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, 2001

                         Commission file number: 0-12668


                              Hills Bancorporation

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

                          131 MAIN STREET, HILLS, IOWA

                        Telephone number: (319) 679-2291


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                 [X] Yes [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                                                             SHARES OUTSTANDING
          CLASS                                                At July 31, 2001
Common Stock, no par value                                         1,497,166


<PAGE>

                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION

Item 1.        Financial Statements

               Consolidated balance sheets, June 30, 2001 (unaudited)
                   and December 31, 2000
               Consolidated statements of income, (unaudited) for three
                   and six months ended June 30, 2001 and 2000
               Consolidated statements of comprehensive income, (unaudited) for
                   the three and six months ended June 30, 2001 and 2000.
               Consolidated statements of stockholders' equity, (unaudited)
                   for six months ended June 30, 2001 and 2000
               Consolidated statements of cash flows (unaudited) for six
                   months ended June 30, 2001 and 2000
               Notes to consolidated financial statements

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

                                     Part II
                                OTHER INFORMATION

Item 1.        Legal proceedings

Item 2.        Changes in securities and use of proceeds

Item 3.        Defaults upon senior securities

Item 4.        Submission of matters to vote of security holders

Item 5.        Other information

Item 6.        Exhibits and reports on Form 8-K

COMPUTATION OF EARNINGS PER SHARE

SIGNATURES

<PAGE>


                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

                                                June 30, 2001
                                                  Unaudited   December 31, 2000*
                                                ------------  ------------------
ASSETS

Cash and due from banks .........................   $ 32,824       $ 25,669
Investment securities:
   Available for sale (amortized cost
     June 30, 2001 $157,392;
     December 31, 2000 $136,661) .................   160,998        137,768
   Held to maturity (fair value
     June 30, 2001 $13,730;
     December 31, 2000 $15,676) ..................    13,405         15,509
   Stock of Federal Home Loan Bank ...............     7,809          7,789
Federal funds sold ...............................     9,065         28,065
Loans, net .......................................   640,933        626,873
Property and equipment, net ......................    18,926         16,499
Accrued interest receivable ......................     7,838          7,522
Deferred income taxes, net .......................     2,214          3,286
Other assets .....................................     7,158          6,770
                                                    --------       --------
                                                    $901,170       $875,750
                                                    ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits .....................  $ 77,839       $ 76,087
Interest-bearing deposits ........................   597,077        576,619
                                                    --------       --------
   Total deposits ................................  $674,916       $652,706
Federal funds purchased and securities
   sold under agreements to repurchase ...........    15,633         16,561
Federal Home Loan Bank notes .....................   120,668        120,668
Accrued interest payable .........................     2,713          2,865
Other liabilities ................................     3,069          2,876
                                                    --------       --------
                                                    $816,999       $795,676
                                                    --------       --------

REDEEMABLE COMMON STOCK HELD BY
   EMPLOYEE STOCK OWNERSHIP PLAN
   (ESOP) ........................................  $ 11,850       $ 11,550
                                                    --------       --------
STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
   authorized 10,000,000 shares;
   issued June 30, 2001 - 1,497,166 shar
   December 31, 2000 - 1,495,483 shares ..........  $ 10,241       $ 10,197
Retained earnings ................................    71,657         69,179
Accumulated other comprehensive income,
   unrealized gains (losses) on investme .........     2,273            698
                                                    --------       --------
                                                    $ 84,171       $ 80,074
Less, maximum cash obligation related to
   ESOP shares ...................................    11,850         11,550
                                                    --------       --------
                                                    $ 72,321       $ 68,524
                                                    --------       --------
                                                    $901,170       $875,750
                                                    ========       ========

* Derived from audited financial statements.

See Notes to Financial Statements.


