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 March 31, 2002

                         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 April 30, 2002
--------------------------------------------------------------------------------
Common Stock, no par value                                         1,498,558


                                       1
<PAGE>

                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION

                                                                           Page
                                                                          Number

Item 1.        Financial Statements

               Consolidated balance sheets, March 31, 2002
                 (unaudited) and December 31, 2001                             3
               Consolidated statements of income, (unaudited)
                 for three months ended March 31, 2002 and 2001                4
               Consolidated statements of comprehensive income,
                 (unaudited) for three months ended March 31,
                 2002 and 2001.                                                5
               Consolidated statements of stockholders' equity,
                 (unaudited) for three months ended March 31, 2002
                 and 2001                                                      6
               Consolidated statements of cash flows (unaudited)
                 for three months ended March 31, 2002 and 2001                7
               Notes to consolidated financial statements                  8 - 9

Item 2.        Management's discussion and analysis of financial
                 condition and results of operations                     10 - 12

Item 3.        Quantitative and Qualitative Disclosures About
                 Market Risk                                                  12


                                    Part II

                                OTHER INFORMATION

Item 1.        Legal proceedings                                              13

Item 2.        Changes in securities                                          13

Item 3.        Defaults upon senior securities                                13

Item 4.        Submission of matters to vote of security holders              13

Item 5.        Other information                                              13

Item 6.        Exhibits and reports on Form 8-K                               13

COMPUTATION OF EARNINGS PER SHARE

SIGNATURES                                                                    14

                                       2
<PAGE>


                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

<TABLE>
                                                         March 31,
                                                           2002     December 31,
                                                         Unaudited     2001*
                                                        ------------------------
<S>                                                     <C>         <C>
ASSETS
Cash and due from banks ..............................   $   28,881   $   37,070
Investment securities:
   Available for sale (amortized cost
     March 31, 2002 $174,789;
     December 31, 2001 $165,515) .....................      178,249      170,311
   Held to maturity (fair value
     March 31, 2002 $11,589;
     December 31, 2001 $12,146) ......................       11,297       11,840
   Stock of Federal Home Loan Bank ...................        7,809        7,809
Federal funds sold ...................................       55,985       29,428
Loans, net ...........................................      709,016      682,692
Property and equipment, net ..........................       21,543       20,997
Accrued interest receivable ..........................        7,367        7,257
Deferred income taxes, net ...........................        2,279        1,873
Other assets .........................................        7,546        6,828
                                                         -----------------------
                                                         $1,029,972   $  976,105
                                                         =======================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits .........................   $   90,202   $   92,179
Interest-bearing deposits ............................      687,784      627,839
                                                         -----------------------
   Total deposits ....................................   $  777,986   $  720,018
Federal funds purchased and securities
   sold under agreements to repurchase ...............       17,541       22,409
Federal Home Loan Bank notes .........................      137,637      137,637
Accrued interest payable .............................        2,663        2,683
Other liabilities ....................................        4,637        3,009
                                                         -----------------------
                                                         $  940,464   $  885,756
                                                         -----------------------
REDEEMABLE COMMON STOCK HELD BY EMPLOYEE STOCK
  OWNERSHIP PLAN (ESOP) ..............................   $   11,897   $   12,194
                                                         -----------------------
STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
   authorized 10,000,000 shares;
   issued March 31, 2002 - 1,498,558 shares;
   December 31, 2001 - 1,498,558 shares ..............   $   10,397   $   10,397
Retained earnings ....................................       76,932       76,931
Accumulated other comprehensive income,
   unrealized gains  on investment securities, net ...        2,179        3,021
                                                         -----------------------
                                                         $   89,508   $   90,349
Less maximum cash obligation related to
   ESOP shares .......................................       11,897       12,194
                                                         -----------------------
                                                         $   77,611   $   78,155
                                                         -----------------------
                                                         $1,029,972   $  976,105
                                                         =======================
<FN>
* Derived from audited financial statements.
</FN>
</TABLE>
See Notes to Financial Statements.

