HILLS BANK AND TRUST COMPANY

                           DEFERRED COMPENSATION PLAN




THIS AGREEMENT, entered into this 1st day of September, 1995, between Hills Bank
and Trust Company,  a Corporation  organized under the laws of the State of Iowa
(Employer) and Dwight O. Seegmiller (Employee).

In consideration  of the agreements  hereinafter  contained,  the parties hereto
agree as follows:

1.    The Employer  agrees to provide the Employee with a deferred  compensation
      arrangement in conjunction with his employment with the Employer.

2.    (a) The Employee shall be given the opportunity to elect to reduce his
          salary by executing a salary reduction agreement on a form provided by
          the Employer.  Said agreement shall be executed prior to the first pay
          period to which it is to be  applicable,  and shall specify the amount
          and method of reduction in the salary of the  Employee.  The agreement
          shall limit the annual  amount  that can be deferred  into the plan by
          the employee to no more than fifteen percent of said Employee's stated
          compensation.

     (b)  In addition to the amounts credited to this plan pursuant to paragraph
          2(a) above,  the Employer may elect to credit an additional  amount to
          the plan.  Said amount must be determined by the Employer prior to the
          end of the calendar year in which it is to be credited to the plan. It
          is the intent of the Employer to credit an amount into this plan equal
          to the benefit the  Employee is not able to receive in the  Employer's
          qualified plans due to statutory and administrative limitations.

3.   (a)  The  Employer  shall  credit  to a book  reserve  ("the  deferred
          compensation  account")  any such amounts that the Employee  elects to
          defer  pursuant to  paragraph  2(a) above and any  additional  amounts
          which  the  Employer  elects to  credit  to the plan  during  the year
          pursuant to paragraph 2(b) above.  Amounts to be credited  pursuant to
          paragraph  2(a) shall be  credited  as of the last day of the month in
          which the salary reduction is made. Amounts to be credited pursuant to
          paragraph  2(b) shall be credited as of the date(s)  designated by the
          Employer.

     (b)  Other than the establishment of the deferred compensation account, the
          Employer  shall  not be  required  to set aside or in any way fund any
          amounts  credited  to  the  deferred   compensation  plan  under  this
          agreement.  Such book reserve  shall  constitute  an obligation on the
          part of the  Employer  that shall be  satisfied  only from the general
          assets of the Employer.

     (c)  The  deferred  compensation  account  will be  adjusted  annually by a
          growth factor to be determined as follows:

            A.  Amounts  deferred by the  Employee  during the year shall accrue
                interest  at a rate  equal  to the one  year  treasury  constant
                maturity  rate,  adjusted on each June 30 and  December 31. Such
                interest  accruals shall be calculated  from the last day of the
                month that the  Employee's  salary  deferral  is credited to the
                deferred  compensation  account up to December 31 of the year of
                such deferral.

                The account  shall also be credited with  interest,  at the same
                rate,  on any amounts paid to the Employee  from the  Employee's
                deferred  compensation  account  during the year.  Such interest
                shall  be  calculated  from  January  1 of the  year of  payment
                through  the end of  month  prior to the  month  in  which  such
                payment to the Employee is made.

            B.  The balance of the Employee's deferred  compensation  account as
                of January 1 of each year shall be adjusted as of December 31 of
                the same year by a factor representing the change in the S&P 500
                Index for that  year.  The  adjustment  shall be  calculated  by
                multiplying the January 1 balance (less any payments made to the
                Employee  during the year) by a ratio  equal to the S&P Index at
                December 31 divided by the S&P Index as of the previous  January
                1.
                
                Such adjustment can be either positive or negative.

<PAGE>


5.    The value of the deferred compensation account shall constitute the entire
      amount of  deferred  compensation  due to the  Employee  pursuant  to this
      agreement.

6.    The benefits to be paid to the Employee shall be as follows:

     (a)  In the event of termination of employment,  for whatever reason, prior
          to the  attainment  of age 60, the value of the deferred  compensation
          account shall be paid in full as soon as is administratively  possible
          after the end of the calendar year of termination. If the value of the
          deferred  compensation  account  at the  end of the  calendar  year of
          termination  is in excess of  $100,000,  the  Employer  shall have the
          option to pay fifty  percent of the deferred  compensation  account as
          soon as  administratively  possible after the end of the calendar year
          of  termination  and to pay  the  balance  of the  account  as soon as
          administratively possible after the end of the calendar year following
          the calendar year of termination.  For this purpose,  the value of the
          balance of the deferred compensation account after the initial payment
          shall be  determined  as of  December 31 of the year after the year of
          termination.

