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, 2004

                         Commission file number: 0-12668

                              Hills Bancorporation

Incorporated in Iowa                             I.R.S. Employer Identification
                                                                dNo. 42-1208067

                       131 MAIN STREET, HILLS, IOWA 52235

                        Telephone number: (319) 679-2291

Indicate by checkmark 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

Indicate by checkmark whether the Registrant is an accelerated filer (as defined
by Rule 12b-2 of the Securities Exchange Act of 1934).

                                |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, 2004
          -----                                        -----------------

Common Stock, no par value                                  4,550,256


                                  Page 1 of 27
<PAGE>

                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION

                                                                           Page
                                                                          Number
                                                                          ------

Item 1. Financial Statements

        Consolidated balance sheets, March 31, 2004 (unaudited)
            and December 31, 2003.                                             3
        Consolidated statements of income, (unaudited) for three
            months ended March 31, 2004 and 2003.                              4
        Consolidated statements of comprehensive income, (unaudited) for
            three ended March 31, 2004 and 2003.                               5
        Consolidated statements of stockholders' equity, (unaudited)
            for three months ended March 31, 2004 and 2003.                    6
        Consolidated statements of cash flows (unaudited) for three
            months ended March 31, 2004 and 2003.                            7-8
        Notes to consolidated financial statements                          9-10

Item 2. Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                      11-17

Item 3. Quantitative and Qualitative Disclosures About Market Risk            18

Item 4. Controls and Procedures                                               19

                                     Part II
                                OTHER INFORMATION

Item 1. Legal proceedings                                                     20

Item 2. Changes in securities and use of proceeds                             20

Item 3. Defaults upon senior securities                                       20

Item 4. Submission of matters to vote of security holders                     20

Item 5. Other information                                                  20-21

Item 6. Exhibits and reports on Form 8-K                                      22

Signatures                                                                    23

Exhibits Index                                                                24


                                  Page 2 of 27
<PAGE>

                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (Amounts In Thousands, Except Shares)

<TABLE>
<CAPTION>
                                                                                    March 31, 2004
ASSETS                                                                                (Unaudited)     December 31, 2003*
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                  <C>
Cash and due from banks                                                               $   21,508           $   24,194
Investment securities:
  Available for sale (amortized cost March 31, 2004 $211,107 ;
    December 31, 2003 $214,530)                                                          216,773              219,430
  Held to maturity (fair value March 31, 2004 $7,744 ; December 31, 2003 $8,064)           7,654                7,953
Stock of Federal Home Loan Bank                                                            8,774                8,774
Federal funds sold                                                                           100               13,233
Loans held for sale                                                                        8,476                1,960
Loans, net                                                                               898,031              868,194
Property and equipment, net                                                               22,229               22,210
Tax credit real estate                                                                     8,178                2,282
Accrued interest receivable                                                                7,246                7,303
Deferred income taxes                                                                      2,127                2,411
Goodwill                                                                                   2,500                2,500
Other assets                                                                               2,747                3,077
                                                                                      ----------------------------------
                                                                                      $1,206,343           $1,183,521
                                                                                      ==================================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------

Liabilities
  Noninterest-bearing deposits                                                        $  116,372           $  116,206
  Interest-bearing deposits                                                              775,762              752,446
                                                                                      ----------------------------------
       Total deposits                                                                 $  892,134           $  868,652
  Federal funds purchased and securities sold under agreements to repurchase              27,257               29,926
  Federal Home Loan Bank borrowings ("FHLB")                                             167,574              167,574
  Accrued interest payable                                                                 1,561                1,735
  Other liabilities                                                                        5,521                4,005
                                                                                      ----------------------------------
                                                                                      $1,094,047           $1,071,892
                                                                                      ----------------------------------

REDEEMABLE COMMON STOCK HELD BY EMPLOYEE STOCK
  OWNERSHIP PLAN (ESOP)                                                               $   15,306           $   14,864
                                                                                      ----------------------------------

STOCKHOLDERS' EQUITY**
  Capital stock, no par value; authorized 10,000,000 shares;
    issued March 31, 2004 1,516,752 shares; December 31, 2003 1,516,678 shares        $   11,360           $   11,353
  Retained earnings                                                                       97,366               97,189
  Accumulated other comprehensive income                                                   3,570                3,087
                                                                                      ----------------------------------
                                                                                      $  112,296           $  111,629
  Less maximum cash obligation related to ESOP shares                                     15,306               14,864
                                                                                      ----------------------------------
                                                                                      $   96,990           $   96,765
                                                                                      ----------------------------------
                                                                                      $1,206,343           $1,183,521
                                                                                      ==================================
</TABLE>

 *    Derived from audited financial statements.

**    See Part II - Item 5 (a) for details of a stock split effective April 19,
      2004.

See Notes to Consolidated Financial Statements.


