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

              (As last amended in Rel. No. 34-26589, eff. 4/12/93.)

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2002


                         Commission file number: 0-12668


                              Hills Bancorporation

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

                       131 MAIN STREET, HILLS, IOWA 52235

                        Telephone number: (319) 679-2291


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.    [X] Yes  [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                                                              SHARES OUTSTANDING
          CLASS                                                At July 31, 2002
--------------------------------------------------------------------------------
Common Stock, no par value                                         1,498,558


                                       1
<PAGE>

Item 1.  Financial Statements

         Consolidated balance sheets, June 30, 2002 (unaudited)
           and December 31, 2001                                               3
         Consolidated statements of income, (unaudited) for the
           three and six months ended June 30, 2002 and 2001                   4
         Consolidated statements of comprehensive income, (unaudited)
           for three and six months ended June 30, 2002 and 2001               5
         Consolidated statements of stockholders' equity, (unaudited)
           for three and six months ended June 30, 2002 and 2001               6
         Consolidated statements of cash flows (unaudited) for six
           months ended June 30, 2002 and 2001                                 7
         Notes to consolidated financial statements                        8 - 9

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk           13


                                    PART II
                               OTHER INFORMATION

Item 1.  Legal proceedings                                                    14

Item 2.  Changes in securities                                                14

Item 3.  Defaults upon senior securities                                      14

Item 4.  Submission of matters to vote of security holders                    14

Item 5.  Other information                                                    14

Item 6.  Exhibits and reports on Form 8-K                                     14

Exhibit 11.  Computation of earnings per share

Exhibit 99.  Certification of 10-Q filing

Signatures


                                       2
<PAGE>

                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

                                                         June 30,
                                                          2002      December 31,
                                                        Unaudited       2001*
                                                        ------------------------

ASSETS
Cash and due from banks .............................   $   26,951   $   37,070
Investment securities:
   Available for sale (amortized cost
     June 30, 2002 $188,498;
     December 31, 2001 $165,515) ....................      194,348      170,311
   Held to maturity (fair value
     June 30, 2002 $9,255;
     December 31, 2001 $12,146) .....................        8,940       11,840
   Stock of Federal Home Loan Bank ..................        8,382        7,809
Federal funds sold ..................................       23,648       29,428
Loans, net ..........................................      738,110      682,692
Property and equipment, net .........................       21,627       20,997
Accrued interest receivable .........................        7,495        7,257
Deferred income taxes, net ..........................        1,395        1,873
Other assets ........................................        7,319        6,828
                                                        -----------------------
                                                        $1,038,215   $  976,105
                                                        =======================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits ........................   $   92,503   $   92,179
Interest-bearing deposits ...........................      658,071      627,839
                                                        -----------------------
   Total deposits ...................................   $  750,574   $  720,018
Federal funds purchased and securities
   sold under agreements to repurchase ..............       20,237       22,409
Federal Home Loan Bank notes ........................      167,637      137,637
Accrued interest payable ............................        2,510        2,683
Other liabilities ...................................        3,570        3,009
                                                        -----------------------
                                                        $  944,528   $  885,756
                                                        -----------------------
REDEEMABLE COMMON STOCK HELD BY EMPLOYEE STOCK
  OWNERSHIP PLAN (ESOP) .............................   $   12,493   $   12,194
                                                        -----------------------
STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
   authorized 10,000,000 shares;
   issued June 30, 2002 - 1,498,558 shares;
   December 31, 2001 - 1,498,558 shares .............   $   10,397   $   10,397
Retained earnings ...................................       79,605       76,931
Accumulated other comprehensive income,
   unrealized gains  on investment securities, net ..        3,685        3,021
                                                        -----------------------
                                                        $   93,687   $   90,349
Less maximum cash obligation related to
   ESOP shares ......................................       12,493       12,194
                                                        -----------------------
                                                        $   81,194   $   78,155
                                                        -----------------------
                                                        $1,038,215   $  976,105
                                                        =======================
* Derived from audited financial statements.

See Notes to Financial Statements.

