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, 1999
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, 1999
- -------------------------- ------------------
Common Stock, no par value 1,493,867
<PAGE>
HILLS BANCORPORATION
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
Page
Number
------
Item 1. Financial Statements
Consolidated balance sheets, June 30, 1999 (unaudited)
and December 31, 1998
Consolidated statements of income, (unaudited) for three
and six months ended June 30, 1999 and 1998
Consolidated statements of comprehensive income,
(unaudited) for three and six months ended June 30,
1999 and 1998.
Consolidated statements of stockholders' equity,
(unaudited) for six months ended June 30, 1999
and 1998
Consolidated statements of cash flows (unaudited) for
six months ended June 30, 1999 and 1998
Notes to consolidated financial statements
Item 2. Management's discussion and analysis of financial
condition and results of operations
Part II
OTHER INFORMATION
Item 1. Legal proceedings
Item 2. Changes in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to vote of security holders
Item 5. Other information
Item 6. Exhibits and reports on Form 8-K
COMPUTATION OF EARNINGS PER SHARE
SIGNATURES
<PAGE>
HILLS BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30,
1999 December 31,
Unaudited 1998*
-----------------------
ASSETS
Cash and due from banks ............................. $ 17,320 $ 16,427
Investment securities:
Available for sale (amortized cost June 30, 1999
$128,028; December 31, 1998 $121,974) .......... 127,733 123,835
Held to maturity (fair value June 30, 1999
$19,318; December 31, 1998 $21,740) ............ 19,076 21,168
Stock of Federal Home Loan Bank .................. 4,931 4,347
Federal funds sold .................................. 11,916 36,811
Loans, net .......................................... 509,380 460,911
Property and equipment, net ......................... 11,689 11,193
Accrued interest receivable ......................... 6,659 5,885
Deferred income taxes, net .......................... 2,702 1,838
Other assets ........................................ 8,049 7,372
----------------------
$ 719,455 $ 689,787
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing deposits ........................ $ 62,681 $ 68,100
Interest-bearing deposits ........................... 482,327 466,051
----------------------
Total deposits ................................... $ 545,008 $ 534,151
Federal funds purchased and securities sold under
agreements to repurchase ......................... 8,489 10,554
Federal Home Loan Bank notes ........................ 93,732 75,732
Accrued interest payable ............................ 2,024 2,048
Other liabilities ................................... 2,619 1,549
----------------------
$ 651,872 $ 624,034
----------------------
REDEEMABLE COMMON STOCK HELD BY EMPLOYEE STOCK
OWNERSHIP PLAN (ESOP) ............................ $ 10,269 $ 9,301
----------------------
STOCKHOLDERS' EQUITY
Capital stock, common, no par value; authorized
10,000,000 shares; issued June 30, 1999 -
1,493,867 shares; December 31, 1998 -
1,469,443 shares ................................. $ 9,785 $ 9,140
Retained earnings ................................... 57,985 55,428
Accumulated other comprehensive income,
unrealized gains on investment securities, net ... (187) 1,185
----------------------
$ 67,583 $ 65,753
Less, maximum cash obligation related to
ESOP shares ...................................... 10,269 9,301
----------------------
$ 57,314 $ 56,452
----------------------
$ 719,455 $ 689,787
======================
* 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, 1999 and 1998
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
1999 1998 1999 1998
------------------ -----------------
Interest Income:
Interest and fees on loans .......... $10,215 $ 9,367 $19,878 $18,542
Interest on investment securities:
Taxable ........................... 1,776 1,686 3,527 3,366
Non-taxable ....................... 384 330 763 665
Interest on federal funds sold ...... 96 296 357 543
----------------- -----------------
Total interest income ............... $12,471 $11,679 $24,525 $23,116
----------------- -----------------
Interest Expense:
Interest on deposits ................ $ 5,188 $ 5,042 $10,278 $10,068
Interest on securities sold under
agreements to repurchase .......... 94 81 195 169
Interest on FHLB borrowings ......... 1,042 1,146 2,119 2,171
----------------- -----------------
Total interest expense .............. $ 6,324 $ 6,269 $12,592 $12,408
----------------- -----------------
Net interest income ................. $ 6,147 $ 5,410 $11,933 $10,708
Provision for loan losses .............. 204 204 408 408
----------------- -----------------
Net interest income after provision
for loan losses ................... $ 5,943 $ 5,206 $11,525 $10,300
----------------- -----------------
Other income:
Loan origination fees ............... $ 205 $ 182 $ 404 $ 334
Trust fees .......................... 500 406 1,026 863
Deposit account charges and fees .... 532 459 984 893
Other fees and charges .............. 440 358 918 731
----------------- -----------------
$ 1,677 $ 1,405 $ 3,332 $ 2,821
----------------- -----------------
Other expenses:
Salaries and employee benefits ...... $ 2,473 $ 2,168 $ 4,815 $ 4,233
Occupancy ........................... 297 305 590 575
Furniture and equipment ............. 459 418 910 828
Office supplies and postage ......... 258 307 524 589
Other operating ..................... 1,110 965 2,005 1,838
----------------- -----------------
$ 4,597 $ 4,163 $ 8,844 $ 8,063
----------------- -----------------
Income before income taxes .......... $ 3,023 $ 2,448 $ 6,013 $ 5,058
Federal and state income taxes ......... 942 715 1,853 1,481
----------------- -----------------
Net income .......................... $ 2,081 $ 1,733 $ 4,160 $ 3,577