                                  Page 3 of 27
<PAGE>

                              HILLS BANCORPORATION
                  CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                (Amounts In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                             March 31,
                                                                                       2004             2003
---------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>              <C>
Interest income:
Loans, including fees                                                              $    13,475      $    13,431
   Investment securities:
      Taxable                                                                            1,423            1,680
      Nontaxable                                                                           602              602
   Federal funds sold                                                                       15              101
                                                                                   ----------------------------
         Total interest income                                                     $    15,515      $    15,814
                                                                                   ----------------------------
Interest expense:
   Deposits                                                                        $     3,530      $     4,560
   Federal funds purchased and securities sold under agreements to repurchase               74               93
   FHLB borrowings                                                                       2,266            2,242
                                                                                   ----------------------------
         Total interest expense                                                    $     5,870      $     6,895
                                                                                   ----------------------------
         Net interest income                                                       $     9,645      $     8,919
Provision for loan losses                                                                  354              484
                                                                                   ----------------------------
         Net interest income after provision for loan losses                       $     9,291      $     8,435
                                                                                   ----------------------------
Other income:
   Net gain on sale of loans                                                       $       351      $       865
   Trust fees                                                                              710              619
   Deposit account charges and fees                                                        886              873
   Other fees and charges                                                                1,102              898
                                                                                   ----------------------------
                                                                                   $     3,049      $     3,255
                                                                                   ----------------------------
Other expenses:
   Salaries and employee benefits                                                  $     4,064      $     3,680
   Occupancy                                                                               502              456
   Furniture and equipment                                                                 806              734
   Office supplies and postage                                                             271              326
   Advertising and business development                                                    414              276
   Other                                                                                 1,421            1,179
                                                                                   ----------------------------
                                                                                   $     7,478      $     6,651
                                                                                   ----------------------------
      Income before income taxes                                                   $     4,862      $     5,039
Federal and state income taxes                                                           1,500            1,658
                                                                                   ----------------------------
      Net income                                                                   $     3,362      $     3,381
                                                                                   ============================

Earnings per share:
   Basic                                                                           $      2.22      $      2.25
   Diluted                                                                                2.21             2.23
</TABLE>

See Notes to Consolidated Financial Statements.


                                  Page 4 of 27
<PAGE>

                              HILLS BANCORPORATION
           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
                             (Amounts In Thousands)

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                              March 31,
                                                                        2004           2003
-----------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>
Net income                                                           $    3,362      $    3,381

Other comprehensive income,
   Unrealized holding gains (losses) arising during the period,
   net of income taxes, 2004 $283; 2003 $(204)                              483            (347)
                                                                     --------------------------

Comprehensive income                                                 $    3,845      $    3,034
                                                                     ==========================
</TABLE>

See Notes to Consolidated Financial Statements.


                                  Page 5 of 27
<PAGE>

                              HILLS BANCORPORATION
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
                  (Amounts In Thousands, Except Share Amounts)

<TABLE>
<CAPTION>
                                                                                             Maximum
                                                                                              Cash
                                                                        Accumulated        Obligation
                                                                           Other             Related
                                         Capital        Retained       Comprehensive         To ESOP
                                          Stock         Earnings       Income (Loss)         Shares          Total
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>               <C>               <C>             <C>
Balance, December 31, 2002              $  10,541      $  85,773         $   4,721         $ (12,951)      $  88,084
  Change related to ESOP shares                --             --                --              (658)           (658)
  Net income                                   --          3,381                --                --           3,381
  Cash dividends ($1.90 per share)             --         (2,853)               --                --          (2,853)
  Other comprehensive income                   --             --              (347)               --            (347)
                                        ----------------------------------------------------------------------------
Balance, March 31, 2003                 $  10,541      $  86,301         $   4,374         $ (13,609)      $  87,607
                                        ============================================================================

Balance, December 31, 2003              $  11,353      $  97,189         $   3,087         $ (14,864)      $  96,765
  Issuance of 74 shares of
    common stock                                7             --                --                --               7
  Change related to ESOP shares                --             --                --              (442)           (442)
  Net income                                   --          3,362                --                --           3,362
  Cash dividends ($2.10 per share)             --         (3,185)               --                --          (3,185)
  Other comprehensive income                   --             --               483                --             483
                                        ----------------------------------------------------------------------------
Balance, March 31, 2004                 $  11,360      $  97,366         $   3,570         $ (15,306)      $  96,990
                                        ============================================================================
</TABLE>

See Notes to Consolidated Financial Statements.