                                       3
<PAGE>

                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                   Three Months Ended March 31, 2002 and 2001
                      (In Thousands, Except Per Share Data)
<TABLE>

                                                            2002          2001
                                                           ---------------------
<S>                                                        <C>           <C>
Interest Income:
   Interest and fees on loans ......................       $12,927       $12,994
   Interest on investment securities:
     Taxable .......................................         1,917         1,788
     Non-taxable ...................................           516           457
   Interest on federal funds sold ..................           161           513
                                                           ---------------------
   Total interest income ...........................       $15,521       $15,752
                                                           ---------------------

Interest Expense:
   Interest on deposits ............................       $ 5,951       $ 7,070
   Interest on securities sold under
   Interest on FHLB borrowings .....................         1,916         1,747
                                                           ---------------------
   Total interest expense ..........................       $ 7,990       $ 9,000
                                                           ---------------------
   Net interest income .............................       $ 7,531       $ 6,752
                                                           ---------------------

Provision for loan losses ..........................           236           225
                                                           ---------------------

   Net interest income after provision

Other income:
   Loan origination fees ...........................       $   377       $   146
   Trust fees ......................................           619           594
   Deposit account charges and fees ................           730           710



    Salaries and employee benefits .................       $ 3,277       $ 2,783
   Occupancy .......................................           417           439
   Furniture and equipment .........................           717           608
   Office supplies and postage .....................           281           282
   Other operating .................................         1,189         1,139
                                                           ---------------------
                                                           $ 5,881       $ 5,251
                                                           ---------------------
   Income before income taxes ......................       $ 3,811       $ 3,339
                                                           ---------------------

Federal and state income taxes .....................         1,188         1,032
                                                           ---------------------

   Net income ......................................       $ 2,623       $ 2,307
                                                           =====================

Earnings per common share:
     Basic .........................................       $  1.75       $  1.54
     Diluted .......................................          1.74          1.53
</TABLE>

                                       4
<PAGE>

                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   Three Months Ended March 31, 2002 and 2001
                      (In Thousands, Except Per Share Data)

                                                             2002       2001
                                                           ------------------
Net Income .............................................   $ 2,623    $ 2,307
                                                           ------------------

Other comprehensive income (loss):

   Unrealized gains (losses) on debt securities ........    (1,336)     2,342
   Income tax effect of unrealized gains (losses) ......       494       (866)
                                                           ------------------
                                                           $  (842)   $ 1,476
                                                           ------------------
   Comprehensive Income ................................   $ 1,781    $ 3,783
                                                           ==================

See Notes to Financial Statements.


                                       5
<PAGE>

                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   Three Months Ended March 31, 2002 and 2001
                      (In Thousands, Except Per Share Data)
<TABLE>
                                                                           Less
                                                                          Maximum
                                                           Accumulated     Cash
                                                             Other       Obligation
                                     Capital    Retained  Comprehensive   To ESOP
                                      Stock     Earnings     Income       Shares      Total
                                     --------------------------------------------------------
<S>                                  <C>        <C>       <C>            <C>         <C>

Balance, December 31, 2001 $ .....   $10,397    $76,931      $3,021      $(12,194)   $ 78,155
  Net income .....................       - -      2,623         - -           - -       2,623
  Change related to ESOP shares ..       - -        - -         - -           297         297
  Cash dividends ($1.75 per share)       - -     (2,622)        - -           - -      (2,622)
  Other comprehensive (loss) .....       - -        - -        (842)          - -        (842)
                                     --------------------------------------------------------
 Balance, March 31, 2002 .........   $10,397    $76,932      $2,179      $(11,897)   $ 77,611
                                     ========================================================


Balance, December 31, 2000 .......   $10,197    $69,179      $  698      $(11,550)   $ 68,524
  Net income .....................       - -      2,307         - -           - -       2,307
  Cash dividends ($1.60 per share)       - -     (2,393)        - -           - -      (2,393)
  Other comprehensive income .....       - -        - -       1,476           - -       1,476
                                     --------------------------------------------------------
Balance, March 31, 2001 ..........   $10,197    $69,093      $2,174      $(11,550)   $ 69,914
                                     ========================================================
</TABLE>
See Notes to Financial Statements.