      (b)   In the event of  termination  of  employment,  for whatever  reason,
            after the  attainment of age 60, the deferred  compensation  account
            shall be paid in 10 annual  installments  commencing in the calendar
            year  following  the  year  of   termination  of  employment.   Each
            installment  shall  be  determined  by  dividing  the  value  of the
            deferred compensation account as of the end of the calendar year, by
            the number of installment  payments  remaining to be made.  Payments
            made   under   this   paragraph   shall   be  made  as  soon  as  is
            administratively possible following the end of each calendar year.

            If the deferred  compensation account decreases to less than $10,000
            as of  the  end of any  calendar  year  after  payments  under  this
            paragraph  have  commenced,  the  Employer  shall  have the right to
            accelerate the payment of the remaining balance in a single lump-sum
            payment.

      (c)   In  the  event  that  the  Employee's  employment  is  decreased  to
            part-time  status  after the  attainment  of age 60, the Board shall
            have the right to commence  distributions  pursuant to paragraph (b)
            above as if the Employee has terminated  employment in the year that
            his status  changes to part-time.  The Board shall have the right to
            elect  to  commence  distribution  by the end of any  calendar  year
            during or after the change in employment  status with  distributions
            beginning  in the  following  year (but not later  than the year the
            employee  attains age 65). Once  distributions  have commenced under
            this  paragraph  they  will  continue   pursuant  to  paragraph  (b)
            regardless of subsequent changes in employment status.

      (d)   If the Employee is still  employed at age 65, payment shall commence
            pursuant  to  paragraph  (b)  above  as if the  Employee  terminated
            employment in the year he reaches age 65.

7.    In the event of the death of the Employee prior to the complete payment of
      benefits  payable  pursuant  to this  plan,  payments  will  commence,  or
      continue in favor of the beneficiary designated by the Employee to receive
      such payments.  The beneficiary may be designated or changed  (without the
      consent of any prior  beneficiaries) by the Employee on a form provided by
      the Employer.  If no such beneficiary has been designated by the Employee,
      or if no designated  beneficiary shall survive the Employee,  payments due
      pursuant to this plan shall be paid to the personal  representative of the
      Employee's estate.

8.    If  payments  are to be  made to a  beneficiary  due to the  death  of the
      Employee,  said  beneficiary  shall  be  given  the  option  of  naming  a
      designated beneficiary.

9.    Nothing  contained in this  agreement and no action taken  pursuant to the
      provisions  of this  Agreement  shall  create or be  construed to create a
      trust of any kind,  or a fiduciary  relationship  between the Employer and
      the Employee, his designated beneficiary or any other person. In the event
      that the  Employer  would  decide to fund any  obligation  due under  this
      agreement,  such funds shall continue for all purposes to be a part of the
      general funds of the Employer and no person other than the Employer  shall
      by virtue of the provisions  contained in this agreement have any interest
      in such funds.  To the extent that any person  acquires a right to receive
      payments from the Employer pursuant to this agreement, such right shall be
      no  greater  than  the  right of any  unsecured  general  creditor  of the
      Employer.

10.   The rights of the  Employee or any other person to the payment of deferred
      compensation or other benefits under this agreement shall not be assigned,
      pledged  or  encumbered  except  by will or by the  laws  of  descent  and
      distribution.

 
<PAGE>


11.   All distributions made under this agreement shall be paid in cash, subject
      to any required federal or state tax  withholding.  The Employee shall not
      have the right to receive a  distribution  of shares of stock or any other
      property.

12.   Nothing  contained  herein  shall  be  construed  as  conferring  upon the
      Employee  the right to continue in the  employment  of the Employer in any
      capacity.

13.   The  Employer  shall  have the full  power  and  authority  to  interpret,
      construe and administer  this Plan and the Employer's  interpretation  and
      construction  thereof, and actions thereunder,  including any valuation of
      the deferred  compensation  account,  or the amount of or the recipient of
      the payment to be made  therefrom,  shall be binding and conclusive on all
      persons for all purposes.

14.   The Employer  reserves the right to discontinue  the Employee's  option to
      elect a  salary  reduction  amount  at any time  prior  to the  Employee's
      execution of salary reduction agreement.

15.   This  agreement  shall be construed in  accordance  with and governed by 
      the laws of the State of Iowa.

IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed by its
duly authorized officers and employees as of the 1st day of September, 1995.


                                              HILLS BANK AND TRUST COMPANY


                                         By:



                                         By: /s/ Dwight O. Seegmiller
                                             -----------------------------------
                                             Employer
                                             Dwight O. Seegmiller
                                             Employee