<PAGE>


                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

                Three and Six Months Ended June 30, 2001 and 2000
                      (In Thousands, Except Per Share Data)

                                          Three Months Ended   Six Months Ended
                                          ------------------   ----------------
                                               June 30            June 30
                                               -------            -------
                                            2001      2000      2001       2000
                                          --------------------------------------
Interest Income:
   Interest and fees on loans ..........   $13,175   $12,225   $26,169   $23,863
   Interest on investment securities:
     Taxable ...........................     1,982     1,902     3,770     3,735
     Non-taxable .......................       475       429       932       845
   Interest on federal funds sold ......       299        95       812       267
                                           -------   -------   -------   -------
   Total interest income ...............   $15,931   $14,651   $31,683   $28,710
                                           -------   -------   -------   -------

Interest Expense:
   Interest on deposits ................   $ 6,857   $ 5,928   $13,927   $11,334
   Interest on securities sold under
     agreements to repurchase                  160       129       343       262
  Interest on FHLB borrowings .........      1,766     1,897     3,513     3,850
                                           -------   -------   -------   -------

   Total interest expense ..............   $ 8,783   $ 7,954   $17,783   $15,446
                                           -------   -------   -------   -------
   Net interest income .................   $ 7,148   $ 6,697   $13,900   $13,264

Provision for loan losses ..............       225       201       450       474
                                           -------   -------   -------   -------

   Net interest income after provision
     for loan losses                       $ 6,923   $ 6,496   $13,450   $12,790
                                           -------   -------   -------   -------

Other income:
   Loan origination fees ...............   $   337   $    65   $   483   $   112
   Trust fees ..........................       616       578     1,210     1,167
   Deposit account charges and fees ....       792       630     1,502     1,199
Other expenses:
   Salaries and employee benefits ......   $ 2,906   $ 2,620   $ 5,689   $ 5,280
   Occupancy ...........................       419       331       858       671
   Furniture and equipment .............       640       509     1,248       995
   Office supplies and postage .........       301       259       583       500
   Other operating .....................     1,301     1,163     2,440     2,331
                                           -------   -------   -------   -------
                                           $ 5,567   $ 4,882   $10,818   $ 9,777
                                           -------   -------   -------   -------
   Income before income taxes ..........   $ 3,680   $ 3,479   $ 7,019   $ 6,667

Federal and state income taxes .........     1,146     1,080     2,178     2,064
                                           -------   -------   -------   -------

   Net income ..........................   $ 2,534   $ 2,399   $ 4,841   $ 4,603
                                           =======   =======   =======   =======

Earning per common share:
     Basic .............................   $  1.69   $  1.60   $  3.23   $  3.08
     Diluted ...........................      1.68      1.59      3.21      3.05

See Notes to Financial Statements


<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)
<TABLE>

                                                   Three Months Ended       Six Months Ended
                                                        June 30                  June 30
                                                     2001       2000        2001         2000
                                                   ------------------      ------------------
<S>                                               <C>        <C>          <C>        <C>

Net Income .....................................  .$ 2,534    $ 2,399      $ 4,841    $ 4,603
                                                   -------    -------      -------    -------

Other comprehensive income:
   Unrealized gains (losses) on debt securities .      156        137        2,498       (230)
   Income tax effect of unrealized gains (losses)      (57)       (51)        (923)        85
                                                   -------    -------      -------    -------
              Other comprehensive income (loss) .      145         86         1575       (145)
                                                   -------    -------      -------    -------

   Comprehensive Income .........................  $ 2,633    $ 2,485      $ 6,416    $ 4,458
                                                   =======    =======      =======    =======
</TABLE>

<PAGE>

                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Six Months Ended June 30, 2001 and 2000
                                 (In Thousands)
<TABLE>

                                                                                                   Less
                                                                                                  Maximum
                                                                              Accumulated          Cash
                                                                                Other           Obligation
                                                   Capital      Retained     Comprehensive       To ESOP
                                                    Stock       Earnings        Income            Shares          Total
                                                    -----       --------       ------           ----------        -----
<S>                                                <C>          <C>           C>               <C>             <C>
Balance, December 31, 2000 $ ........               $10,197     $ 69,179      $     698         $ (11,550)      $ 68,524
  Net income ........................                 - - -        4,841          - - -             - - -          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>

<TABLE>
                                                                                                    Less
                                                                                                   Maximum
                                                                                Accumulated         Cash
                                                                                   Other          Obligation
                                                   Capital       Retained      Comprehensive        To ESOP
                                                    Stock        Earnings          Income           Shares       Total
                                                    -----       --------           ------         ----------      -----
<S>                                               <C>           <C>             <C>              <C>             <C>
Balance, December 31, 1999..........   $           $10,214        $61,984         $   (981)        $(10,953)       $ 60,264
  Net income ......................                  - - -          4,603            - - -            - - -           4,603
  Cash dividends ($1.45 per share)                   - - -         (2,169)           - - -            - - -          (2,169)
  Change related to ESOP shares ...                  - - -          - - -            - - -             (391)           (391)
  Other comprehensive income (loss)                  - - -          - - -             (145)           - - -            (145)
                                                  --------       ---------      ----------         --------        --------
  Balance, June 30, 2000 ..........   $            $10,214        $ 64,418        $ (1,126)        $(11,344)       $ 62,162
                                                  ========       =========      ==========         ========        ========
</TABLE>

See Notes to Financial Statements.