                                       6
<PAGE>

                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Three Months Ended March 31, 2002 and 2001
                                 (In Thousands)
<TABLE>
                                                                                      2002      2001
                                                                                   --------------------
<S>                                                                                <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................................   $  2,623    $  2,307
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation ...............................................................        570         482
    Provision for loan losses ..................................................        236         225
    Deferred income taxes ......................................................         88         178
    (Increase) decrease in accrued interest receivable .........................       (110)        140
    Amortization of bond discount ..............................................         68          19
    (Increase) in other assets .................................................       (760)       (169)
    Amortization of intangibles ................................................         42          85
    Increase in accrued interest and other liabilities .........................      1,608         985
                                                                                   --------------------
       Net cash provided by operating activities ...............................   $  4,365    $  4,252
                                                                                   --------------------

CASH FLOWS FROM  INVESTING  ACTIVITIES
Proceeds  from  maturities of investment securities:
    Available for sale .........................................................   $ 11,776    $ 18,747
    Held to maturity ...........................................................        544         293
Purchase of investment securities available for sale ...........................    (21,119)    (36,266)
Federal funds sold, net ........................................................    (26,557)      6,280
Loans made to customers, net of collections ....................................    (26,560)     (1,288)
Purchases of property and equipment ............................................     (1,116)     (1,932)
                                                                                   --------------------
    Net cash (used in) investing activities ....................................   $(63,032)   $(14,166)
                                                                                   --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits .......................................................   $ 57,968    $ 10,331
Net  (decrease) in fed funds purchased and
    securities sold under agreements to repurchase .............................     (4,868)     (1,385)
Dividends paid .................................................................     (2,622)     (2,393)
                                                                                   --------------------
    Net cash provided by financing activities ..................................   $ 50,478    $  6,553
                                                                                   --------------------
    (Decrease) in cash and due from banks ......................................   $ (8,189)   $ (3,361)

CASH AND DUE FROM BANKS
    Beginning ..................................................................     37,070      25,669
                                                                                   --------------------
    Ending .....................................................................   $ 28,881    $ 22,308
                                                                                   ====================

SUPPLEMENTAL DISCLOSURES Cash payments for:
  Interest paid to depositors and others .......................................   $  5,971    $  7,113
    Interest paid on other obligations .........................................      2,039       1,930
  Non-cash financing transaction,
    decrease in maximum cash obligation related
    to ESOP shares .............................................................       (297)         --
</TABLE>
See Notes to Financial Statements.

                                       7
<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.

In reviewing these financial  statements,  reference should be made to the Notes
to Financial Statements contained in the Financial Statements for the year ended
December 31, 2001.

There were no changes in accounting  policies which had a significant  effect on
the interim  consolidated  financial statements for the periods presented except
as disclosed in Note 4 to the financial statements.

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)
                                                                March 31
                                                       -------------------------
                                                         2002             2001
                                                       -------------------------

Agricultural .................................         $ 33,111         $ 30,441
Commercial and financial .....................           39,966           36,572
Real estate, construction ....................           38,103           39,548
Real estate, mortgage ........................          575,616          499,578
Loans to individuals .........................           32,485           32,129
                                                       -------------------------
                                                       $719,281         $638,268
Less allowance for loan losses ...............           10,265           10,332
                                                       -------------------------
                                                       $709,016         $627,936
                                                       =========================

Transactions in the allowance for loan losses are as follows:

                                                            (In thousands)
                                                             Three Months
                                                            Ended March 31
                                                      -------------------------
                                                         2002             2001
                                                      -------------------------

Balance, beginning ..........................         $  9,950         $ 10,428
  Provision charged to expense ..............              236              225
  Net recoveries (charge-offs) ..............               79             (321)
                                                      -------------------------
Balance, ending .............................         $ 10,265         $ 10,332
                                                      =========================


                                       8
<PAGE>

The following summarizes the Company's  nonaccrual,  past due,  restructured and
impaired loans:
                                                               (In thousands)
                                                                  March 31
                                                           ---------------------
                                                             2002          2001
                                                           ---------------------

