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 September 30, 1996

                        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 October 31, 1996
--------------------------                            -------------------
Common Stock, no par value                                  1,463,604



<PAGE>


                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION


                                                                      Page
                                                                     Number

Item 1.   Financial Statements

               Consolidated balance sheets, September 30, 1996 (unaudited)
                   and December 31, 1995                                 
               Consolidated statements of income, (unaudited) for three and
                   nine months ended September 30, 1996 and 1995          
               Consolidated statement of stockholders' equity, (unaudited)
                   for three and nine months ended September 30, 1996 and 1995 
               Consolidated statements of cash flows (unaudited) for three and
                   nine months ended September 30, 1996 and 1995    
               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)

                                                      September 30,
                                                           1996     December 31,
                                                        Unaudited     1995*
                                                      ------------- ------------
ASSETS
Cash and due from banks ...............................   $  12,968    $  11,883
Investment securities:
    Available for sale (amortized cost
      September 30, 1996 $111,358;
      December 31, 1995 $99,621) ......................     111,853      100,093
    Held to maturity (fair value
      September 30, 1996 $21,985;
      December 31, 1995 $21,754) ......................      21,914       21,443
Federal funds sold ....................................       3,762       16,080
Loans, net ............................................     360,928      318,546
Property and equipment, net ...........................       8,472        6,996
Accrued interest receivable ...........................       5,211        4,446
Deferred income taxes, net ............................       1,843        1,474
Other assets ..........................................       9,876        3,646
                                                          ---------    ---------
                                                          $ 536,827    $ 484,607
                                                          =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits ..........................   $  45,246    $  42,927
Interest-bearing deposits .............................     402,887      349,330
                                                          ---------    ---------
    Total deposits ....................................   $ 448,133    $ 392,257
Federal funds purchased and securities
    sold under agreements to repurchase ...............       7,972       10,019
Federal Home Loan Bank notes ..........................      25,795       30,727
Accrued interest payable ..............................       1,964        1,885
Other liabilities .....................................       1,854        1,171
                                                          ---------    ---------
                                                          $ 485,718    $ 436,059
                                                          ---------    ---------

REDEEMABLE COMMON STOCK HELD BY
    EMPLOYEE STOCK OWNERSHIP PLAN
    (ESOP) ............................................   $   6,040    $   5,271
                                                          ---------    ---------

STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
    authorized 1996 10,000,000 shares; 1995
    2,000,000 shares; issued 1996 1,463,604
    shares; 1995 487,773 shares .......................   $   8,925    $   8,925
Retained earnings .....................................      42,495       39,325
Unrealized gains (losses) on debt securities, net .....        (311)         298
                                                          ---------    ---------
                                                          $  51,109    $  48,548
Less, maximum cash obligation related to ESOP shares ..       6,040        5,271
                                                          ---------    ---------
                                                          $  45,069    $  43,277
                                                          ---------    ---------
                                                          $ 536,827    $ 484,607
                                                          =========    =========


*   Derived from audited financial statements.


See Notes to Financial Statements.
<PAGE>




                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
             Three and Nine Months Ended September 30, 1996 and 1995
                      (In Thousands, Except Per Share Data)
<TABLE>

                                                             Three Months Ended     Nine Months Ended
                                                                September 30           September 30
                                                             -------------------    ------------------
                                                              1996        1995       1996       1995
                                                             -------    --------    -------    -------
<S>                                                          <C>        <C>         <C>        <C>
Interest Income:
    Interest and fees on loans .......................       $ 7,618     $ 7,041    $21,740    $20,300
    Interest on investment securities
      Taxable ........................................         1,628       1,273      4,524      3,677
      Non-taxable ....................................           281         249        827        770
    Other interest income ............................            79         180        380        283
                                                             -------     -------    -------    -------
    Total interest income ............................       $ 9,606     $ 8,743    $27,471    $25,030
                                                             -------     -------    -------    -------

Interest Expense:
    Interest on deposits .............................       $ 4,557     $ 4,193    $13,053    $11,923
    Interest on securities sold under
      agreements to repurchase .......................            62         102        229        270
    Interest on FHLB borrowings ......................           459         546      1,436      1,380
                                                             -------     -------    -------    -------
      Total interest expense .........................       $ 5,078     $ 4,841    $14,718    $13,573
                                                             -------     -------    -------    -------
      Net interest income ............................       $ 4,528     $ 3,902    $12,753    $11,457

Provision for loan losses ............................           187         180        547        540
                                                             -------     -------    -------    -------
      Net interest income after
        provision for loan losses ....................       $ 4,341     $ 3,722    $12,206    $10,917
                                                             -------     -------    -------    -------