                                       3
<PAGE>

                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

                Three and Six Months Ended June 30, 2002 and 2001
                      (In Thousands, Except Per Share Data)

                                          Three Months Ended    Six Months Ended
                                               June 30             June 30
                                           -------------------------------------
                                            2002      2001      2002      2001
                                           -------------------------------------
Interest Income:
   Interest and fees on loans ..........   $13,339   $13,175   $26,266   $26,169
   Interest on investment securities:
     Taxable ...........................     1,896     1,982     3,813     3,770
     Non-taxable .......................       581       475     1,097       932
   Interest on federal funds sold ......       112       299       273       812
                                           -------------------------------------
   Total interest income ...............   $15,928   $15,931   $31,449   $31,683
                                           -------------------------------------

Interest Expense:
   Interest on deposits ................   $ 5,817   $ 6,857   $11,768   $13,927
   Interest on securities sold under
     agreements to repurchase ..........        89       160       212       343
   Interest on FHLB borrowings .........     1,973     1,766     3,889     3,513
                                           -------------------------------------
   Total interest expense ..............   $ 7,879   $ 8,783   $15,869   $17,783
                                           -------------------------------------

   Net interest income .................   $ 8,049   $ 7,148   $15,580   $13,900
Provision for loan losses ..............       251       225       487       450
                                           -------------------------------------
   Net interest income after provision
    for loan losses ....................   $ 7,798   $ 6,923   $15,093   $13,450
                                           -------------------------------------

Other income:
   Loan origination fees ...............   $   242   $   337   $   619   $   483
   Trust fees ..........................       540       616     1,159     1,210
   Deposit account charges and fees ....       791       792     1,521     1,502
   Other fees and charges ..............       632       579     1,303     1,192
                                           -------------------------------------
Other expenses:
   Salaries and employee benefits ......   $ 3,440   $ 2,906   $ 6,717   $ 5,689
   Occupancy ...........................       429       419       846       858
   Furniture and equipment .............       745       640     1,462     1,248
   Office supplies and postage .........       259       301       540       583
   Other operating .....................     1,306     1,301     2,495     2,440
                                           -------------------------------------
                                           $ 6,179   $ 5,567   $12,060   $10,818
                                           -------------------------------------
   Income before income taxes ..........   $ 3,824   $ 3,680   $ 7,635   $ 7,019

Federal and state income taxes .........     1,151     1,146     2,339     2,178
                                           -------------------------------------
   Net income ..........................   $ 2,673   $ 2,534   $ 5,296   $ 4,841
                                           =====================================

Earning per common share:
     Basic .............................   $  1.78   $  1.69   $  3.53   $  3.23
     Diluted ...........................      1.76      1.68      3.50      3.21

See Notes to Financial Statements

                                       4
<PAGE>


                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                Three and Six Months Ended June 30, 2001 and 2000
                      (In Thousands, Except Per Share Data)


                                                   Three             Six
                                               Months Ended      Months Ended
                                                  June 30           June 30
                                               2002     2001     2002     2001
                                              ----------------------------------

Net Income ................................   $2,673   $2,534   $5,296   $4,841
                                              ----------------------------------

Other comprehensive income:
   Unrealized gains (losses) on debt
     securities ...........................    2,390      156    1,054    2,498
   Income tax effect of unrealized gains
     (losses) .............................     (884)     (57)    (390)    (923)
                                              ----------------------------------
                                               1,506       99      664    1,575
                                              ----------------------------------

   Comprehensive Income ...................   $4,179   $2,633   $5,960   $6,416
                                              ==================================

See Notes to Financial Statements.

                                       5
<PAGE>


                              HILLS BANCORPORATION

            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                     Six Months Ended June 30, 2002 and 2001
                      (In Thousands, Except Per Share Data)
<TABLE>

                                                            Accumu-      Less
                                                             lated      Maximum
                                                             Other       Cash
                                                            Compre-    Obligation
                                        Capital  Retained   hensive     To ESOP
                                         Stock   Earnings   Income      Shares       Total
                                        ---------------------------------------------------
<S>                                     <C>      <C>        <C>        <C>          <C>
Balance, December 31, 2001 ..........   $10,397   $76,931    $3,021    $(12,194)    $78,155
  Net income ........................       - -     5,296       - -         - -       5,296
  Change related to ESOP shares .....       - -       - -       - -        (299)       (299)
  Cash dividends ($1.75 per share) ..       - -    (2,622)      - -         - -      (2,622)
  Other comprehensive income ........       - -       - -       664         - -         664
                                        ---------------------------------------------------
 Balance, June 30, 2002 .............   $10,397   $79,605    $3,685    $(12,493)    $81,194
                                        ===================================================

Balance, December 31, 2000 ..........   $10,197   $69,179    $  698    $(11,550)    $68,524
  Net income ........................       - -     4,481       - -         - -       4,841
  Cash dividends ($1.60 per share) ..       - -    (2,393)      - -         - -      (2,393)
  Change related to ESOP shares .....       - -       - -       - -        (300)       (300)
  Issuance of 1,683 shares of common
    stock ...........................        44       - -       - -         - -          44
  Income tax benefit related to stock
    based compensation ..............       - -        30       - -         - -          30
  Other comprehensive income ........       - -       - -     1,575         - -       1,575
                                        ---------------------------------------------------
Balance, June 30, 2001 ..............   $10,241   $71,657    $2,273    $(11,850)    $72,321
                                        ===================================================
</TABLE>
See Notes to Financial Statements.