Non-accrual ........................................       $   756       $   618
Accruing loans, past due 90 days or more ...........         3,406         3,019
Restructured loan ..................................           - -           - -
Impaired loans .....................................       $12,033        12,858


Note 3. Earnings Per Share

Basic net income per share  amounts are  computed by dividing  net income by the
weighted average number of common shares outstanding during the period.  Diluted
earnings per share are  computed by dividing net income by the weighted  average
number of  common  shares  outstanding  during  the  period  plus the  number of
potential  dilutive  common shares  attributable  to the Company's  stock option
plan.

Note 4. Recent Accounting Pronouncements

In July 2001, the Financial  Accounting  Standards  Board issued  Statement 141,
"Business  Combinations"  and  Statement  142,  "Goodwill  and Other  Intangible
Assets." Statement 141 eliminated the pooling method for accounting for business
combinations;  requires  that  intangible  assets that meet certain  criteria be
reported separately from goodwill; and requires negative goodwill arising from a
business  combination  to be recorded as an  extraordinary  gain.  Statement 142
eliminated  the  amortization  of  goodwill  and  other   intangibles  that  are
determined  to have an  indefinite  life;  and  requires,  at a minimum,  annual
impairment tests for goodwill and other intangible assets that are determined to
have an indefinite  life.  The  provisions of the  Statements  were  implemented
effective  January 1, 2002. The amortization of goodwill with an indefinite life
was  suspended on January 1, 2002..  Annual  goodwill  amortization  for 2002 is
expected to be approximately $170,000 less than in 2001.



                                       9
<PAGE>

                                 PART I, ITEM 2.

                              HILLS BANCORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward Looking Information

Forward looking  information  relating to the financial results or strategies of
the Company are made in the Management's  Discussion and Analysis. The following
paragraphs  identify  forward  looking  statements and the risks that need to be
considered when reading those statements.

Forward looking  statements include such words as believe,  expect,  anticipate,
target,  goal,  objective and other words with similar  meaning.  The Company is
under no obligation to update such statements.

The risks  involved in the  operations  and  strategies  of the Company  include
competition  from  other  financial  institutions,  changes in  interest  rates,
changes in economic or market  conditions  and  changes in  regulatory  factors.
These risks, which are not all inclusive, cannot be estimated.

Recent Activities

Hills Bank and Trust Company  opened its eleventh  office on April 1, 2002.  The
full service banking office in Cedar Rapids is located at 3610 Williams Blvd. SW
and is the second location in Cedar Rapids.  The new 7,200 square foot one story
building has three drive-up lanes and a drive-up ATM.

Hills  Bancorporation  achieved a new  milestone  as of March 31,  2002 as total
assets  exceeded  one billion  dollars.  Total  assets are $1.03  billion at the
quarter  endied March 31, 2002 compared to $887.1  million one year ago at March
31,  2001.  The growth in assets for the quarter  ended March 31, 2002 was $53.9
million  and  was  funded  by  an   increase  in  deposits  of  $58.0   million.
Approximately  $28  million of the  deposit  growth was  temporary  as it was in
public funds, which are not considered long-term core deposits.

Financial Position

Net loan growth from March 2001 to March 2002 was $81.1  million,  with over $26
million of the net loans coming in the first  quarter of 2002 as interest  rates
remain at  favorable  rates for  borrowers.  Loan growth was  primarily  in real
estate loans as in prior years  including  1-4 family home loans.  The growth in
loans and investment  securities was funded  principally by an increase in total
deposits and securities sold under  agreements to repurchase.  In addition,  the
Bank  borrowed  additional  advances  from the  Federal  Home Loan Bank of $17.0
million since March 2001.

Due  to  the  continued  loan  demand  and   challenges  for  funding   sources,
asset-liability  management continues to be very important.  The asset-liability
process  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.  The Company  believes it
will be able to maintain sufficient liquidity.