                                  Page 6 of 27
<PAGE>

                              HILLS BANCORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                             (Amounts In Thousands)

<TABLE>
<CAPTION>
                                                                     Three Months Ended
                                                                           March 31,
                                                                   2004              2003
-------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>
Cash Flows from Operating Activities
  Net income                                                     $  3,362          $  3,381
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation                                                      619               565
    Provision for loan losses                                         354               484
    Compensation paid by issuance of common stock                       7                --
    Deferred income taxes                                              --               124
    Decrease in accrued interest receivable                            57               202
    Amortization of bond discount                                     334               166
    Decrease in other assets                                          330               377
    Increase in accrued interest and other liabilities              1,342             1,427
    Loans originated for sale                                     (39,613)          (73,028)
    Proceeds on sales of loans                                     33,448            63,383
    Net gain on sales of loans                                       (351)             (865)
                                                                 --------------------------
        Net cash using in operating activities                   $   (111)         $ (3,784)
                                                                 --------------------------

Cash Flows from Investing Activities
  Proceeds from maturities of investment securities:
    Available for sale                                           $ 23,394          $ 16,500
    Held to maturity                                                  299               675
  Purchases of investment securities available for sale           (20,305)          (12,569)
  Federal funds sold, net                                          13,133           (21,730)
  Loans made to customers, net of collections                     (30,191)          (25,250)
  Purchases of property and equipment                                (638)           (1,128)
  Investment in tax credit real estate                             (5,896)               --
                                                                 --------------------------
        Net cash used in investing activities                    $(20,204)         $(43,502)
                                                                 --------------------------

Cash Flows from Financing Activities
  Net increase in deposits                                       $ 23,483          $ 41,566
  Net increase (decrease) in federal funds purchased and
    securities sold under agreements to repurchase                 (2,669)            7,029
  Dividends paid                                                   (3,185)           (2,853)
                                                                 --------------------------
        Net cash provided by financing activities                $ 17,629          $ 45,742
                                                                 --------------------------
</TABLE>

(Continued)


                                  Page 7 of 27
<PAGE>

                              HILLS BANCORPORATION
           CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Continued
                             (Amounts In Thousands)

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                                     March 31,
                                                              2004             2003
-------------------------------------------------------------------------------------
<S>                                                        <C>               <C>
Increase (decrease) in cash and due from banks             $ (2,686)         $ (1,544)

Cash and due from banks:
  Beginning                                                  24,194            32,647
                                                           --------------------------
  Ending                                                   $ 21,508          $ 31,103
                                                           ==========================

Supplemental Disclosures
  Cash payments for:
    Interest paid to depositors                            $  3,704          $  4,712
    Interest paid on other obligations                        2,340             2,335
    Income taxes                                                 14               725

  Noncash financing activities:
    Increase in maximum cash obligation related to
      ESOP shares                                          $    442          $    658
</TABLE>

See Notes to Consolidated Financial Statements.


                                  Page 8 of 27
<PAGE>

                              HILLS BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.     Basis of Presentation

            The accompanying unaudited consolidated financial statements have
            been prepared in accordance with accounting principles generally
            accepted in the United States of America for interim financial
            reporting and with instructions for Form 10-Q and Regulation S-X.
            These financial statements include all adjustments (consisting of
            normal recurring accruals) which in the opinion of management are
            considered necessary for the fair presentation of the financial
            position and results of operations for the periods shown. Certain
            prior year amounts may be reclassified to conform to the current
            year presentation.

            Operating results for the three month period ended March 31, 2004
            are not necessarily indicative of the results that may be expected
            for the fiscal year ending December 31, 2004. For further
            information, refer to the consolidated financial statements and
            footnotes thereto included in the Form 10-K Annual Report of Hills
            Bancorporation and subsidiary (the "Company") for the year ended
            December 31, 2003 filed with the Securities Exchange Commission on
            March 11, 2004.

Note 2.     Earnings Per Share

            Basic earnings per share amounts are computed by dividing net income
            (the numerator) by the weighted average number of common shares
            outstanding (the denominator) during the period. Diluted per share
            amounts assume the conversion, exercise or issuance of all potential
            common stock equivalents unless the effect is to reduce the loss or
            increase the income per common share from continuing operations.

            The computation of basic and diluted earnings per share for the
            periods presented is as follows:

<TABLE>
<CAPTION>
                                                                                  Three months ended
                                                                              2004                 2003
                                                                          ------------         ------------
<S>                                                                       <C>                  <C>
 Common shares outstanding at the beginning of the year                       1,516,678            1,501,054
 Weighted average number of net shares issued (redemption)                           37                    0
                                                                           ------------         ------------
       Weighted average shares outstanding (basic)                            1,516,715            1,501,054
 Weighted average of potential dilutive shares
   attributable to stock options granted, computed under
   the treasury stock method                                                      4,641               13,408
                                                                           ------------         ------------
       Weighted average number of shares (diluted)                            1,521,356            1,514,462
                                                                           ============         ============

Net income (In Thousands)                                                 $      3,362         $      3,381
                                                                          ============         ============

Earnings per share:
  Basic                                                                   $       2.22         $       2.25
                                                                          ============         ============
  Diluted                                                                 $       2.21         $       2.23
                                                                          ============         ============
</TABLE>


                                  Page 9 of 27
<PAGE>

                              HILLS BANCORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

Note 3.     Recent Accounting Pronouncement

In December, 2003, the FASB issued a revised Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46). FIN 46 addresses
consolidation by business enterprises of variable interest entities that have
certain characteristics. It requires a business enterprise that has a
controlling interest in a variable interest entity (as defined by FIN 46) to
include the assets, liabilities, and results of the activities of the variable
interest entity in the consolidated financial statements of the business
enterprise. FIN 46 applies to a public entity that is not a small business
issuer no later than the end of the first reporting period that ends after March
15, 2004. The impact of adopting FIN 46 on the Company's financial condition and
results of operations was not material.


