FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
              (As last amended in Rel. No. 34-26589, eff. 4/12/93.)

                                  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 June 30, 1998


                         Commission file number: 0-12668


                              Hills Bancorporation


Incorporated in Iowa                              I.R.S. Employer Identification
                                                           No. 42-1208067

                          131 MAIN STREET, HILLS, IOWA

                        Telephone number: (319) 679-2291

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practical date.

                                                             SHARES OUTSTANDING
          CLASS                                               AT July 31, 1998
--------------------------                                   ------------------

Common Stock, no par value                                        1,467,754
<PAGE>


                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION


                                                                           Page
                                                                          Number

Item 1.   Financial Statements

          Consolidated balance sheets, June 30, 1998 (unaudited)
            and December 31, 1997                                 
          Consolidated statements of income, (unaudited) for three and six
            months ended June 30, 1998 and 1997                     
          Consolidated statements of comprehensive income, (unaudited) for
            three and six months ended June 30, 1998 and 1997.   
          Consolidated statements of stockholders' equity, (unaudited)
            for six months ended June 30, 1998 and 1997          
          Consolidated statements of cash flows (unaudited) for six
            months ended June 30, 1998 and 1997           
          Notes to consolidated financial statements          

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 vote of security holders      

Item 5.   Other information                               

Item 6.   Exhibits and reports on Form 8-K                 

COMPUTATION OF EARNINGS PER SHARE                                     

SIGNATURES                                                          



<PAGE>


                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)
<TABLE>

                                                       June 30, 1998
                                                          Unaudited  December 31, 1997*
                                                       -------------------------------- 
<S>                                                    <C>           <C>  
ASSETS
Cash and due from banks ..............................     $ 18,591     $ 15,508
Investment securities:
   Available for sale (amortized cost
     June 30, 1998 $109,492;
     December 31, 1997 $108,718) .....................      110,322      109,486
   Held to maturity (fair value
     June 30, 1998 $22,539;
     December 31, 1997 $24,230) ......................       22,191       23,840
   Stock of Federal Home Bank ........................        4,347        4,738
Federal funds sold ...................................       17,131        2,447
Loans, net ...........................................      438,129      422,761
Property and equipment, net ..........................       10,547        9,437
Accrued interest receivable ..........................        6,938        5,441
Deferred income taxes, net ...........................        1,832        1,859
Other assets .........................................        7,070        7,585
                                                           --------     --------
                                                           $637,098     $603,102
                                                           ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits .........................     $ 54,617     $ 52,174
Interest-bearing deposits ............................      436,145      427,596
                                                           --------     --------
   Total deposits ....................................     $490,762     $479,770
Federal funds purchased and securities
   sold under agreements to repurchase ...............        5,339        9,008
Federal Home Loan Bank notes .........................       75,764       50,764
Accrued interest payable .............................        1,964        2,060
Other liabilities ....................................        2,235        2,318
                                                           --------     --------
                                                           $576,064     $543,920
                                                           --------     --------

REDEEMABLE COMMON STOCK HELD BY
   EMPLOYEE STOCK OWNERSHIP PLAN
   (ESOP) ............................................     $  8,482     $  7,682
                                                           --------     --------

STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
   authorized 10,000,000 shares;
   issued June 30, 1998 and December 31,
   1997 - 1,467,754 shares ...........................     $  9,070     $  9,070
Retained earnings ....................................       51,441       49,627
Accumulated other comprehensive income,
   unrealized gains on investment securities, net ....          523          485
                                                           --------     --------
                                                           $ 61,034     $ 59,182
Less, maximum cash obligation related to
   ESOP shares .......................................        8,482        7,682
                                                           --------     --------
                                                           $ 52,552     $ 51,500
                                                           --------     --------
                                                           $637,098     $603,102
                                                           ========     ========
<FN>
*  Derived from audited financial statements.
</FN>
</TABLE>
See Notes to Financial Statements.
<PAGE>


                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                Three and Six Months Ended June 30, 1998 and 1997
                      (In Thousands, Except Per Share Data)
<TABLE>
                                                         Three Months Ended  Six Months Ended
                                                              June 30             June 30
                                                         -------------------------------------
                                                           1998      1997     1998      1997
                                                         ------------------  -----------------
<S>                                                      <C>       <C>       <C>       <C>  
Interest Income:
   Interest and fees on loans ........................   $ 9,367   $ 8,515   $18,542   $16,556
   Interest on investment securities:
     Taxable .........................................     1,686     1,693     3,366     3,366
     Non-taxable .....................................       330       298       665       592
   Interest on federal funds sold ....................       296        39       543        80
                                                         -------   -------   -------   -------
   Total interest income .............................   $11,679   $10,545   $23,116   $20,594
                                                         -------   -------   -------   -------