Other Income:
    Real estate origination fees .....................       $    76     $   139    $   281    $   215
    Trust fees .......................................           195         154        603        482
    Deposit account charges and fees .................           425         419      1,197      1,202
    Other fees and charges ...........................           254         235        781        709
                                                             -------     -------    -------    -------
                                                             $   950     $   947    $ 2,862    $ 2,608
                                                             -------     -------    -------    -------

Other Expenses:
    Salaries and employee benefits ...................       $ 1,608     $ 1,538    $ 4,671    $ 4,247
    Occupancy expenses ...............................           224         203        643        579
    Furniture and equipment ..........................           278         277        798        801
    F.D.I.C. insurance ...............................           - -         (24)         1        388
    Office supplies and postage ......................           228         189        590        533
    Other operating ..................................           747         479      1,968      1,675
                                                             -------     -------    -------    -------
                                                             $ 3,085     $ 2,662    $ 8,671    $ 8,223
                                                             -------     -------    -------    -------

      Income before income taxes .....................       $ 2,206     $ 2,007    $ 6,397    $ 5,302

Federal and state income taxes .......................           626         568      1,836      1,480
                                                             -------    --------    -------   --------
      Net Income .....................................       $ 1,580    $  1,439    $ 4,561   $  3,822
                                                             =======    ========    =======   ========
                                                                                                    
Per common share:   
     Net income ......................................       $  1.07   $     .98    $  3.09   $   2.60
     Dividend, January ...............................            --          --        .95        .87
     Weighted average of common outstanding
       stock .........................................     1,476,374   1,472,448  1,476,847  1,472,496

</TABLE>

See Notes to Financial Statements


<PAGE>




                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  Nine Months Ended September 30, 1996 and 1995
                                 (In Thousands)
<TABLE>

                                                             Capital   Retained  Unrealized     ESOP
                                                   Total      Stock    Earnings    Losses    Obligations
                                                  -------    -------   --------  ----------- -----------
<S>                                               <C>        <C>       <C>       <C>         <C>
Balance, January 1, 1996 .....................    $43,277    $ 8,925    $39,325    $   298    $(5,271)
Net income ...................................      4,561        - -      4,561        - -        - -
Change related to ESOP shares ................       (769)       - -        - -        - -       (769)
Cash dividends ($.95 per share) ..............     (1,391)       - -     (1,391)       - -        - -
Unrealized gains (losses) on debt
  securities, net ............................       (609)       - -        - -       (609)       - -
                                                  -------    -------    -------    -------     ------
Balance, September 30, 1996 ..................    $45,069    $ 8,925    $42,495    $  (311)   $(6,040)
                                                  =======    =======    =======    =======    =======


Balance, January 1, 1995 .....................    $36,447    $ 8,915    $35,336    $(2,594)   $(5,210)
Net income ...................................      3,822        - -      3,822        - -        - -
Change related to ESOP shares ................       (171)       - -        - -        - -       (171)
Cash dividends ($.87 per share) ..............     (1,268)       - -     (1,268)       - -        - -
Unrealized gains (losses) on
  debt securities, net .......................      2,512        - -        - -      2,512        - -
                                                  -------    -------    -------    -------    -------
Balance, September 30, 1995 ..................    $41,342    $ 8,915    $37,890    $   (82)   $(5,381)
                                                  =======    =======    =======    =======    =======
</TABLE>
                                                                       
See Notes to Financial Statements.


<PAGE>




                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine Months Ended September 30, 1996 and 1995
                                 (In Thousands)
<TABLE>

                                                                                     1996       1995
                                                                                   --------    --------
<S>                                                                                <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................................   $  4,561    $  3,822
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation ...............................................................        637         607
    Provision for loan losses ..................................................        547         540
    (Increase) decrease in accrued interest receivable .........................       (448)     (1,178)
    Amortization of bond discount ..............................................        398         374
    (Increase) in other assets .................................................        (44)     (1,150)
    Amortization of intangibles ................................................         45       - - -
    Increase in accrued interest and other liabilities .........................        549         628
                                                                                   --------    --------
    Net cash provided by operating activities ..................................   $  6,245    $  3,643
                                                                                   --------    --------