                                 Page 10 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations

The following is management's discussion and analysis of the financial condition
of Hills Bancorporation and subsidiary ("Hills Bancorporation" or the "Company")
at March 31, 2004, (unaudited) when compared with December 31, 2003 and the
results of operations for the three months ended March 31, 2004 compared to the
same period in 2003.

Special Note Regarding Forward Looking Statements

The discussion following contains certain forward-looking statements with
respect to the financial condition, the results of operations and business of
the Company. These statements involve certain risks and uncertainties, which are
often inherent in the ongoing operation of financial institutions such as the
Company's subsidiary bank.

Forward-looking statements discuss matters that are not facts and are typically
identified by the words "believe," "expect," "anticipate," "target," "goal,"
"objective," "intend," "estimate," "will," "can," "would," "should," "could,"
"may" and similar expressions. They discuss expectations about the future and
are not guarantees. Forward-looking statements speak only as of the date they
are made, and the Company undertakes no obligation to update them to reflect
changes that occur after the date they are made.

There are several factors - many of which are beyond the control of the Company
or its subsidiary Bank that could cause results to differ significantly from
expectations. Some of these factors are described below. There are factors other
than those described below that could cause results to differ from expectations.
Any factor described below could by itself, or together with one or more other
factors, adversely affect the business, earnings and/or financial condition of
the Company and its subsidiary Bank.

The risks involved in the operations and strategies of the Company and its
subsidiary Bank include competition from other financial institutions, changes
in interest rates, changes in economic or market conditions as well as events
and trends affecting specific assets, the effect of credit quality and market
perceptions of value on the fair values of financial instruments and regulatory
factors. These risks, which are not inclusive, cannot be accurately estimated.

For example, a financial institution may accept deposits at fixed interest
rates, at different times and for different terms, and lend funds at fixed
interest rates, at different times and for different terms. In doing so, it
accepts the risk that its cost of funds may raise while the use of those funds
may be at a fixed rate. Similarly, although market rates of interest may
decline, the financial institution may have committed by virtue of the term of a
deposit, to pay what essentially becomes an above-market rate.

Loans, and the allowance for loan losses, carry the risk that borrowers will not
repay all funds in a timely manner, as well as the risk of total loss. The
collateral pledged as security for loans may or may not have the value that has
been attributed to it. The loan loss reserve, while believed to be adequate, may
prove inadequate if one or more large-balance borrowers, or numerous mid-balance
borrowers, or a combination of both, experience financial difficulty for a
variety of reasons. These reasons may relate to the financial circumstances of
an individual borrower, or may be caused by negative economic circumstances at
the local, regional, national or international level that are beyond the control
of the borrowers or the lender.


                                 Page 11 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations (continued)

Because the business of banking is of a highly regulated nature, the decisions
of governmental entities can have a major effect on operating results. Changes
to statutes, regulations or regulatory policies, including changes in
interpretation or implementation of statutes, regulations or policies, could
have substantial and unpredictable effects including increasing the ability of
non-banks to offer competing financial services and products.

The Bank's success depends, in part, on its ability to attract and retain key
people. Competition for the best people - in particular individuals with
technology experience - is intense. The Bank may not be able to hire
well-qualified people or pay them enough to keep them.

All of these uncertainties, as well as others, are present in the operations and
business of the Company, and stockholders are cautioned that the Company's
actual results may differ materially from those included in the forward-looking
statements.

Critical Accounting Policies

The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The financial
information contained within these statements is, to a significant extent,
financial information that is based on approximate measures of the financial
effects of transactions and events that have already occurred. Based on its
consideration of accounting policies that involve the most complex and
subjective decisions and assessments, management has identified its most
critical accounting policies to be related to the allowance for loan losses. The
Company's allowance for loan loss methodology incorporates a variety of risk
considerations, both quantitative and qualitative in establishing an allowance
for loan loss that management believes is appropriate at each reporting date.
Quantitative factors include the Company's historical loss experience,
delinquency and charge-off trends, collateral values, changes in non-performing
loans, and other factors. Quantitative factors also incorporate known
information about individual loans, including borrowers' sensitivity to interest
rate movements. Qualitative factors include the general economic environment in
the Company's markets, including economic conditions throughout the Midwest and
in particular, the state of certain industries. Size and complexity of
individual credits in relation to loan structure, existing loan policies and
pace of portfolio growth are other qualitative factors that are considered in
the methodology. As the Company adds new products and increases the complexity
of its loan portfolio, it will enhance its methodology accordingly. This
discussion and analysis should be read in conjunction with the Company's
financial statements and the accompanying notes presented elsewhere herein, as
well as the portion of this Management's Discussion and Analysis section
entitled "Financial Condition - Allowance for Loan Losses". Although management
believes the levels of the allowance as of March 31, 2004 and December 31, 2003
were adequate to absorb probable losses inherent in the loan portfolio, a
decline in local economic conditions, or other factors, could result in
increasing losses that cannot be reasonably predicted at this time.