Dividends and Equity

In January 2002, Hills Bancorporation paid a dividend of $2,622,000 or $1.75 per
share,  a 9.38%  increase from the $1.60 paid in January 2001.  After payment of
the  dividend  and  adjustment  for  accumulated  other  comprehensive   income,
stockholders'  equity  as of March  31,  2002  totaled  $77,611,000.  The  total
stockholders'  equity of Hills  Bancorporation  as of March 31, 2002, before the
reduction for the ESOP shares,  totaled 8.69% of total assets.  Under risk-based
capital rules,  the total risk based capital is 12.72% of risk adjusted  assets,
and substantially in excess of required minimums.


                                       10
<PAGE>

Liquidity

The  Company  actively  monitors  and manages its  liquidity  position  with the
objective of maintaining  sufficient cash flows to fund operations,  meet client
commitments, take advantage of market opportunities and provide a margin against
unforeseeable  liquidity  needs.  Federal  funds  sold,  loans held for sale and
investment   securities  available  for  sale  are  readily  marketable  assets.
Maturities of all investment securities are managed to meet the Company's normal
liquidity needs.  Investment  securities available for sale may be sold prior to
maturity to meet liquidity  needs, to respond to market changes or to adjust the
Company's  interest rate risk position.  Readily  marketable  assets, as defined
above, comprised 17.3% of the Company's total assets at March 31, 2002.

Net  cash  provided  from  Company  operations  is  another  primary  source  of
liquidity. For the three months ended March 31, 2002 and 2001, net cash provided
by  operating  activities  was  $4,365,000  and  $4,252,000,  respectively.  The
Company's trend of increasing cash flows from operations is expected to continue
in the foreseeable future due to the Company's growth.

The Company has  historically  maintained a stable deposit base and a relatively
low level of large  deposits,  which  result  in a low  dependence  on  volatile
liabilities. As of March 31, 2002, the Company had advances of $137,637,000 from
the FHLB of Des Moines.  These  advances were used as a means of providing  both
long and  short-term,  fixed-rated  funding  for  certain  assets  and  managing
interest rate risk. The Company had additional borrowing capacity available from
the FHLB of approximately $112 million at March 31, 2002.

The combination of high levels of potentially  liquid assets,  low dependence on
volatile  liabilities  and additional  borrowing  capacity  provided  sufficient
liquidity for the Company at March 31, 2002.

Results of Operations

Net income was  $2,623,000  and $2,307,000 for the three months ending March 31,
2002 and 2001,  respectively.  This is an increase  of  $316,000 or 13.70%.  The
increase is due to a $779,000 increase in net interest income and an increase in
other income of $334,000.  The increase in net interest  income is due primarily
to  average  earning  assets for the first  quarter of 2002 being  approximately
$96.0 million higher than the balances in 2001 for the three months ending March
31, 2001. Due to lower secondary  market interest rates,  loan  origination fees
were up for the current  year by $231,000 to  $377,000.  This  increase  was the
result of the large number of loans sold in the first  quarter of 2002  compared
to one year ago. All other income increase $103,000 or 5.31%.

The Bank's  primary trade  territory is Johnson  County,  Iowa. Due to the large
employment in the county by the  University  of Iowa and the  University of Iowa
Hospitals and Clinics and the dependency on funding by the State of Iowa,  which
is  experiencing  decreasing  tax  revenue,  the Bank  continues to monitor loan
delinquencies  and other indicators of loan problems.  The quality of the Bank's
loans has  continued to be very high because the  portfolio is  concentrated  in
well collateralized real estate loans.

Other expenses  increased  from  $5,251,000 for the three months ended March 31,
2001 to  $5,881,000  for the first  quarter  of 2002,  or  $630,000.  Salary and
employee benefits  accounted for $494,000 of the increase as new staff was added
in the last year for the new Eastside  office in Iowa City, the expansion of the
Coralville  and Downtown Cedar Rapids offices and the addition of the new office
in Cedar Rapids that opened on April 1, 2002. In addition to these new positions
both  operations and other retail  banking  departments  added needed staff.  In
total full time equivalent  positions in the last year increased by thirty. Also
normal salary adjustments in January, 2002 resulted in increased salary expense.
All other  expenses for the first  quarter of 2002 were  $2,604,000  compared to
$2,468,000.  The increase of $136,000 was 5.51% and was  primarily in a $109,000
increase in furniture and equipment costs which includes  depreciation  expense.
The increase is due to increased equipment purchases over the last two years.