CASH FLOWS FROM  INVESTING  ACTIVITIES  Proceeds  from  maturities of investment
securities:
    Available for sale .........................................................   $ 13,000    $ 13,000
    Held to maturity ...........................................................      2,902       2,382
Purchase of investment securities
    Available for sale .........................................................    (19,451)    (14,458)
    Held to maturity ...........................................................     (3,418)     (2,876)
Federal funds sold, net ........................................................     23,766      (3,355)
Loans made to customers, net of collections ....................................    (22,264)    (16,375)
Purchases of property and equipment ............................................       (675)     (1,092)
Business acquisitions, net of cash and cash equivalents acquired of
  $910,000 - 1996; $0 - 1995
    Investment securities available for sale ...................................     (6,640)      - - -
    Federal funds ..............................................................    (11,448)      - - -
    Loans, net .................................................................    (20,665)      - - -
    Property and equipment .....................................................     (1,438)      - - -
    Accrued interest receivable ................................................       (317)      - - -
    Intangible assets ..........................................................     (4,293)      - - -
    Other assets ...............................................................     (1,938)      - - -
    Deposits and accrued interest ..............................................     39,019       - - -
    Borrowings from FHLB .......................................................        100       - - -
    Other liabilities ..........................................................         60       - - -
                                                                                   --------    --------
    Net cash (used in) investing activities ....................................   $(13,700)   $(22,774)
                                                                                   --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits ........................................   $ 17,010    $  6,482
    Net increase (decrease) in securities sold
       under agreements to repurchase ..........................................     (2,047)      3,260
    Borrowings from FHLB .......................................................        - -      10,000
    Payments on FHLB ...........................................................     (5,032)        (31)
    Dividends paid .............................................................     (1,391)     (1,268)
                                                                                   --------    --------
       Net cash provided by financing activities ...............................   $  8,540    $ 18,443
                                                                                   --------    --------
       Increase in cash and due from banks .....................................   $  1,085    $   (688)

CASH AND DUE FROM BANKS
    Beginning ..................................................................   $ 11,883      10,805
                                                                                   --------    --------
    Ending .....................................................................   $ 12,968    $ 10,117
                                                                                   ========    ========

SUPPLEMENTAL DISCLOSURES Cash payments for:
       Interest paid to depositors and others ..................................   $ 13,127    $ 11,639
       Interest paid on other obligations ......................................      1,665       1,650
    Non-cash financing transactions:
       Increase in maximum cash obligation related
        to ESOP shares .........................................................        769         171
       Net unrealized gains (losses) on debt securities ........................       (609)      2,512

</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)
                                                             September 30
                                                         1996             1995
                                                       --------        ---------

Agricultural .................................         $ 23,811         $ 19,591
Commercial and financial .....................           30,800           27,569
Real estate, construction ....................            8,507            7,886
Real estate, mortgage ........................          272,161          236,763
Loans to individual ..........................           32,935           31,455
                                                       --------         --------
                                                       $368,214         $323,264
Less allowance for loan losses ...............            7,286            6,608
                                                       --------         --------
                                                       $360,928         $316,565
                                                       ========         ========

     Transactions in the allowance for loan losses are as follows:

                                                            (In thousands)
                                                             Nine months
                                                          ended September 30
                                                          ------------------
                                                             1996     1995
                                                            ------   ------

              Balance, beginning ....................       $6,740   $6,210
                Allowance related to acquisitions ...          350      - -
                Provision charged to expense ........          547      540
                Net charge-offs .....................         (351)    (142)
                                                            ------   ------
              Balance, ending .......................       $7,286   $6,608
                                                            ======   ======

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

                                                        (In thousands)
                                                         September 30
                                                     -------------------
                                                      1996        1995
                                                     ------     --------

Nonaccrual .....................................     $  339     $    - - 
Accruing loans, past due 90 days or more .......      1,079        1,146
Restructured loan ..............................        - -          - -
Impaired loans .................................      5,970            *


*  Not determined prior to adoption of FASB Statement No. 114.

<PAGE>



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



These  financial  statements  include for the first time the  acquisition of the
Lisbon  Bank and Trust  Company  on July 12,  1996 and the  purchase  of certain
assets and assumption of deposits of the Kalona, Iowa branch office of Boatmen's
Bank of Iowa,  Inc. on  September  20,  1996.  The  acquisitions  accounted  for
approximately $40 million in asset growth, $22 million in net loan increase,  an
increase of $18  million in  investment  securities  and other  assets,  and $40
million in deposits and other funding sources growth. The acquisitions  required
resources of $7.6 million.