                                 Page 12 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations (continued)

Financial condition at March 31, 2004 compared to December 31, 2003.

Assets and Liabilities Review

Total assets grew to $1.206 billion at March 31, 2004, compared to total assets
of $1.184 billion at December 31, 2003. The asset growth of $22.8 million
includes an increase in net loans of $29.8 million. Loans held for sale to the
secondary market increased $6.5 million to $8.5 million at March 31, 2004. The
change is due to the volume of secondary market loans increasing in the last six
weeks of the quarter compared to the quarter ended December 31, 2003. The volume
change is due to a drop in rates in the first quarter of 2004 compared to the
quarter ended December 31, 2003. Other significant changes in assets on the
balance sheet for the two periods presented include a reduction in federal funds
sold of $13.1 million, an increase in the investment in tax credit real estate
of $5.9 million and a reduction of cash and investment securities of $5.6
million. The liabilities of the Company increased a net $22.2 million as of
March 31, 2004. This increase in net liabilities was primarily the result of a
net increase in deposits and short-term borrowings of $20.8 million.

The table below sets forth the composition of the loan portfolio as of March 31,
2004 and December 31, 2003

(in thousands):

<TABLE>
<CAPTION>
                                                   March 31, 2004             December 31, 2003
                                                 Amount      Percent       Amount         Percent
                                               ---------------------     ------------------------
<S>                                            <C>            <C>        <C>               <C>
        Agricultural                           $  38,881        4.27%    $   38,153          4.33%
        Commercial and financial                  50,820        5.58         47,938          5.44
        Real estate:
          Construction                            63,240        6.94         66,644          7.57
          Mortgage                               724,705       79.55        696,453         79.07
        Loans to indivuals                        33,365        3.66         31,591          3.59
                                               ---------      ------     ----------        ------
                                               $ 911,011      100.00%    $  880,779        100.00%
                                               =========      ======     ==========        ======
        Less allowance for loan losses           (12,980)                   (12,585)
                                               ---------                 ----------
        Loans, net                             $ 898,031                 $  868,194
                                               =========                 ==========
</TABLE>

Changes in the allowance for loan losses were as follows:

<TABLE>
<CAPTION>
                                                               Three months ended
                                                                     March 31,
                                                              2004              2003
                                                            --------          --------
                                                               (Amounts in thousands)
<S>                                                         <C>               <C>
                 Balance, beginning                         $ 12,585          $ 12,125
                   Provision charged to expense                  354               484
                   Recoveries                                    269               342
                   Loans charged off                            (228)             (421)
                                                            --------          --------
                 Balance, ending                            $ 12,980          $ 12,530
                                                            ========          ========
</TABLE>


                                 Page 13 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations (continued)

Non-performing loan information at March 31, 2004 and December 31, 2003, was as
follows:

<TABLE>
<CAPTION>
                                                               March 31, 2004       December 31, 2003
                                                                     2004                  2003
                                                               --------------       -----------------
                                                                        (Amounts in thousands)
<S>                                                                <C>                   <C>
Impaired loans, non-accrual                                        $  3,670              $  3,944

Loans past due ninety days or more and still accruing                 2,087                 2,296

Restructured loans                                                       --                    --
</TABLE>

Interest rates remained relatively stable during the first quarter of 2004. As a
result of stable interest rates, the growth of the loan portfolio continued as
the overall economy in the Company's primary trade area in Johnson and Linn
County remained positive. The increase in deposits for the first three months of
2004 reflects the continued marketing of deposits in this local economy and
steady deposit increase at the twelve banking locations.

Dividends and Equity

In January 2004, Hills Bancorporation paid a dividend of $3,185,000 or $2.10 per
share, a 10.53% increase from the $1.90 paid in January 2003. After payment of
the dividend and the adjustment for accumulated other comprehensive income,
stockholders' equity as of March 31, 2004 totaled $96,990,000. Under risk-based
capital rules, the total risk based capital is 14.13% of risk-adjusted assets,
and is substantially in excess of required minimums.


                                 Page 14 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations (continued)

Results of operations for the three months ended March 31, 2004 and 2003.