Interest Expense:
   Interest on deposits ..............................   $ 5,042   $ 4,719   $10,068   $ 9,322
   Interest on securities sold under
agreements to repurchase .............................        81       109       169       198
   Interest on FHLB borrowings .......................     1,146       730     2,171     1,260
                                                         -------   -------   -------   -------

   Total interest expense ............................   $ 6,269   $ 5,558   $12,408   $10,780
                                                         -------   -------   -------   -------
   Net interest income ...............................   $ 5,410   $ 4,987   $10,708   $ 9,814

Provision for loan losses ............................       204       395       408       590
                                                         -------   -------   -------   -------

   Net interest income after provision
for loan losses ......................................   $ 5,206   $ 4,592   $10,300   $ 9,224
                                                         -------   -------   -------   -------

Other income:
   Net gains (losses) on sale of investment securities   $  --     $ 1,054   $  --     $ 1,054
   Loan origination fees .............................       182        61       334       120
   Trust fees ........................................       406       321       863       625
   Deposit account charges and fees ..................       459       470       893       903
   Other fees and charges ............................       358       300       731       629
                                                         -------   -------   -------   -------
                                                         $ 1,405   $ 2,206   $ 2,821   $ 3,331
                                                         -------   -------   -------   -------
Other expenses:
   Salaries and employee benefits ....................   $ 2,168   $ 1,797   $ 4,233   $ 3,587
   Occupancy .........................................       305       241       575       487
   Furniture and equipment ...........................       418       343       828       670
   Office supplies and postage .......................       307       187       589     1,092
   Contributions .....................................         8     1,073         8       418
   Other operating ...................................       957       867     1,830     1,714
                                                         -------   -------   -------   -------
                                                         $ 4,163   $ 4,508   $ 8,063   $ 7,968
                                                         -------   -------   -------   -------
   Income before income taxes ........................   $ 2,448   $ 2,290   $ 5,058   $ 4,587

Federal and state income taxes .......................       715       355     1,481     1,041
                                                         -------   -------   -------   -------

   Net income ........................................   $ 1,733   $ 1,935   $ 3,577   $ 3,546
                                                         =======   =======   =======   =======

Earning per common share:
     Basic ...........................................   $  1.18   $  1.32   $  2.44   $  2.42
     Diluted .........................................      1.16      1.31      2.40      2.40
</TABLE>
See Notes to Financial Statements
<PAGE>


                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                Three and Six Months Ended June 30, 1998 and 1997
                      (In Thousands, Except Per Share Data)
<TABLE>

                                                    Three Months Ended     Six Months Ended
                                                         June 30                June 30
                                                    ------------------     -----------------
                                                      1998       1997       1998       1997
                                                    ----------------------------------------
<S>                                                 <C>        <C>        <C>        <C> 
Net Income ......................................   $ 1,733    $ 1,935    $ 3,577    $ 3,546

Other comprehensive income:
   Unrealized gains (losses) on debt securities .      (122)      (692)        62       (912)
   Income tax effect of unrealized gains (losses)        44        236        (24)       318
                                                    -------    -------    -------    -------

   Comprehensive Income .........................   $ 1,655    $ 1,479    $ 3,615    $ 2,952
                                                    =======    =======    =======    =======
</TABLE>
<PAGE>


                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Six Months Ended June 30, 1998 and 1997
                                 (In Thousands)

<TABLE>
                                    Capital   Retained   Unrealized       ESOP
                                     Stock    Earnings Gains (Losses)  Obligations   Total
                                    -------------------------------------------------------
<S>                                 <C>       <C>      <C>             <C>          <C>
Balance, January 1, 1998 ........   $ 9,070   $49,627     $   485        $(7,682)   $51,500
Net income ......................       - -     3,577         - -            - -      3,577
Change related to ESOP shares ...       - -       - -         - -           (800)      (800)
Cash dividends ($1.20 per share).       - -    (1,763)        - -            - -     (1,763)
Unrealized gains (losses) on debt
  securities, net ...............       - -       - -          38            - -         38
                                    -------------------------------------------------------
Balance, June 30, 1998 ..........   $ 9,070   $51,441     $   523        $(8,482)   $52,552
                                    =======================================================