================= =================
Earning per common share:
Basic ............................. $ 1.40 $ 1.18 $ 2.80 $ 2.44
Diluted ........................... 1.39 1.16 2.78 2.40
See Notes to Financial Statements
<PAGE>
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 1999 and 1998
(In Thousands, Except Per Share Data)
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1999 1998 1999 1998
------------------ ------------------
<S> <C> <C> <C> <C>
Net Income ...................................... $ 2,081 $ 1,733 $ 4,160 $ 3,577
Other comprehensive income:
Unrealized gains (losses) on debt securities . (1,301) (122) (2,156) 62
Income tax effect of unrealized gains (losses) 483 44 784 (24)
------------------ ------------------
Comprehensive Income ............................ $ 1,263 $ 1,655 $ 2,788 $ 3,615
================== ==================
</TABLE>
<PAGE>
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1999 and 1998
(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, January 1, 1999 ................ $ 9,140 $ 55,428 $ 1,185 $ (9,301) $ 56,452
Net income .............................. - - - 4,160 - - - - - - 4,160
Change related to ESOP shares ........... - - - - - - - - - (968) (968)
Cash dividends ($1.30 per share) ........ - - - (1,911) - - - - - - (1,911)
Other comprehensive income .............. - - - - - - (1,372) - - - (1,372)
Issuance of 24,424 shares of common stock 645 - - - - - - - - - 645
Income tax benefit related to
stock options exercised .............. - - - 308 - - - - - - 308
----------------------------------------------------------
Balance, June 30, 1999 .................. $ 9,785 $ 57,985 $ (187) $(10,269) $ 57,314
==========================================================
Balance, January 1, 1998 ................ $ 9,070 $49,627 $ 485 $(7,682) $ 51,500
Net income .............................. - - - 3,577 - - - - - - 3,577
Change related to ESOP shares ........... - - - - - - - - - (800) (800)
Cash dividends ($1.20 per share) ........ - - - (1,763) - - - - - - (1,763)
Other comprehensive income .............. - - - - - - 38 - - - 38
----------------------------------------------------------
Balance, June 30, 1998 .................. $ 9,070 $ 51,441 $ 523 $(8,482) $52,552
==========================================================
</TABLE>
See Notes to Financial Statements.
<PAGE>
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
(In Thousands)
<TABLE>
1999 1998
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................................... $ 4,160 $ 3,577
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation ............................................................... 714 658
Provision for loan losses .................................................. 408 408
Deferred income taxes ...................................................... (60) - - -
Compensation paid by issuance of common stock .............................. 20 - - -
(Increase) decrease in accrued interest receivable ......................... (774) (1,497)
Amortization of bond discount .............................................. 245 139
(Increase) in other assets ................................................. (849) 346
Amortization of intangibles ................................................ 172 172
Increase in accrued interest and other liabilities ......................... 1,046 (179)
--------------------
Net cash provided by operating activities .................................. $ 5,082 $ 3,624
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities:
Available for sale ......................................................... $ 19,637 $ 13,499
Held to maturity ........................................................... 2,241 2,086
Purchase of investment securities, available for sale .......................... (26,689) (14,459)
Federal funds sold, net ........................................................ 24,895 (14,684)
Loans made to customers, net of collections .................................... (48,877) (15,776)
Purchases of property and equipment ............................................ (1,210) (1,768)
--------------------
Net cash (used in) investing activities .................................... $(30,003) $(31,102)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits ........................................ $ 10,857 $ 10,992
Net increase (decrease) in fed funds purchased and
securities sold under agreements to repurchase .......................... (2,065) (3,669)
Borrowings from FHLB ....................................................... 25,000 40,000
Payments on FHLB notes ..................................................... (7,000) (15,000)
Stock options exercised .................................................... 625 - - -
Income tax benefits on stock options exercised ............................. 308 - - -
Dividends paid ............................................................. (1,911) (1,762)
--------------------
Net cash provided by financing activities ............................... $ 25,814 $ 30,561
--------------------
(Decrease) in cash and due from banks ................................... $ 893 $ 3,083
CASH AND DUE FROM BANKS
Beginning .................................................................. 16,427 15,508
--------------------
Ending ..................................................................... $ 17,320 $ 18,591
====================
SUPPLEMENTAL DISCLOSURES
Cash payments for:
Interest paid to depositors and others .................................. $ 10,282 $ 10,164
Interest paid on other obligations ...................................... 2,314 2,340
Non-cash financing transactions:
Increase in maximum cash obligation related
to ESOP shares ......................................................... 968 800
Net unrealized gains (losses) on debt securities ........................ (2,156) 62
</TABLE>
See Notes to Financial Statements.