Net income decreased for the quarter ended March 31, 2004 compared to March 31,
2003 by $19,000. Net interest income increased $726,000 in 2004 compared to
2003. Net interest income is the excess of the interest and fees received on
interest-earning assets over the interest expense of the interest-bearing
liabilities. The factors that have the greatest impact on net interest income
are the volume of average earning assets and the net interest margin. The volume
of average earning assets continues to have significant increases. In comparing
the earning assets as of March 31, 2004 to March 31, 2003, the increase is $76
million. Net loan growth accounts for a $90 million increase while federal funds
and investments have decreased $14 million. The net interest margin continues to
remain steady at 3.53% for the first quarter of 2004 compared to 3.51% for the
same quarter in 2003. The measure is shown on a tax-equivalent basis using a
rate of 34% to make the interest earned on taxable and non-taxable assets more
comparable. The provision for loan losses was $354,000 and $484,000 for the
three months ended March 31, 2004 and 2003, respectively. The Company
experienced net recoveries in the first quarter of 2004 of $41,000 compared to
net charge-offs of $79,000 in the first quarter of 2003. The provision
adjustment computed on a quarterly basis is a result of management's
determination of the quality of the loan portfolio and the adequacy of the
allowance for loan losses. The provision reflects a number of factors, including
the size of the loan portfolio, loan concentrations, the level of impaired loans
which are all non-accrual and loans past due ninety days or more. In addition,
management considers the credit quality of the loan portfolio based on review of
problem and watch loans, including loans with historically higher credit risks
(primarily agricultural loans).

The allowance for loan losses totaled $12,980,000 at March 31, 2004 compared to
$12,530,000 at March 31, 2003. The percentage of the allowance to outstanding
loans was 1.42% and 1.54% at March 31, 2004 and 2003, respectively. The
allowance was based on management's consideration of a number of factors,
including loan concentrations, loans with higher credit risks (primarily
agriculture loans and spec real estate construction) and overall increases in
net loans outstanding. The methodology used in 2004 is consistent with the prior
year.

Net gain on sale of loans for the quarter ended March 31, 2004 were $351,000
compared to $865,000 for the same period ended March 31, 2003. The decrease was
expected as net gain on sale of secondary market loans dropped significantly
from the levels experienced in the first three quarters of 2003. The decrease in
the volume of loans is due to the fact that many consumers had taken advantage
of lower rates in 2003 to refinance loans and rates remain similar to rates that
existed during the summer of 2003, resulting in additional refinancing activity.

Trust fees increased $91,000 or 14.71% in the first quarter of 2004 compared to
2003 and is due to the increase in total assets under management. Since
approximately 51% of the trust assets are held in common stocks the asset growth
has been fueled by the increase in the stock market the last twelve months. For
example, the Dow Jones Industrial Average is up just over 25% in the twelve
months ended March 31, 2004. Other fees and charges increased for the two
quarters shown from $898,000 in 2003 to $1,102,000 in 2004 or $204,000.
Approximately $60,000 of the increased revenue is in ATM service fees and credit
card merchant fees. In addition, rental revenue from a new tax credit real
estate property added in January, 2004 was $81,000 higher in 2004 than in 2003.


                                 Page 15 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations (continued)

Total other expenses were $7,478,000 and $6,651,000 for the three months ended
March 31, 2004 and 2003, respectively. The increase of $827,000 included
salaries and employee benefits which were $384,000 higher. The increase in
direct salaries was $291,000 or 10.47%. The increase is due to salary
adjustments for 2004 and full-time equivalents increasing. Increased employment
resulted in part from the need to staff the Marion office that opened in
February of 2003. Medical expenses on the Company's self-funding plan increased
by $69,000 for the quarter from one year ago and are a result of higher medical
costs and more employees in the plan.

Other expenses were $1,421,000 for the quarter ended March 31, 2004 compared to
$1,179,000 for the three months ended March 31, 2003. The increase of $242,000
included a $138,000 increase in the advertising and business development
expenses primarily costs associated with the 2004, 100th Anniversary celebration
of the registrant's.

Merchant card processing charges were $37,000 higher in 2004 than 2003 and were
related to the increased volume of activity. Also, expenses for the rental of
the tax credit real estate increased from $66,000 in the three months ended
March 31, 2003 to $163,000 for the same period in 2004. The increase is due to a
new property added in January of 2004.

Income tax expense was $1,500,000 and $1,658,000 for the three months ended
March 31, 2004 and 2003, respectively. The corresponding percentage of income
taxes compared to income before income taxes is 30.85% in 2004 and 32.90% in
2003. The percentage in 2004 is lower due to higher income tax credits available
from the tax credit real estate investments. The credits were $132,000 and
$59,000 for the quarters ended March 31, 2004 and 2003, respectively.

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 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, to respond
to market changes or to adjust the Company's interest rate risk position.
Federal funds sold and investment securities available for sale comprised 17.98%
of the Company's total assets at March 31, 2004, compared to 19.66% at December
31, 2003.

The Company has historically maintained a stable deposit base and a relatively
low level of large deposits, which has mitigated the volatility in liquidity. As
of March 31, 2004, the Company had borrowed $167.6 million from the FHLB of Des
Moines. The amount of advances from the FHLB of Des Moines is unchanged from
March 31, 2003. 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 $141 million at March 31, 2004.