Balance, January 1, 1997 ........   $ 8,996   $44,079     $   676        $(6,416)   $47,335
Exercise Stock Options
  for 2,055 shares ..............        53       - -         - -            - -         53
Redemption of stock .............        (7)      - -         - -            - -         (7)
Net income ......................       - -     3,546         - -            - -      3,546
Change related to ESOP shares ...       - -       - -         - -           (481)      (481)
Cash dividends ($1.05 per share)        - -    (1,539)        - -            - -     (1,539)
Unrealized gains (losses) on
  debt securities, net ..........       - -       - -        (594)           - -       (594)
                                    -------------------------------------------------------
Balance, June 30, 1997 ..........   $ 9,042   $46,086     $    82        $(6,897)   $48,313
                                    =======================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>


                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 1998 and 1997
                                 (In Thousands)
<TABLE>
                                                                                      1998       1997
                                                                                   --------------------
<S>                                                                                <C>         <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................................   $  3,577    $  3,546
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation ...............................................................        658         535
    Provision for loan losses ..................................................        408         590
    (Increase) decrease in accrued interest receivable .........................     (1,497)       (512)
    Amortization of bond discount ..............................................        139         189
    (Increase) in other assets .................................................        346        (337)
    Amortization of intangibles ................................................        172         171
    Increase in accrued interest and other liabilities .........................       (179)        263
                                                                                   --------    --------
    Net cash provided by operating activities ..................................   $  3,624    $  4,445
                                                                                   --------    --------

CASH FLOWS FROM  INVESTING  ACTIVITIES  Proceeds  from  maturities of investment
securities:
    Available for sale .........................................................   $ 13,499    $  8,801
    Held to maturity ...........................................................      2,086       1,393
Purchase of investment securities:
    Available for sale .........................................................    (14,459)     (9,315)
    Held to maturity ...........................................................      - - -      (3,393)
Federal funds sold, net ........................................................    (14,684)       (605)
Loans made to customers, net of collections ....................................    (15,776)    (32,182)
Purchases of property and equipment ............................................     (1,768)       (475)
                                                                                   --------    --------
    Net cash (used in) investing activities ....................................   $(31,102)   $(35,776)
                                                                                   --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits ........................................   $ 10,992    $ 15,583
    Net increase (decrease) in fed funds purchased and
       Securities sold under agreements to repurchase ..........................     (3,669)         13
    Borrowings from FHLB .......................................................     40,000      20,000
    Payments on FHLB notes .....................................................    (15,000)      - - -
    Stock options exercised ....................................................      - - -          52
    Redemption of common stock .................................................      - - -          (7)
    Dividends paid .............................................................     (1,762)     (1,539)
                                                                                   --------    --------
       Net cash provided by financing activities ...............................   $ 30,561    $ 34,102
                                                                                   --------    --------
       Increase in cash and due from banks .....................................   $  3,083    $  2,771

CASH AND DUE FROM BANKS
    Beginning ..................................................................     15,508      15,036
                                                                                   --------    --------
    Ending .....................................................................   $ 18,591    $ 17,807
                                                                                   ========    ========

SUPPLEMENTAL DISCLOSURES Cash payments for:
       Interest paid to depositors and others ..................................   $ 10,164    $  9,325
       Interest paid on other obligations ......................................      2,340       1,458
    Non-cash financing transactions:
       Increase in maximum cash obligation related
        to ESOP shares .........................................................        800         481
       Net unrealized gains (losses) on debt securities ........................         62        (913)
</TABLE>

See Notes to Financial Statements.
<PAGE>


                              HILLS BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


Note 1. Interim Financial Statements

Interim consolidated  financial statements have not been examined by independent
public  accountants,  but include  all  adjustments  (consisting  only of normal
recurring  accruals)  which,  in the opinion of management,  are necessary for a
fair presentation of the results for these periods. The results of operation for
the interim  periods are not  necessarily  indicative  of the results for a full
year.

For purposes of reporting  cash flows,  cash and due from banks includes cash on
hand and amounts due from banks  (including  cash items in process of clearing).
Cash flows from demand deposits,  NOW accounts,  savings  accounts,  and federal
funds  purchased and sold are reported net since their  original  maturities are
less than three months. Cash flows from loans and time deposits are presented as
net increases or decreases.