<PAGE>


                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 2001 and 2000
                                 (In Thousands)

                                                               2001        2000
                                                               ----        ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...............................................    $ 4,841   $ 4,603
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation .........................................        964       680
    Provision for loan losses ............................        450       474
    Deferred income taxes ................................        149       161
    (Increase) decrease in accrued interest receivable ...       (316)     (740)
    Amortization of bond discount ........................         58        33
    (Increase) in other assets ...........................       (559)      378
    Amortization of intangibles ..........................        171       172
    Increase in accrued interest and other liabilities ...         41       182
                                                             --------    -------
    Net cash provided by operating activities ............   $  5,799  $  5,943
                                                             --------    -------

CASH FLOWS FROM  INVESTING  ACTIVITIES
 Proceeds  from  maturities of investment securities:
    Available for sale ...................................   $ 34,587  $ 13,531
    Held to maturity .....................................      2,104     1,568
Purchase of investment securities, available for sale ....    (55,397)  (16,489)
Federal funds sold, net ..................................     19,000         6
Loans made to customers, net of collections ..............    (14,510)  (40,427)
Purchases of property and equipment ......................     (3,391)   (2,237)
                                                             --------    -------
    Net cash (used in) investing activities ..............   $(17,607) $(44,048)
                                                             --------  ---------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits ..................   $ 22,210  $ 36,791
    Net increase (decrease) in fed funds purchased and
       securities sold under agreements to repurchase ....       (928)  (10,961)
    Borrowings from FHLB .................................      - - -    40,000
   Payments on FHLB notes ................................      - - -   (23,000)
    Issuance of stock upon exercise of stock options .....         44     - - -
    Income tax benefits on stock options exercised .......         30     - - -
    Dividends paid .......................................     (2,393)   (2,169)
                                                             --------  ---------
       Net cash provided by financing activities .........   $ 18,963  $ 40,661
                                                             --------  ---------
       Increase in cash and due from banks ...............   $  7,155  $  2,556

CASH AND DUE FROM BANKS
    Beginning ............................................     25,669    21,765
                                                             --------  ---------
    Ending ...............................................   $ 32,824  $ 24,321
                                                             ========  =========

SUPPLEMENTAL DISCLOSURES
     Cash payments for:
       Interest paid to depositors and others ............   $ 14,079  $ 11,121
       Interest paid on other obligations ................      3,856     4,112
     Non-cash financing transaction,
       increase in maximum cash obligation related
        to ESOP shares ...................................        300       391

See Notes to Financial Statements.


<PAGE>


                              HILLS BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

Note 1.       Interim Financial Statements

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

              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, 1999.

              There  were  no  changes  in  accounting   policies  which  had  a
              significant   effect  on  the   interim   consolidated   financial
              statements for the periods presented.

              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
              llowance for loan losses:
                                                             (In thousands)
                                                               June 30
                                                      2001            2000
                                                      ----            ----

              Agricultural .................            $ 32,213   $ 30,131
              Commercial and financial .....              39,311     35,927
              Real estate, construction ....              40,840     40,417
              Real estate, mortgage ........             505,730    477,892
              Loans to individuals .........              33,165     30,927
                                                        --------   --------
                                                        $651,259   $615,294
              Less allowance for loan losses              10,326      9,960
                                                        --------   --------
                                                        $640,933   $605,334
                                                        ========   ========

              Transactions in the allowance for loan losses are as follows:

                                                           (In thousands)
                                                             Six Months
                                                           Ended June 30
                                                        2001            2000
                                                        ----            ----

              Balance, beginning ...........         $ 10,428       $  9,750
              Provision charged to expense                450            474
                Net charge-offs ............             (552)          (264)
                                                     --------       --------
              Balance, ending ..............         $ 10,326       $  9,960
                                                     ========       ========