<PAGE>
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Interim Financial Statements
Interim consolidated financial statements have not been examined by independent
public accountants, but include all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary for a
fair presentation of the results for these periods. The results of operation for
the interim periods are not necessarily indicative of the results for a full
year.
For purposes of reporting cash flows, cash and due from banks includes cash on
hand and amounts due from banks (including cash items in process of clearing).
Cash flows from demand deposits, NOW accounts, savings accounts, and federal
funds purchased and sold are reported net since their original maturities are
less than three months. Cash flows from loans and time deposits are presented as
net increases or decreases.
Note 2. Loans
The following tables set forth the composition of loans and the allowance for
loan losses:
(In thousands)
June 30
---------------------------
1999 1998
---------------------------
Agricultural ............................... $ 27,997 $ 28,881
Commercial and financial ................... 34,300 34,376
Real estate, construction .................. 38,634 18,618
Real estate, mortgage ...................... 382,741 328,229
Loans to individuals ....................... 34,935 36,134
---------------------------
$ 518,607 $ 446,238
Less allowance for loan losses ............. (9,227) (8,109)
---------------------------
$ 509,380 $ 438,129
===========================
Transactions in the allowance for loan losses are as follows:
(In thousands)
Six Months Ended June 30
------------------------
1999 1998
------------------------
Balance, beginning ........................... $ 8,856 $ 8,010
Provision charged to expense ............... 408 408
Net charge-offs ............................ (37) (309)
------------------------
Balance, ending .............................. $ 9,227 $ 8,109
========================
The following summarizes the Company's nonaccrual, past due, restructured and
impaired loans:
(In thousands)
June 30
--------------
1999 1998
--------------
Nonaccrual .................................... $ - - $ - -
Accruing loans, past due 90 days or more ...... 1,749 1,065
Restructured loan ............................. - - - -
Impaired loans ................................ 9,413 7,309
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.
<PAGE>
PART I, ITEM 2.
HILLS BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The consolidated balance sheet of Hills Bancorporation as of June 30, 1999
reflects total assets of $719.5 million, which is an increase of $29.7 million
from December 31, 1998. Net loans increased from $460.9 million to $509.4
million, which represents an increase of $48.5 million from December 31, 1998.
Compared to one year ago, total assets have increased from $637.1 million to
$719.5 million for an increase of $82.4 million. Also during this time, net
loans increased $71.3 million to $509.4 million as of June 30, 1999. The major
portion of the loan increase was in real estate loans, with loans secured by 1-4
family mortgages accounting for the largest change. The local and national
economy continues to be strong and coupled with the interest rates have aided in
the increase in loans outstanding. Investment securities in one year increased
from $136.9 million to $151.7 million for the period from June 30, 1998 to June
30, 1999.
The growth in loans and investment securities in the last year was funded by an
increase in total deposits and securities sold under agreements to repurchase of
$57.4 million along with a net increase in Federal Home Loan Bank advances of
$18.0 million. In addition, federal funds sold decreased from $17.1 million to
$12.0 million and these funds assisted in the funding of the increase in assets.
Asset-liability management encompasses both the management of interest rate
sensitivity and the maintenance of adequate liquidity. Interest rate sensitivity
management attempts to provide the optimal level of net interest income while
managing exposure to risks associated with interest rate movements. Liquidity
management involves planning to meet anticipated funding needs. Management
monitors the rate sensitivity and liquidity positions on an on-going basis and,
when necessary, appropriate action is taken to minimize any adverse effects of
rapid interest rate movements or any unexpected liquidity concerns.