Earnings per share,  both basic and  diluted,  increased  for the quarter  ended
March 31, 2002  compared to 2001.  For the period ended March 31, 2002 basic and
diluted earnings per share were $1.75 and $1.74 in comparison to $1.54 and $1.53
for the quarter ended March 31, 2001.

Market Risk Management

Market risk is the risk of earnings volatility that results from adverse changes
in interest  rates and market  prices.  The  Company's  market risk is comprised
primarily of interest  rate risk arising  from its core  banking  activities  of
lending  and  deposit  taking.  Interest  rate risk is the risk that  changes in
market  interest rates may adversely  affect the Company's net interest  income.
Management  continually  develops and applies  strategies to mitigate this risk.
Management does not believe that the Company's primary market risk exposures and
how those exposures have been managed to-date in 2002 changed significantly when
compared to 2001.

                                       11
<PAGE>

Asset/Liability Management

The Company has a fully integrated  asset/liability  management system to assist
in managing the balance sheet. The process, which is used to project the results
of alternative  investment  decisions,  includes the  development of simulations
that  reflect the effects of various  interest  rate  scenarios  on net interest
income.  Management  analyzes the  simulations to manage interest rate risk, the
net interest margin and levels of net interest income.

The  goal is to  structure  the  balance  sheet  so  that  net  interest  margin
fluctuates  in a narrow range during  periods of changing  interest  rates.  The
Company  currently  believes that net interest  income would fall by less than 5
percent if interest  rates  increased  or  decreased  by 300 basis points over a
one-year time horizon. This is within the Company's policy limits.

To  improve  net  interest  income  and lessen  interest  rate risk,  management
continues its strategy of de-emphasizing  fixed-rate portfolio  residential real
estate  loans with long  repricing  periods.  The Company  continues to focus on
reducing interest rate risk by emphasizing growth in variable-rate  consumer and
commercial loans.  Other actions include the use of fixed-rate Federal Home Loan
Bank (FHLB) advances as  alternatives  to  certificates  of deposit,  and active
management of the available for sale investment  securities portfolio to provide
for cash flows that will facilitate interest rate risk management.

The highly  competitive  banking  environment  in Iowa also greatly  impacts the
Company's net interest margin.  The effect of competition on net interest income
is difficult to predict.

                                 PART I, ITEM 3.

                    QUANTITATIVE AND QUALITATIVE DISCLOSURES

                                ABOUT MARKET RISK

Market risk is the risk of loss arising from  adverse  changes in market  prices
and rates.  The  Company's  market risk is comprised  primarily of interest rate
risk  resulting  from  its  core  banking  activities  of  lending  and  deposit
gathering.  Interest  rate risk  measures the impact on earnings from changes in
interest  rates and the effect on current  fair market  values of the  Company's
assets, liabilities and off-balance sheet contracts. The objective is to measure
this risk and manage  the  balance  sheet to avoid  unacceptable  potential  for
economic  loss.  Management  continually  develops  and  applies  strategies  to
mitigate market risk.  Exposure to market risk is reviewed on a regular basis by
the asset/liability  committee at the bank. Management does not believe that the
Company's  primary  market  risk  exposures  and how those  exposures  have been
managed to date in 2002 changed significantly when compared to 2001.

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<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

         No matters were submitted to a vote of security holders during the
         quarter ended March 31, 2002.

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 March 31, 2002.


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<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)


   5/14/2001                         /s/ Dwight O. Seegmiller
---------------------------          -------------------------------------------
Date                                 Dwight O. Seegmiller, President

                                     (Duly authorized officer of the registrant)


  5/14/2001                          /s/ James G. Pratt
---------------------------          -------------------------------------------
Date                                 James G. Pratt, Treasurer
                                     (Principal Financial Officer)




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