<PAGE>


                              HILLS BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

    The following summarizes the Company's  nonaccrual,  past due,  restructured
and impaired loans:
                                                     (In thousands)
                                                         June 30
                                                2001                2000
                                              ---------           --------

Nonaccrual .............................       $1,993            $ - - -
Accruing loans, past due 90 days or more        1,627              2,172
Restructured loan ......................        - - -              - - -
Impaired loans .........................       $7,708              8,837


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 eliminates
               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 eliminates 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 are generally  effective  January 1, 2002. The Company
               anticipates  that goodwill will be evaluated for  impairment  and
               that the  amortization  of  substantially  all  goodwill  will be
               suspended on January 1, 2001. Annual goodwill amortization totals
               $261,000.

               In July 2001,  the  Securities  and Exchange  Commission  issued
               Staff Accounting  Bulletin No. 102, "Selected Loan Loss Allowance
               Methodology  and  Documentation  Issues." The  bulletin  does not
               change accounting guidance for the Allowance for Loan Losses, but
               does provide  significant  interpretation  of the manner in which
               institutions  should develop and document their  methodology  for
               calculating  the allowance for loan losses,  as well as measuring
               the  adequacy  of such.  Management  is in the  early  stages  of
               comparing its  documentation  and  methodology  to determine what
               changes and  adjustments to the allowance for loan losses will be
               needed.  This process is  anticipated  to be completed in the 4th
               quarter of 2001.


<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

During  the  second   quarter  of  2001  Hills  Bank  and  Trust  Company  began
construction  of a new Eastside Iowa City branch office to replace the currently
leased  location.  The new 5,800 square feet one story  building will have three
drive-up  lanes and a drive-up ATM when it opens in December  2001. In the first
quarter  2001  the  Company  relocated  personnel  and  equipment  from  several
locations to the Bank's new bank operations  center building  addition in Hills,
Iowa to help centralize all bank operations.  In addition, the 6,000 square feet
expansion and remodeling of the Coralville  office location was completed in the
first quarter if 2001.

Financial Position

Assets as of June 30, 2001 totaled $901.2 million and represent an $81.9 million
increase in assets from one year ago.  Net loans  increased  in the last year by
$35.6 million with the majority of this increase in real estate loans. The local
economy  continues to be strong and the housing market,with interest rates lower
than one year ago, is still experiencing growth.

The Banks also  increased the investment  securities  portfolio by $24.9 million
compared to June 30,2000.  Investment rates on U.S. Treasury  securities in 2001
continued to decrease.  For example,  most rates with  maturities up to 10 years
are 150 to 225 basis  points  less than one year ago.  These rates have a direct
effect on investment  securities  rates,  loan rates including  secondary market
loans and on cost of funds that consist of both deposits and borrowings from the
Federal Home Loan Bank.

These  increases in loans and  securities  were funded by a significant  deposit
growth in the last year of $76.0  million.  Because the growth of  deposits  the
Company  reduced its  borrowing  from the Federal  Home Loan Bank by $5 million.
Since June 30, 2000. Due to the continued loan demand and challenges for funding
sources,   asset-liability  management  continues  to  be  very  important.  The
asset-liability 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.

In January 2001, Hills Bancorporation paid a dividend of $2,393,000 or $1.60 per
share, a 10.34%  increase from the $1.45 paid in January 2000.  After payment of
the  dividend  and  adjustment  to  accumulated  other   comprehensive   income,
stockholders'  equity  as of  June  30,  2001  totaled  $72,321,000.  The  total
stockholders'  equity of Hills  Bancorporation  as of June 30,  2001  before the
reduction for the ESOP shares,  totaled 9.34% of total assets.  Under risk-based
capital rules,  the total risk based capital is 14.58% of risk adjusted  assets,
and substantially in excess of required minimums.
<PAGE>

Liquidity

The  Company  actively  monitors  and manages its  liquidity  position  with the
objective of maintaining  sufficient cash flows to fund operations,  meet client
commitments, take advantage of market opportunities and provide a margin against
unforeseeable  liquidity  needs.  Federal  funds  sold,  loans held for sale and
investment   securities  available  for  sale  are  readily  marketable  assets.
Maturities of all investment securities are managed to meet the Company's normal
liquidity needs.  Investment  securities available for sale may be sold prior to
maturity to meet liquidity  needs, to respond to market changes or to adjust the
Company's  interest rate risk position.  Readily  marketable  assets, as defined
above, comprised 17.8% of the Company's total assets at June 30, 2001.

