consists of fixed rate balloon maturity pools with
short stated final maturities and adjustable rate mortgage (ARM) pools with
coupons that reset annually and have longer maturities.  Investments in CMOs
consist mainly of Planned Amortization Classes (PAC), Targeted Amortization
Classes (TAC), and sequential classes.  As of September 30, 2000, floating rate
securities made up 70% of the CMO portfolio.  Support and liquidity classes with
longer average lives and floating rate coupons comprise a relatively small
portion of the portfolio.

To maximize after-tax income, investments in tax-exempt municipal securities are
utilized but with somewhat longer maturities.

Securities are the Company's single largest interest-earning asset representing
approximately 49% of total assets at September 30, 2000. The investment
portfolio totaled $201,073,000 at September 30, 2000, up from $192,254,000 at
December 31, 1999.  This increase resulted due to excess cash and fed funds
being invested in available for sale securities for increased yields

Recent Accounting Pronouncements
--------------------------------

The following pronouncement has been issued, but has not yet become effective,
and is listed together with the expected impact on the Company.

FASB 133, Accounting for Derivative Instruments and Hedging Activities - This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivatives embedded in other contracts, and for
hedging activities.  It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value.  The Statement will be effective for the Company in the year
ending in 2001.  Due to the Company's limited use of derivative instruments, the
effect of implementation of this new pronouncement is not expected to have a
significant effect on the financial position or results of operations of the
Company.

Corporate Objectives
--------------------

It is the philosophy of the Company to continue to remain independent in
ownership, to foster its image as the community leader in banking, to increase
its market share through selected acquisitions and aggressive marketing, to
maintain a sound earning-asset portfolio, and to assess liquidity needs while
maximizing its profitability and return to its shareholders.

Forward-Looking Information
---------------------------

Statements and financial discussion and analysis by management contained
throughout this Form 10-Q that are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve a number of
risks and uncertainties.  Various factors could cause actual results to differ
materially from the forward-looking statements, including, without limitation,
changes in interest rates and economic conditions, increased competition for
deposits and loans adversely affecting rates and terms, changes in availability
of funds increasing costs or reducing liquidity, changes in applicable statutes
and governmental regulations, and the loss of any member of senior management or
operating personnel and the potential inability to hire qualified personnel at
reasonable compensation levels.

                                       15
<PAGE>

Item 3.

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary market risk exposures is interest rate risk and, to a
lesser extent, liquidity risk.  The Company does not maintain a trading account
for any class of financial instrument and the Company is not affected by foreign
currency exchange rate risk or commodity price risk.

Interest rate risk is the risk that the Company's financial condition will be
adversely affected due to movements in interest rates.  The Company, like other
financial institutions, is subject to interest rate risk to the extent that its
interest-earning assets reprice differently than its interest-bearing
liabilities.  The income of financial institutions is primarily derived from the
excess of interest earned on interest-earning assets over the interest paid on
interest-bearing liabilities.  A high ratio of interest sensitive liabilities
tends to benefit net interest income during periods of falling interest rates as
the average rate paid on interest-bearing liabilities declines faster than the
average rate earned on interest-earning assets.  The opposite holds true during
periods of rising interest rates.  One of the Company's principal financial
objectives is to achieve long-term profitability while reducing its exposure to
fluctuations in interest rates.  Management recognizes certain risks are
inherent and that the goal is to measure the effect on net interest income and
to adjust the balance sheet to minimize the risk while at the same time maximize
income.  Accordingly, the Company places great importance on monitoring and
controlling interest rate risk.

There are several methods employed by the Company to monitor and control
interest rate risk.  One such method is using a simulation model to analyze net
interest income sensitivity to movements in interest rates.  The simulation
model projects net interest income based on both an immediate rise or fall in
interest rates (rate shock) over a twelve-month period.  The model is based on
the actual maturity and repricing characteristics of interest rate sensitive
assets and liabilities.  The repricing can occur due to changes in rates on
variable rate products as well as maturities of interest-earning assets and
interest-bearing liabilities.  The model incorporates assumptions regarding the
impact of changing interest rates on the prepayment rate of certain assets and
liabilities as well as projections for anticipated activity levels by product
lines offered by the Company.  The simulation model also takes into account the
Company's historical core deposits.  Management considers the Company's market
risk to be acceptable at this time.

One strategy used by the Company to reduce the volatility of its net interest
income is to originate variable rate loans tied to market indices.  Such loans
reprice on an annual, quarterly, monthly or daily basis as the underlying market
index change.  Currently, approximately 14% of the Company's loan portfolio
reprices on at least an annual basis.

The Company has also structured the securities portfolio so that most of the
mortgage-backed securities reprice on at least an annual basis. The Company also
maintains most of its securities in the available for sale portfolio to take
advantage of changes in interest rates and to maintain liquidity for loan
funding and deposit withdrawals. The mortgage-backed and related securities also
provide the Company with a constant flow stream from principal repayments. The
Company invests short-term excess funds in overnight federal funds that mature
and reprice on a daily basis.

The Company's 1999 annual report details a table that provides information about
the Company's financial instruments that are sensitive to changes in interest
rates as of December 31, 1999. The table is based on information and assumptions
set forth in the discussion. The Company believes the assumptions utilized are
reasonable. Management believes that no events have occurred since December 31,
1999 which would significantly change the ratio of rate sensitive assts to rate
sensitive liabilities for the given time horizons in the table.

                                       16
<PAGE>

Part II - OTHER INFORMATION


Item 1.  Legal Proceedings

       None

Item 2.  Changes in Securities and Use of Proceeds

       None

Item 3.  Defaults Upon Senior Securities

       None

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

       None

Item 5.  Other Information

       None

Item 6.  Exhibits and Reports on Form 8-K

       None

                                       17
<PAGE>

Signatures


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




                                        HENDERSON CITIZENS BANCSHARES, INC.


Date:   November 10, 2000                  By:  /s/  Milton S. McGee, Jr.
        -----------------                       --------------------------

                                                Milton S. McGee, Jr., CPA
                                                President



Date:   November 10, 2000                 By:  /s/  Rebecca G. Tanner
        -----------------                      ---------------------------

                                               Rebecca G. Tanner, CPA
                                               Vice President, Treasurer,
                                               Chief Financial Officer and
                                               Chief Accounting Officer

                                       18
<PAGE>

                                 EXHIBIT INDEX



Exhibit
-------------------------------------------------------------------------------

27.1   Financial Data Schedule.

                                       19