In January 1999, Hills Bancorporation paid a dividend of $1.30 per share, a
8.33% increase from the $1.20 paid in January 1998. The total dividend of
$1,911,000 is deducted from stockholders' equity and is reflected in the
resulting stockholders' equity as of June 30, 1999 of $57,314,000. Stockholders'
equity at June 30, 1999 and December 31, 1998 reflects an adjustment for
unrealized gain (losses) on debt securities, net of income taxes. The total
stockholders' equity of Hills Bancorporation as of June 30, 1999 before the
reduction for the ESOP shares, as a percent of total assets is 9.39%. Under
risk-based capital rules, total capital is 14.63% of risk adjusted assets,
compared to the current 8% requirement.
Net income for the quarter and six months ended June 30, 1999 showed increases
of $348,000 and $583,000, respectively. For both periods the changes were
primarily 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 $60.5 million higher for the six months ended
June 30, 1999 compared to the same period in 1998. Other income increased over
the prior year by $272,000 for the three months ended June 30th and $511,000 for
the six month period shown. Significant increases occurred in loan origination
fees, trust fees and other fees and charges. Origination fees increased due to
the volume of secondary market loans processed, as overall rates were more
favorable than the prior year. Trust fees and other fees and charges increased
by $350,000 for the six months ended June 30, 1999 and was primarily due to more
trust assets under management and more accounts subject to fees and charges.
Other expenses for the six months ended June 30, 1999 were $8,844,000 or an
increase of $781,000 from the period ended June 30, 1998. Salaries and employee
benefits accounted for $582,000 of the increase and is the result of new staff
additions in 1999, salary adjustments in January 1999, and increases in medical
insurance claims over 1998 claims. All other expenses increased from $3,830,000
at June 30, 1998 to $4,029,000 at June 30, 1999 or $199,000, which was an
increase of 5.20%. The major category that increased was furniture and
equipment, which was $828,000 in 1998 and $910,000 in 1999 and was the result of
major computer hardware and software additions in 1998.
Earnings per share, both basic and diluted increased for the quarter ending June
30, 1999 compared to 1998. For the period ending June 30, 1999 basic and diluted
earnings per share were $1.40 and $1.39 in comparison to $1.18 and $1.16 for the
quarter ending June 30, 1998. The earnings per share for the six months ended
June 30, 1999 and June 30, 1998 were $2.80 and $2.44 for basic earnings per
share and $2.78 and $2.40 for diluted earnings per share.
<PAGE>
The Company's principal sources of funds continue to be prepayment of loan
principal and current amortized loan payments. In addition, funds are provided
from current operations. All of the funds are used to fulfill loan commitments,
make short-term investments, and fund any deposit withdrawals needed. The
Company has no material commitments or plans which will materially affect its
liquidity or capital resources. The acquisition of property and equipment may be
in cash purchases, or they may be financed if favorable terms are available.
Year 2000
The Year 2000 poses an important business issue regarding how existing
application software programs and operating systems can accommodate this date
value. Many computer programs that can only distinguish the final two digits of
the year entered are expected to read entries for the Year 2000 as the Year
1900. Like most financial service providers, the Company may be significantly
affected by the Year 2000 issues due to the nature of financial information.
Software, hardware and equipment both within and outside the Company's direct
control and with whom the Company electronically or operationally interfaces are
likely to be affected. If computer systems are not adequately changed to
identify the Year 2000, many computer applications could fail or create
erroneous results. As a result, many calculations that rely on the data field
information, such as interest, payment or due dates and other operating
functions, may generate results that could be significantly misstated, and the
Company could experience a temporary inability to process transactions and
engage in normal business activities.
All of the significant computer programs of the Company that could be affected
by this issue are provided by major third-party vendors. In 1998, the Company
completed the replacement/upgrading of most of its computer systems and
programs, as well as most equipment, in order to provide cost-effective and
efficient delivery of services to customers, information to management, and to
provide additional capacity for processing information and transactions due to
acquisitions. The third-party vendors have advised the Company that all such
computer systems and programs either are or shortly will be Year 2000 compliant.
The Company completed off-site testing of its major applications in 1998.