                                       6
<PAGE>


                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 2002 and 2001
                                 (In Thousands)
<TABLE>
                                                                                     2002        2001
                                                                                   --------------------
<S>                                                                                <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................................   $  5,296    $  4,841
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation ...............................................................      1,140         964
    Provision for loan losses ..................................................        487         450
    Deferred income taxes ......................................................         88         149
    (Increase) decrease in accrued interest receivable .........................       (238)       (316)
    Amortization of bond discount ..............................................        160          58
    (Increase) in other assets .................................................       (576)       (559)
    Amortization of intangibles ................................................         85         171
    Increase in accrued interest and other liabilities .........................        388          41
                                                                                   --------------------
       Net cash provided by operating activities ...............................   $  6,830    $  5,799
                                                                                   --------------------

CASH FLOWS FROM  INVESTING  ACTIVITIES
Proceeds  from  maturities of investment securities:
    Available for sale .........................................................   $ 23,354    $ 34,587
    Held to maturity ...........................................................      2,901       1,104
Purchase of investment securities available for sale ...........................    (47,071)    (55,397)
Federal funds sold, net ........................................................      5,780      19,000
Loans made to customers, net of collections ....................................    (55,905)    (14,510)
Purchases of property and equipment ............................................     (1,770)     (3,391)
                                                                                   --------------------
    Net cash (used in) investing activities ....................................   $(72,711)   $(17,607)
                                                                                   --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits .......................................................   $ 30,556    $ 22,210
Net  (decrease) in fed funds purchased and
    securities sold under agreements to repurchase .............................     (2,172)       (928)
Borrowings from FHLB ...........................................................     30,000        --
Dividends paid .................................................................     (2,622)     (2,393)
                                                                                   --------------------
    Net cash provided by financing activities ..................................   $ 55,762    $ 18,963
                                                                                   --------------------
    Increase (decrease) in cash and due from banks .............................   $(10,119)   $  7,155

CASH AND DUE FROM BANKS
    Beginning ..................................................................     37,070      25,669
                                                                                   --------------------
    Ending .....................................................................   $ 26,951    $ 32,824
                                                                                   ====================

SUPPLEMENTAL DISCLOSURES
  Cash payments for:
    Interest paid to depositors and others .....................................   $ 11,941    $ 14,079
    Interest paid on other obligations .........................................      4,101       3,856
  Non-cash financing transaction,
    decrease in maximum cash obligation related to ESOP shares .................        299         300
</TABLE>
See Notes to Financial Statements.

                                       7
<PAGE>

                              HILLS BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


Note 1. Interim Financial Statements

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

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

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

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

Note 2. Loans

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

                                                            (In thousands)
                                                                June 30
                                                       -------------------------
                                                         2002             2001
                                                       -------------------------

Agricultural .................................         $ 36,442         $ 32,213
Commercial and financial .....................           40,444           39,311
Real estate, construction ....................           45,015           40,840
Real estate, mortgage ........................          593,907          505,730
Loans to individuals .........................           32,652           33,165
                                                       -------------------------
                                                       $748,460         $651,259
Less allowance for loan losses ...............           10,350           10,326
                                                       -------------------------
                                                       $738,110         $640,933
                                                       =========================

Transactions in the allowance for loan losses are as follows:

                                                            (In thousands)
                                                              Six Months
                                                             Ended June 30
                                                      --------------------------
                                                        2002              2001
                                                      --------------------------

Balance, beginning ..........................         $  9,950         $ 10,428
  Provision charged to expense ..............              487              450
  Net recoveries (charge-offs) ..............               87             (552)
                                                      --------------------------
Balance, ending .............................         $ 10,350         $ 10,326
                                                      ==========================

                                       8
<PAGE>

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

                                                              (In thousands)
                                                                  June 30
                                                           ---------------------
                                                             2002         2001
                                                           ---------------------