                                 Page 16 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition And Results
        of Operations (continued)

As additional sources of liquidity, the Company has the ability to borrow up to
$10 million from the Federal Reserve Bank of Chicago, and two lines of credit
with two banks totaling $102 million. Those two lines of credit require the
pledging of investment securities when drawn upon.

The combination of high levels of potentially liquid assets, low dependence on
volatile liabilities and additional borrowing capacity provided sources of
liquidity for the Company which management considered sufficient at March 31,
2004.


                                 Page 17 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management

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 Company's 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, some of which are described below. 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 2004, changed
significantly when compared to 2003.

Asset/Liability Management

The Company's primary market risk exposure is to changes in interest rates. The
Company's asset/liability management, or its management of interest rate risk,
is focused primarily on evaluating and managing net interest income given
various risk criteria. Factors beyond the Company's control, such as market
interest rates and competition, may also have an impact on the Company's
interest income and interest expense. In the absence of other factors, the
Company's overall yield on interest-earning assets will increase as will its
cost of funds on its interest-bearing liabilities when market rates increase
over an extended period of time. The Company's yields and cost of funds will
decrease when market rates decline. The Company is able to manage these swings
to some extent by attempting to control the maturity or rate adjustments of its
interest-earning assets and interest-bearing liabilities over given periods of
time.

The Bank maintains an asset/liability committee, which meets at least quarterly
to review the interest rate sensitivity position and to review various
strategies as to interest rate risk management. In addition, the Bank uses a
simulation model to review various assumptions relating to interest rate
movement. The model attempts to limit rate risk even if it appears the Bank's
asset and liability maturities are perfectly matched and a favorable interest
margin is present.

In order to minimize the potential effects of adverse material and prolonged
increases or decreases in market interest rates on the Company's operations,
management has implemented an asset/liability program designed to mitigate the
Company's interest rate sensitivity. The program emphasizes the origination of
adjustable rate loans, which are held in the portfolio, the investment of excess
cash in short or intermediate term interest-earning assets, and the solicitation
of passbook or transaction deposit accounts, which are less sensitive to changes
in interest rates and can be re-priced rapidly.

Net interest income should decline with instantaneous increases in interest
rates while net interest income should increase with instantaneous declines in
interest rates. Generally, during periods of increasing interest rates, the
Company's interest rate sensitive liabilities would re-price faster than its
interest rate sensitive assets causing a decline in the Company's interest rate
spread and margin. This would tend to reduce net interest income because the
resulting increase in the Company's cost of funds would not be immediately
offset by an increase in its yield on earning assets. In times of decreasing
interest rates, fixed rate assets could increase in value and the lag in
re-pricing of interest rate sensitive assets could be expected to have a
positive effect on the Company's net interest income.


                                 Page 18 of 27
<PAGE>

                              HILLS BANCORPORATION

Item 4. Controls and Procedures

As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operations of the Company's
disclosure controls and procedures, and as defined in Exchange Act Rule
15d-15(e). Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in enabling the Company's periodic SEC filings within
the required time period. There have been no changes in the Company's internal
controls over financial reporting that occurred during the Company's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.


                                 Page 19 of 27
<PAGE>

                              HILLS BANCORPORATION
                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

            There is 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, 2004.

Item 5.     Other Information

            (a)   Effective with a record date of April 19, 2004, Hills
                  Bancorporation approved a three for one stock split on April
                  13, 2004. On April 26, 2004, each shareholder of Hills
                  Bancorporation was mailed two additional shares of stock for
                  each share owned on the record date. This transaction
                  increased the shares outstanding from 1,516,752 at March 31,
                  2004 to 4,550,256 shares.

            (b)   The Company does not have a standing nominating committee of
                  the Board of Directors or a committee performing similar
                  functions. Historically, changes in the membership of the
                  Company's Board of Directors have been relatively infrequent.
                  In the view of the Board of Directors the amount of nominating
                  activity does not justify the establishment of such a
                  committee. The Board of Directors has directly performed and
                  expects that it will continue to be capable of directly
                  performing all nominating functions. Therefore, the Board of
                  Directors has concluded that such a committee is not needed.
                  In connection with its performance of such nominating
                  functions, the Board of Directors does not have a charter.

                  All directors would participate in the consideration of
                  director nominees. Each of the directors, with the exception
                  of Mr. Seegmiller, is independent as defined under the rules
                  of the NASDAQ Stock Market. If one or more positions on the
                  Board of Directors were to become vacant for any reason, the
                  vacancy would be filled by the Board of Directors and all
                  directors would participate in the selection of a person to
                  fill each such vacancy.