The consolidated  balance sheet of Hills Bancorporation as of September 30, 1996
reflects  total assets of $536.8  million  which is an increase of $52.2 million
from  December  31,  1995.  Net loans are $360.9  million  which  represents  an
increase of $42.3  million from  December  31,  1995.  Compared to one year ago,
total  assets  have  increased  from  $470.3  million to $536.8  million  for an
increase of $66.5 million. Also since September, 1995, net loans increased $44.3
million to $360.9  million as of September 30, 1996.  These loan  increases were
the  result  of the $22  million  in  loans  acquired  in the  two  acquisitions
discussed above and increases  primarily in single family  residential  loans in
the Iowa City and Coralville area. Investment securities total $133.8 million as
of September  30, 1996,  an increase of $12.2 million from December 31, 1995 and
an $18.2 million  increase in investment  securities  since  September 30, 1995.
Federal funds sold decreased  primarily due to the acquisitions and the increase
in net loans.  Interest rates on investment securities increased during the last
nine months ending  September  30, 1996  resulting in a net change in unrealized
losses on investment  securities of $967,000.  This had the effect of decreasing
stockholders' equity by $609,000 at September 30, 1996. Comparing this component
of equity  between  September  30,  1995 to  September  30,  1996 a decrease  of
$229,000 was shown.

Deposits (when federal funds purchased and securities  sold under  agreements to
repurchase  are included) as of September 30, 1996 totaled  $456.1  million,  an
increase of $53.8 million in nine months. September 30, 1996 deposits, including
repos,  have grown $66.5 million since  September 30, 1995.  Borrowings from the
FHLB have  decreased  from  $30,727,000  to  $25,795,000  during the last twelve
months.

Significant  changes  in  the  balance  sheet  are  subject  to  asset-liability
management,  which  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 1996, Hills Bancorporation paid a dividend of $.95 per share, a 9.20%
increase from the $.87 paid in January 1995.  Stockholders'  equity at September
30, 1996 and  December  31, 1995  reflects an  adjustment  for  unrealized  gain
(losses) on debt securities, net of income taxes.

The total  stockholders'  equity as of September  30, 1996 (before the reduction
for the ESOP  shares) as a percent of total assets was 9.52%.  Under  risk-based
capital rules, total capital is 15.05% of risk-adjusted assets,  compared to the
current 8% requirement.

The  consolidated  net income for the nine months ended  September  30, 1996 was
$4,561,000  compared to $3,822,000 for the same period ended September 30, 1995.
This is an increase of $739,000  representing an earnings per share for the nine
months of $3.09 compared to $2.60 for the same nine months in 1995. Net interest
income for 1996 is up by  $1,296,000  over 1995 and is  primarily  the result of
earning  assets  being  $36.1  million  higher  in 1996  compared  to 1995.  The
provisions  for loan losses are $547,000 and $540,000 for the periods  presented
and is reflective of management's  assessment of the loan portfolio.  Net income
for the three  months  ended  September  30,  1996 and 1995 was  $1,580,000  and
$1,439,000;  respectively.  This  represents  an increase in earnings per common
share of $.09 from $.98 per share to $1.07 per share. The primary factor for the
increase is an increase of net interest income due to a higher volume of earning
assets.
<PAGE>



Other  income of the bank was  $2,862,000  compared to  $2,608,000  for the nine
months ended September 30, 1996 and 1995,  respectively.  Loan  origination fees
amounted to $281,000 for the nine month period ended September 30, 1996 compared
to $215,000 in 1995.  Trust fees were  $603,000 and $482,000 for the nine months
ended  September 30, 1996 and 1995,  respectively  and  represents  primarily an
increase in accounts under management.

Other  expenses  have  increased  from  $8,223,000  for the  nine  months  ended
September  30, 1995 to  $8,671,000  for the period ended  September 30, 1996. Of
this net increase of $448,000,  salaries and employee  benefits  accounted for a
$424,000  increase.  This is a combination of salary increases and the number of
full-time  equivalent  employees increasing from September 30, 1995 to September
30,  1996 by  sixteen  employees  due in large  measure to the Lisbon and Kalona
purchases.  For the nine months ended  September  30, 1996  compared to the same
period in 1995, the major increase in net income is accounted for by a reduction
of  F.D.I.C.  insurance  premiums  from  $412,000  in 1995 to  $1,000  in  1996.
Occupancy,  furniture and  equipment,  office  supplies and the other  operating
expenses  totaled  $4,000,000  for the nine  months  ending  September  30, 1996
compared to $3,976,000  for the same period in 1995.  This small increase is the
result of $387,000 in savings in F.D.I.C. insurance premiums in 1996 compared to
1995.  Federal and state income taxes for 1996 are more than in 1995,  primarily
the result of increased income before taxes.

The Bank's principal sources of funds continues to be deposit growth, 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

              No matters were submitted to a vote of security holders during 
              the quarter ending September 30, 1996.

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 September 30, 1996.



<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)


11/13/96                             /s/ Dwight O. Seegmiller
----------------------               -------------------------------------------
Date                                 Dwight O. Seegmiller, President
                                     (Duly authorized officer of the registrant)


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