Non-accrual ........................................       $ 2,493       $ 1,993
Accruing loans, past due 90 days or more ...........         1,424         1,627
Restructured loan ..................................           - -           - -
Impaired loans .....................................        11,761         7,708

Note 3. Earnings Per Share

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

Note 4. Recent Accounting Pronouncements

In July 2001, the Financial  Accounting  Standards  Board issued  Statement 141,
"Business  Combinations"  and  Statement  142,  "Goodwill  and Other  Intangible
Assets." Statement 141 eliminated the pooling method for accounting for business
combinations;  requires  that  intangible  assets that meet certain  criteria be
reported separately from goodwill; and requires negative goodwill arising from a
business  combination  to be recorded as an  extraordinary  gain.  Statement 142
eliminated  the  amortization  of  goodwill  and  other   intangibles  that  are
determined  to have an  indefinite  life;  and  requires,  at a minimum,  annual
impairment tests for goodwill and other intangible assets that are determined to
have an indefinite  life.  The  provisions of the  Statements  were  implemented
effective  January 1, 2002. The amortization of goodwill with an indefinite life
was  suspended on January 1, 2002..  Annual  goodwill  amortization  for 2002 is
expected to be approximately $92,000 less than in 2001.

                                       9
<PAGE>

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



Forward Looking Information

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

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

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

Recent Activities

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

Hills  Bancorporation  achieved a new  milestone in the quarter  ended March 31,
2002 as total assets exceeded one billion dollars.  This growth continued in the
second  quarter  with total  assets at June 30, 2002 at $1.038  billion and this
represents a $137 million increase in assets from June 30, 2001.

Financial Position

Net loans as of June 30, 2002 increased by $97.2 million since June 30, 2001 and
by $55.4 million  since  December 31, 2001 with the majority of this increase in
real estate loans.  The local housing  market has continued to create demand for
loans and refinancing of loans with interest rates still low. However, in recent
months with conditions in the state and national economy being  unfavorable,  it
will be difficult for the local economy to not be fazed in the coming months.

Hills Bancorporation also saw an increase of the investment  securities by $29.5
million.  These  increases in loans and securities  were funded by a significant
deposit growth,  including  repurchase  agreements,  since June30, 2001 of $80.3
million.  Advances  from the Federal Home Loan Bank have also provided a net $47
million since June30, 2001.

Due  to  the  continued  loan  demand  and   challenges  for  funding   sources,
asset-liability  management continues to be very important.  The asset-liability
process  encompasses  both the management of interest rate  sensitivity  and the
maintenance of adequate liquidity. Interest rate sensitivity management attempts
to provide the optimal level of net interest  income while managing  exposure to
risks  associated with interest rate movements.  Liquidity  management  involves
planning  to meet  anticipated  funding  needs.  Management  monitors  the  rate
sensitivity  and liquidity  positions on an on-going basis and, when  necessary,
appropriate  action is taken to minimize any adverse  effects of rapid  interest
rate movements or any unexpected  liquidity  concerns.  The Company  believes it
will be able to maintain sufficient liquidity.

Dividends and Equity

In January 2002, Hills Bancorporation paid a dividend of $2,622,000 or $1.75 per
share,  a 9.38%  increase from the $1.60 paid in January 2001.  After payment of
the dividend and the  adjustment for  accumulated  other  comprehensive  income,
stockholders'  equity  as of  June  30,  2002  totaled  $81,194,000.  The  total
stockholders'  equity of Hills  Bancorporation  as of June 30, 2002,  before the
reduction for the ESOP shares,  totaled 9.02% of total assets.  Under risk-based
capital rules,  the total risk based capital is 12.75% of risk adjusted  assets,
and substantially in excess of required minimums.

                                       10
<PAGE>

Liquidity

The  Company  actively  monitors  and manages its  liquidity  position  with the
objective of maintaining  sufficient cash flows to fund operations,  meet client
commitments, take advantage of market opportunities and provide a margin against
unforeseeable  liquidity  needs.  Federal  funds  sold,  loans held for sale and
investment   securities  available  for  sale  are  readily  marketable  assets.
Maturities of all investment securities are managed to meet the Company's normal
liquidity needs.  Investment  securities available for sale may be sold prior to
maturity to meet liquidity  needs, to respond to market changes or to adjust the
Company's  interest rate risk position.  Readily  marketable  assets, as defined
above, comprised 18.7% of the Company's total assets at June 30, 2002.

Net cash provided from  operations is another  primary source of liquidity.  For
the six months  ended June 30, 2002 and 2001,  net cash  provided  by  operating
activities was $6,830,000 and $5,799,000,  respectively.