Note 2. Loans

The following  tables set forth the  composition  of loans and the allowance for
loan losses:

                                                            (In thousands)
                                                                June 30
                                                       -------------------------
                                                         1998             1997
                                                       -------------------------

Agricultural .................................         $ 28,881         $ 24,630
Commercial and financial .....................           34,376           31,101
Real estate, construction ....................           18,618           11,530
Real estate, mortgage ........................          328,229          306,149
Loans to individual ..........................           36,134           34,232
                                                       --------         --------
                                                       $446,238         $407,642
Less allowance for loan losses ...............            8,109            7,786
                                                       --------         --------
                                                       $438,129         $399,856
                                                       ========         ========

Transactions in the allowance for loan losses are as follows:

                                                            (In thousands)
                                                              Six Months
                                                             ended June 30
                                                       ------------------------
                                                        1998              1997
                                                       ------------------------

Balance, beginning ...........................         $ 8,010          $ 7,311
  Provision charged to expense ...............             408              590
  Net charge-offs ............................            (309)            (115)
                                                       -------          -------
Balance, ending ..............................         $ 8,109          $ 7,786
                                                       =======          =======
<PAGE>



The following summarizes the Company's  nonaccrual,  past due,  restructured and
impaired loans:

                                                        (In thousands)
                                                           March 31
                                                      -----------------
                                                       1998       1997
                                                      -------   -------

Nonaccrual ....................................       $   - -   $   - -
Accruing loans, past due 90 days or more ......         1,065       870
Restructured loan .............................           - -       - -
Impaired loans ................................         7,309     6,807


Note 3.  Changes in Accounting Policies

In June 1997, the FASB issued Statement #130, "Reporting  Comprehensive Income",
and Statement  #131,  "Disclosures  About  Segments of an Enterprise and Related
Information".  Statement #130 establishes standards for reporting  comprehensive
income in financial  statements.  Statement #131 expands  certain  reporting and
disclosure requirements for segments from current standards.  The Statements are
effective  for the quarter  ended March 31,  1998.  The company has  presented a
Statement of Comprehensive  Income.  Statement #131 has no effect on the interim
period financial statements.
<PAGE>


                                 PART I, ITEM 2.
                              HILLS BANCORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The  consolidated  balance  sheet of Hills  Bancorporation  as of June 30,  1998
reflects  total assets of $637.1  million  which is an increase of $34.0 million
from  December  31,  1997.  Net loans  increased  from $422.8  million to $438.1
million,  which represents an increase of $15.3. Compared to one year ago, total
assets have  increased  from $576.8 million to $637.1 million for an increase of
$60.3  million.  Also during this year,  net loans  increased  $38.3  million to
$438.1 million as of June 30, 1998.  The loan  increases  were primarily  single
family  residential  loans in the Iowa City and  Coralville  area as lower rates
continued and a strong  economy  remains  active.  Federal funds sold  increased
during the first half of 1998 by $14.7 million and have  increased from June 30,
1997 to June 30, 1998 by $15.4 million.  This increase is primarily excess funds
that will be used for loan commitments and other investments  during the balance
of 1998.  Also during the first six months of 1998 Hills Bank and Trust  Company
took advantage of lower interest rates on four and five year advances  available
from the Federal  Home Loan Bank and borrowed a net $25 million  since  December
31, 1997 and a net $30 million since June 30, 1997.  These  advances are secured
by 1-4 family mortgage loans.

Total  deposits,  including  federal funds  purchased and securities  sold under
agreements to  repurchase,  total $496.1 million at June 30, 1998 and this is an
increase of $7.3  million  from the  December  31, 1997  balances.  Deposits and
securities sold under agreements to repurchase  increased from $471.7 million at
June 30,1997 to $496.1  million at June 30, 1998, an increase of $24.4  million.
The largest  increase  on the  liability  side of the  balance  sheet is the net
increase  discussed  above in  Federal  Home  Loan Bank  notes.  Asset-liability
management  encompasses both the management of interest rate sensitivity and the
maintenance of adequate liquidity. Interest rate sensitivity management attempts
to provide the optimal level of net interest  income while managing  exposure to
risks  associated with interest rate movements.  Liquidity  management  involves
planning  to meet  anticipated  funding  needs.  Management  monitors  the  rate
sensitivity  and liquidity  positions on an on-going basis and, when  necessary,
appropriate  action is taken to minimize any adverse  effects of rapid  interest
rate movements or any unexpected liquidity concerns.