                  The Board will utilize a variety of methods for identifying
                  and evaluating candidates for director. The size of the Board
                  is established by the Company's bylaws. The Board will
                  regularly assess whether any vacancies on the Board are
                  expected due to retirement or otherwise. In the event that
                  vacancies are anticipated, or otherwise arise, the Board will
                  consider various potential candidates for director. Candidates
                  may come to the attention of the committee through current
                  Board members, shareholders, or other persons. The Board has
                  never paid fees to any third party to identify, evaluate, or
                  to assist in identifying or evaluating, potential nominees,
                  and it does not now anticipate that it will be necessary to do
                  so in the future.


                                 Page 20 of 27
<PAGE>

                              HILLS BANCORPORATION
                    PART II - OTHER INFORMATION (continued)

            (b)   (continued)

                  The Board is not obligated to nominate any candidate for
                  election. Candidates will be evaluated at meetings of the
                  Board. In evaluating possible candidates for membership on the
                  Board of Directors, the Board will seek to achieve a balance
                  of knowledge, experience, and capability on the Board and to
                  address the following qualifications. Members of the Board
                  should have the highest professional and personal ethics and
                  values and excellent personal and professional reputations and
                  must satisfy all regulatory requirements to serve as
                  directors. They should have broad experience at the
                  policy-making level in business, government, education,
                  technology, or public interest. They should be committed to
                  furthering the long-term as well as short-term interest of the
                  Company and its shareholders, and in doing so they should be
                  willing to consider the effect of any action on the Company's
                  shareholders, employees, suppliers, creditors, and customers
                  and on the communities in which the Company and its subsidiary
                  operate. They should have sufficient time to carry out their
                  duties and to provide insight and practical wisdom based on
                  experience. Their service on other boards of public companies
                  should be limited to a number that permits them, given their
                  individual circumstances, to perform responsibly all
                  directors' duties. The Board of Directors reserves the right
                  to modify these qualifications from time to time.

                  In general, advance notice of the shareholder's intention to
                  nominate such candidate for election to the Board must be
                  given to the Company's Treasurer. In order to be considered
                  for nomination by the Board of Directors in connection with
                  the Annual Meeting of Shareholders to be held in 2005, such
                  advance notice of nominations must be received by the Company
                  no later than November 20, 2004. A shareholder's advance
                  notice of nomination should set forth (i) as to each person
                  whom the shareholder proposes to nominate for election or
                  re-election as a director all information relating to such
                  person that is required to be disclosed in solicitations of
                  proxies for election of directors, or is otherwise required,
                  in each case pursuant to Regulation 14A under the Securities
                  Exchange Act of 1934, as amended (including such person's
                  written consent to being named in the proxy statement as a
                  nominee and to serving as a director, if elected); and (ii) as
                  to the shareholder giving the notice and the beneficial owner,
                  if any, on whose behalf the nomination is made, (A) the name
                  and address of such shareholder, as they appear on the
                  Company's books, and of such beneficial owner, (B) the number
                  of shares of Common Stock that are owned (beneficially or of
                  record) by such shareholder and such beneficial owner, (C) a
                  description of all arrangements or understandings between such
                  shareholder and such beneficial owner and any other person or
                  persons (including their names) in connection with the
                  nomination, and (D) a representation that such shareholder or
                  its agent or designee intends to appear in person or by proxy
                  at the annual meeting to place such candidate in nomination
                  for election as a director.


                                 Page 21 of 27
<PAGE>

                              HILLS BANCORPORATION
                     PART II - OTHER INFORMATION (continued)

Item 6.     Exhibits and Reports on Form 8-K

            Exhibits

31          Certifications under Section 302 of the Sarbanes-Oxley Act of 2002

32          Certifications under Section 906 of the Sarbanes-Oxley Act of 2002

            Reports on Form 8-K

            No reports on Form 8-K have been filed during the quarter ended
            March 30, 2004.


                                 Page 22 of 27
<PAGE>

                                   SIGNATURES

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

                                                HILLS BANCORPORATION


Date  May 7, 2004                         By  /s/ Dwight O. Seegmiller
     ------------                            -----------------------------------
                                             Dwight O. Seegmiller, President and
                                             Chief Executive Officer


Date  May 7, 2004                         By /s/ James G. Pratt
     ------------                            -----------------------------------
                                             James G. Pratt, Treasurer and
                                             Chief Financial Officer


                                 Page 23 of 27
<PAGE>

                              HILLS BANCORPORATION
                      QUARTERLY REPORT OF FORM 10-Q FOR THE
                          QUARTER ENDED MARCH 31, 2004

<TABLE>
<CAPTION>
                                                                                         Page Number
                                                                                      In The Sequential
  Exhibit                                                                              Numbering System
  Number                                       Description                         March 31, 2004 Form 10-Q
------------------------------------------------------------------------------------------------------------
<S>         <C>                                                                          <C>
    31      Certifications under Section 302 of the Sarbanes-Oxley Act of 2002           25-26 of 27

    32      Certifications under Section 906 of the Sarbanes-Oxley Act of 2002              27 of 27
</TABLE>


                                 Page 24 of 27