Net  cash  provided  from  Company  operations  is  another  primary  source  of
liquidity. For the six months ended June 30, 2001 and 2000, net cash provided by
operating activities was $5,799,000 and $5,943,000,  respectively. The Company's
trend of  increasing  cash flows from  operations  is  expected to resume in the
foreseeable future due to the Company's growth.

The Company has  historically  maintained a stable deposit base and a relatively
low level of large  deposits,  which  result  in a low  dependence  on  volatile
liabilities.  As of June 30, 2001, the Company had advances of $120,668,000 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 $176 million at June 30, 2001.

The combination of high levels of potentially  liquid assets,  low dependence on
volatile  liabilities  and additional  borrowing  capacity  provided  sufficient
liquidity for the Company at June 30, 2001.

Results of Operations

Net income for the  quarter and six months  ended June 30, 2001  compared to the
same periods in 2000 had increases of $135,000 and $238,000,  respectively.  For
both  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 and higher real estate loan  origination  fees.  Average  earning
assets were approximately $80.0 million higher for the six months ended June 30,
2001  compared to the same period in 2000.  Other  income,  which  included loan
origination  fees,  increased  over the prior  periods by $459,000 for the three
months  ended June 30, 2001 and  $733,000 for the six month ended June 30, 2001.
Loan origination fees for the quarter and six months in 2001 increased  $272,000
and $371,000,  respectively,  as interest rates  decreased  during the first six
months of 2000. The lower interest rates contributed to refinancing and new real
estate loan  orginations.  Trust fees,  deposit  account  charges and other fees
increased  $187,000  for the three  months ended March 31, 2001 and $362,000 for
the six months ended June 30, 2001 compared to comparable periods in 2000. Trust
fees  increased  $43,000 for the six months ended June 30, 2001  compared to the
same  period in 2000.  The  increase in trust fees was  realized  because of new
trust assets  under  management  and despite the  reduction in assets due to the
stock market.  Deposit account charges and fees increased  $162,000 and $303,000
for the three and six months  period ending June 30, 2001 compared to comparable
periods ended June 30, 2000 due to both volume changes and fee increases.

Other expenses for the quarter ended June 30, 2001 were  $5,567,000  compared to
$4,882,000  for the same time frame in 2000.  For the six months  ended June 30,
2001 other  expenses  totaled  $10,818,000,  an increase of $1,041,000  from the
first six months in 2000.  Salaries and benefits  accounted  for $409,000 of the
increase  and were  direct  result  of  salary  adjustments  in 2001  and  staff
additions  at  various  locations.  The new  operations  center in Hills and the
Coralville expansion accounted for the major change in the occupancy expense and
furniture and equipment  expenses,  which increased  $440,000 for the six months
ended June 30, 2001 compared to June 30, 2000.

Earnings per share, both basic and diluted, increased for the quarter ended June
30, 2001 compared to 2000.  For the period ended June 30, 2001 basic and diluted
earnings per share  totaled $1.69 and $1.68 in comparison to $1.60 and $1.59 for
the quarter  ended June 30,  2000.  Earnings  per share for the six months ended
June 30,  2001 and June 30,  2000 were  $3.23 and $3.08 for basic  earnings  per
share and $3.21 and $3.05 for diluted earnings per share.

<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  form 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 2001 changed significantly when
compared to 2000.

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,  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.


<PAGE>


                              HILLS BANCORPORATION
                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

              There are no material pending legal proceedings.

Item 2.       Changes in Securities and Use of Proceeds

              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  16,  2001,  the  security
              holders approved the following:

              1.   Election of Michael E. Hodge,  Richard W. Oberman and Sheldo
                   E. Yoder, DVM to three-year  terms to the Board of Directors
                   expiring at the 2004 AnnualMeeting.

Item 5.       Other Information

              None

Item 6.       Exhibits and Reports on Form 8-K

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

              (b) Reports on Form 8-K
                  No  reports on Form 8-K have been  filed  during the  quarter
                  ended June 30, 2001.


<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, 2001                    /s/ Dwight O. Seegmiller
-------------------                 ------------------------------------------
Date                                Dwight O. Seegmiller, President

                                    (Duly authorized officer of the registrant)

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














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