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 June 30, 2002, the Company had advances of $167,637,000  from the FHLB of Des
Moines.  These  advances  were  used as a  means  of  providing  both  long  and
short-term,  fixed-rated  funding for certain assets and managing  interest rate
risk. The Company had additional  borrowing  capacity available from the FHLB of
approximately $83 million at June 30, 2002.

The combination of high levels of potentially  liquid assets,  low dependence on
volatile  liabilities  and additional  borrowing  capacity  provided  sufficient
liquidity for the Company through June 30, 2002.

Results of Operations

Net income for the  quarter and six months  ended June 30, 2002  compared to the
same periods in 2001 had increases of $139,000 and $455,000,  respectively.  For
the three and six month  periods,  the  changes  were the result of  significant
increases  in net  interest  income which was the result of increases in average
earning assets from the prior year.  Average  earning assets were  approximately
$105 million  higher for the six months ended June 30, 2002 compared to the same
period in 2001. Loan  origination  fees decreased over the prior year by $95,000
for the three  months ended June 30th but  increased  $136,000 for the six month
period  shown.  Trust fees  decreased  for the  quarter  ended March 31, 2002 by
$76,000 and for the six months by $51,000  compared  to the same  periods in the
previous year. Even though trust accounts under  management have increased,  the
downturn in stock  values  that  existed in 2001 and  continued  in 2002 had the
effect of  reducing  trust  fees that are based on asset  value of the  account.
Deposit  account  charges and fees were  $1,521,000  and  $1,502,000 for the six
months ended June 30, 2002 and 2001, respectively.  Other fees and charges as of
June 30, 2002 increased $111,000 to $1,303,000.  This increase was due to volume
changes in various accounts.

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

Other expenses for the quarter ended June 30, 2002 were $6,179,000  compared  to
$5,567,000  for the same time frame in 2001.  For the six months ended  June 30,
2002 other expenses were $12,060,000,  and increase of $1,242,000 from the first
six  months in 2001.  The  changes  for the six  months  included  salaries  and
benefits  which  accounted for  $1,028,000  and were the direct result of salary
adjustments in 2002 and staff additions at various locations.  The occupancy and
furniture and equipment expenses increased $202,000 and these increases were the
result of new locations that have been added and new equipment purchases both in
2001 and 2002.

Earnings per share, both basic and diluted, increased for the quarter ended June
30, 2002 compared to 2001.  For the period ended June 30, 2002 basic and diluted
earnings per share were $1.78 and $1.76 in comparison to $1.69 and $1.68 for the
quarter  ended June 30,  2001.  The  earnings per share for the six months ended
June 30,  2002 and June 30,  2001 were  $3.53 and $3.23 for basic  earnings  per
share and $3.50 and $3.21 for diluted earnings per share.

                                       11
<PAGE>

Market Risk Management

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

Asset/Liability Management

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

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

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

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

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<PAGE>


                                 PART I, ITEM 3.
                    QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK



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



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<PAGE>


                              HILLS BANCORPORATION
                           PART II - OTHER INFORMATION



Item 1. Legal Proceedings

        There are no material pending legal proceedings.

Item 2. Changes in Securities

        There were no changes in securities.

Item 3. Defaults upon Senior Securities

        Hills Bancorporation has no senior securities.

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

        At the Annual Meeting held on April 15, 2002, the security holders
        approved the following:

        1.  Election of Theodore H. Pacha, Ann Marie Rhodes, Ronald E. Stutsman
            to three-year terms to the Board of Directors expiring at the 2005
            Annual Meeting.

Item 5. Other Information

        None

Item 6. Exhibits and Reports on Form 8-K

        (a)  Exhibits

             Exhibit II - Statement Re Computation of Earnings Per
             Common Share

             Exhibit 99 - Certification of Form 10-Q Filing

        (b)  Reports on Form 8-K

             No  reports on Form 8-K have been  filed  during the  quarter
             ended June 30, 2002.



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<PAGE>

                                   SIGNATURES

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

                                                HILLS BANCORPORATION
                                                (Registrant)


August 14, 2002                                 /s/ Dwight O. Seegmiller
-----------------------                         --------------------------------
Date                                            Dwight O. Seegmiller, President
                                                (Duly authorized officer of the
                                                registrant)


August 14, 2002                                 /s/ James G. Pratt
------------------------                        --------------------------------
Date                                            James G. Pratt, Treasurer
                                                (Principal Financial Officer)




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