In January  1998,  Hills  Bancorporation  paid a dividend of $1.20 per share,  a
14.29%  increase  from the $1.05 paid in January  1997.  The total  dividend  of
$1,762,000  is  deducted  form  stockholders'  equity  and is  reflected  in the
resulting stockholders' equity as of June 30, 1998 of $52,552,000. Stockholders'
equity at June 30,  1998 and  December  31,  1997  reflects  an  adjustment  for
unrealized  gain (losses) on debt  securities,  net of income  taxes.  The total
stockholders' equity of Hills  Bancorporation  before the reduction for the ESOP
shares as a percent of total assets is 9.58%.  Under  risk-based  capital rules,
total  capital is 15.04% of risk  adjusted  assets,  compared  to the current 8%
requirement.

Net income for the  quarter  ending June 30,  1998 was  $1,733,000  and was down
$202,000 from the previous  year's quarter.  A significant  other income item in
the second  quarter of 1997 was the  recognition  of $1,054,000 on the sale of a
marketable equity security held by Hills Bancorporation. The equity security was
transferred  to  the  Hills  Bancorporation  Foundation,  a  private  charitable
foundation,  organized exclusively for charitable and educational purposes. As a
result of the stock contribution,  Hills  Bancorporation  received an income tax
savings of  approximately  $340,000  which was  reflected  as tax savings in the
federal and state income  taxes  expense for the second  quarter of 1997.  Other
income changes occurred in loan  origination  fees which increased  $121,000 for
the three  months ended June 30, 1998 from one year ago and $214,000 for the six
months  ending June 30,  1998,  compared to the same period in 1997.  Trust fees
showed  growth  over last year with an  $85,000  increase  for the  quarter  and
$238,000 for the six months.

Other expenses,  excluding the contribution  discussed above increased  $728,000
and  $1,187,000  for the second  quarter and the six months  ended June 30, 1998
compared to the same  periods in 1997.  The major  portion of this  increase was
$371,000  increase in salaries  and employee  benefits as  full-time  equivalent
employees  increased by twenty-seven  due to the new banks added in 1996 and new
positions  added at Hills Bank and Trust  Company in  various  areas.  All other
operating expenses are up $533,000 as a result of increases in marketing,  other
professional  fees,  expenses relating to the new bank in Mount Vernon and other
data processing charges.
<PAGE>


Basic and diluted  earnings per share for the three months  ending June 30, 1998
were $1.18 and $1.16 in  comparison  to $1.32 and $1.31 for the  quarter  ending
June 30, 1997. The earnings per share for the six months ended June 30, 1998 and
June 30,  1997 were $2.44 and $2.42 for basic  earnings  per share and $2.40 for
diluted earnings per share for both periods present.

The  Bank's  principal  sources  of funds  continues  to be  prepayment  of loan
principal and current amortized loan payments.  In addition,  funds are provided
from current operations.  All of the funds are used to fulfill loan commitments,
make  short-term  investments,  and fund any  deposit  withdrawals  needed.  The
Company has no material  commitments or plans which will  materially  affect its
liquidity or capital resources. The acquisition of property and equipment may be
in cash purchases, or they may be financed if favorable terms are available


<PAGE>


                              HILLS BANCORPORATION
                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          There are no material pending legal proceedings.

Item 2.   Changes in Securities

          There were no changes in securities.

Item 3.   Defaults upon Senior Securities

          Hills Bancorporation has no senior securities.

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

          At the Annual  Meeting  held on April 20, 1998,  the security  holders
          approved  the  election  of Richard W.  Oberman,  Earl M.  Yoder,  and
          Sheldon E. Yoder, D.V.M. to three-year terms to the Board of Directors
          expiring at the 2001 Annual Meeting.

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibit
               See exhibit II - Statement Re Computation of Earnings Per 
               Common Share

          (b)  Reports on Form 8-K
               No  reports on Form 8-K have been  filed  during the  quarter
               ended June 30, 1998.



<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 and thereunto duly authorized.

                                     HILLS BANCORPORATION
                                     (Registrant)




                    
Date AUGUST 13, 1998
     ---------------------------     /s/ Dwight O. Seegmiller
                                     -------------------------------------------
                                     Dwight O. Seegmiller, President

                                     (Duly authorized officer of the registrant)



                                     /s/ James G. Pratt
                                     -------------------------------------------
                                     James G. Pratt, Treasurer
                                     (Principal Financial Officer)