The total cost of the Year 2000 project was approximately $1,180,000 for
capitalized hardware and software and an additional $88,000 in expenses charged
to earnings in 1998. Management estimates the cost of the remediation effort to
make the Company's systems Year 2000 ready will be approximately $40,000 to be
charged to expense in 1999 and $105,000 to be capitalized in 1999. In addition,
it is estimated that 2,000 man hours will be incurred by Company personnel
related to Year 2000 issues at an approximate cost of $40,000. Such costs will
be charged to expense as they are incurred.
The Company is developing a Year 2000 contingency plan that addresses, among
other issues, critical operations and potential failures thereof, and strategies
for business continuation. The contingency plan includes back up power sources,
off-site processing of data and a detailed listing of responsibilities among
various employees of their contingency plan duties. The plan is expected to be
finalized during the third quarter of 1999.
The Company could incur losses if loan payments are delayed due to Year 2000
problems affecting significant borrowers. The Company is communicating with such
parties to assess their progress in evaluating and implementing any corrective
measures required by them to be Year 2000 ready. To date, the Company has been
advised by such parties that they have plans in place to address and correct the
issues associated with the Year 2000 problem; however, no assurance can be given
as to the adequacy of such plans or to the timeliness of their implementation.
As part of the current credit approval process, new and renewed loans are
evaluated as to the borrower's Year 2000 readiness. Management does not
anticipate significant loan losses related to this issue.
Although management believes the Company's computer systems and service
providers will be Year 2000 ready, there can be no assurance that these systems,
or those systems of other companies on which the Company's systems rely, will be
fully functional in the Year 2000. Such failure could have a significant adverse
impact on the financial condition and results of operations of the Company. In
addition, there could be a material effect to the financial statements if there
are significant interruptions in basic services, such as the electric power
grid, telephone services or the banking system. These risks cannot be estimated.
<PAGE>
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.
<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 19, 1999, the security holders
approved the election of Theodore H. Pacha, Ann Marie Rhodes and
Ronald E. Stutsman to three-year terms to the Board of Directors
expiring at the 2002 Annual Meeting.
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, 1999.
<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 13, 1999 /s/ Dwight O. Seegmiller
- --------------------------- -------------------------------------------
Date Dwight O. Seegmiller, President
(Duly authorized officer of the registrant)
/s/ James G. Pratt
-------------------------------------------
James G. Pratt, Treasurer
(Principal Financial Officer)
HILLS BANCORPORATION
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1999 1998 1999 1998
--------------------- ---------------------
<S> <C> <C> <C> <C>
Weighted average number of shares outstanding (basic) . 1,484,525 1,467,754 1,476,139 1,467,754
Weighted average of potential dilutive shares
attributable to stock options granted computed under
the treasury stock method .......................... 11,871 20,563 16,217 21,931
--------- --------- --------- ---------
Weighted average number of shares (diluted) ........... 1,496,396 1,488,317 1,492,356 1,489,685
========= ========= ========= =========
Earnings Per Share:
Net income (in thousands) .......................... $ 2,081 $ 1,733 $ 4,160 $ 3,577
========= ========= ========= =========
Earnings per common share:
Basic ............................................ $ 1.40 $ 1.18 $ 2.80 $ 2.44
========= ========= ========= =========
Diluted .......................................... 1.39 1.16 2.78 2.40
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE JUNE 30, 1999 FORM
10-Q OF HILLS BANCORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,320
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,916
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 127,733
<INVESTMENTS-CARRYING> 19,076
<INVESTMENTS-MARKET> 19,318
<LOANS> 518,607
<ALLOWANCE> 9,227
<TOTAL-ASSETS> 719,455
<DEPOSITS> 545,008
<SHORT-TERM> 27,089
<LIABILITIES-OTHER> 4,643
<LONG-TERM> 75,132
10,269
0
<COMMON> 9,785
<OTHER-SE> 47,529
<TOTAL-LIABILITIES-AND-EQUITY> 719,455
<INTEREST-LOAN> 19,878
<INTEREST-INVEST> 4,290
<INTEREST-OTHER> 357
<INTEREST-TOTAL> 24,525
<INTEREST-DEPOSIT> 10,278
<INTEREST-EXPENSE> 12,592
<INTEREST-INCOME-NET> 11,933
<LOAN-LOSSES> 408
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,844
<INCOME-PRETAX> 6,013
<INCOME-PRE-EXTRAORDINARY> 4,160
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,160
<EPS-BASIC> 2.80
<EPS-DILUTED> 2.78
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 1,749
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 9,413
<ALLOWANCE-OPEN> 8,856
<CHARGE-OFFS> 37
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 9,227
<ALLOWANCE-DOMESTIC> 9,227
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
