UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

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Check the appropriate box:

SCHEDULE 14A

~~(Rule 14a-101)~~

~~INFORMATION REQUIRED IN PROXY STATEMENT~~

SCHEDULE 14A INFORMATION

~~Proxy Statement Pursuant to Section 14(a) of the~~
~~Securities Exchange Act of 1934 (Amendment No. )~~

~~Filed by the Registrant [X]~~
~~Filed by a Party other than the Registrant [_]~~

~~Check the appropriate box:~~

~~[X]~~ Preliminary Proxy Statement

~~[_] Soliciting Material Under Rule 14a-12~~

~~[_]~~ o

Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

~~[_]~~ o

Definitive Proxy Statement

~~[_]~~ o

Definitive Additional Materials

o	Soliciting Material Pursuant to §240.14a-12

HILLS BANCORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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~~HILLS BANCORPORATION~~
~~(Name of Registrant as Specified In Its Charter)~~

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HILLS BANCORPORATION

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

April 21, 2014

The Annual Meeting of the Shareholders of Hills Bancorporation, an Iowa corporation (the “Company”), will be held at the Hills Community Center, Hills, Iowa, on Monday, the 21st day of April, 2014, at 4:00 o’clock p.m., local time, for the following purposes:

~~HILLS BANCORPORATION~~ ~~NOTICE OF ANNUAL MEETING OF SHAREHOLDERS~~ ~~April 19, 2004~~

The Annual Meeting of the Shareholders of Hills Bancorporation, an Iowa corporation (the “Company”), will be held at the Hills Community Center, Hills, Iowa, on Monday, the 19th day of April, 2004, at 4:00 o’clock p.m., local time, for the following purposes:

	1.	To elect ~~three~~four members of the Board of Directors.


	2.	To ~~ratify~~amend Article IX of the ~~selection~~Company’s Restated Articles of ~~KPMG, LLP as Hills Bancorporation’s~~Incorporation.

To approve a non-binding advisory vote on executive compensation.

To approve a non-binding advisory vote on the Company’s appointment of its independent ~~auditors for the fiscal year ending December 31, 2004.~~registered public accounting firm.


	3.5.	To transact such other business as may properly be brought before the meeting or any adjournments thereof.

The Board of Directors has fixed the close of business on March 15, 2004, as the record date for the determination of the shareholders entitled to notice of, and to vote at, the meeting. Accordingly, only shareholders of record at the close of business on that date will be entitled to vote at the meeting, or any adjournments thereof.

TO INSURE YOUR REPRESENTATION AT THE MEETING, THE BOARD OF DIRECTORS OF THE COMPANY SOLICITS YOU TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED AND, IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY WITHDRAW YOUR PROXY AND DO SO.

The Board of Directors has fixed the close of business on March 7, 2014, as the record date for the determination of the shareholders entitled to notice of, to attend, and to vote at, the meeting. Accordingly, only shareholders of record at the close of business on that date will be entitled to attend and vote at the meeting, or any adjournments thereof.

TO ENSURE YOUR REPRESENTATION AT THE MEETING, THE BOARD OF DIRECTORS OF THE COMPANY SOLICITS YOU TO MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED. IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES PERSONALLY, YOU MAY WITHDRAW YOUR PROXY AND DO SO.

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE

SHAREHOLDERS’ MEETING TO BE HELD ON APRIL 21, 2014.

Pursuant to the rules promulgated by the Securities and Exchange Commission, we have elected to provide access to our proxy materials both by: (i) sending you this full set of proxy materials, including a proxy card; and (ii) notifying you of the availability of our proxy materials on the internet.

This Notice of Annual Meeting, Proxy Statement, and our Annual Report to Shareholders for the fiscal year ended December 31, 2013, are available online and may be accessed at www.envisionreports.com/HBIA or www.edocumentview.com/HBIA. In accordance with applicable rules, we do not use “cookies” or other software that identifies visitors accessing these materials on this website. We encourage you to access and review all of the important information contained in the proxy materials before voting.

Date: March ~~22, 2004~~21, 2014	By Order of the Board of Directors

	/s/ Dwight O. Seegmiller

Hills Bancorporation	Dwight O. Seegmiller ~~President~~
131 Main Street	President and CEO
Hills, Iowa 52235

PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS OF

HILLS BANCORPORATION

To Be Held on April 21, 2014

TABLE OF CONTENTS

~~HILLS BANCORPORATION~~ ~~131 Main Street~~ ~~Hills, Iowa 52235~~	Page

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS ~~To Be Held on April 19, 2004~~	3


This Proxy Statement is furnished to shareholders of Hills Bancorporation (the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company for the Annual Meeting of Shareholders to be held April 19, 2004, and any adjournments thereof. This Proxy Statement and form of Proxy enclosed herewith are first sent to the shareholders of the Company entitled thereto on or about March 22, 2004. If the accompanying Proxy is properly signed and returned and is not withdrawn or revoked, the shares represented thereby will be voted in accordance with the specifications thereon. If the manner of voting such shares is not indicated on the Proxy, the shares will be voted~~FORthe election of the nominees for directors named herein and~~~~FOR~~ratification of the selection of KPMG, LLP as Hills Bancorporation’s independent auditors for the fiscal year ending December 31, 2004. Election of any nominee as a director and ratification of the selection of KPMG, LLP require a majority of the votes cast by the shares entitled to vote at a meeting at which a quorum is present. Only shareholders of record at the close of business on March 15, 2004, are entitled to notice of and to vote at the meeting. There were 1,516,678 shares of Common Stock of the Company outstanding at the close of business on that date, all of which will be entitled to vote. The presence, in person or by proxy, of the holders of a majority of such outstanding shares is necessary to constitute a quorum for the transaction of business at the meeting. Holders of the shares of Common Stock are entitled to one vote per share standing in their names on the record date on all matters. Shareholders do not have cumulative voting rights. If the holder of shares abstains from voting on any matter, or if shares are held by a broker which has indicated that it does not have discretionary authority to vote on a particular matter, those shares will be counted for quorum purposes, but will not be counted as votes cast with respect to any matter to come before the meeting and will not affect the outcome of any matter. The Company will bear the cost of solicitation of proxies. In addition to the use of the mails, proxies may be solicited by officers, directors and regular employees of the Company, without extra compensation, by telephone, facsimile or personal contact. It will greatly assist the Company in limiting expense in connection with the meeting if shareholders who do not expect to attend in person will return signed proxies promptly whether they own a few or many shares. A shareholder may revoke his or her Proxy at any time prior to the voting thereof by filing with the Secretary of the Company at the Company’s principal office at 131 Main Street, Hills, Iowa 52235, a written revocation or a duly executed Proxy bearing a later date. A shareholder may also withdraw the Proxy at the meeting at any time before it is exercised.

INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS

The Company has ten directors with staggered terms of office. Three directors are to be elected at the 2004 Annual Meeting of Shareholders to serve for a three-year term. The Board of Directors has no reason to believe that any nominee will be unable to serve as a director, if elected. However, in case any nominee should become unavailable for election, the proxy will be voted for such substitute, if any, as the Board of Directors may designate.

Each director of the Company also serves as a director of the Company’s wholly-owned subsidiary which is a commercial bank. The commercial bank is Hills Bank and Trust Company (the “Bank”). The Company anticipates that, following the election of the nominees set forth below, all directors of the Company will continue to serve as directors of the Bank, being elected to such positions by the vote of the Company as the sole shareholder of the Bank.

Set forth below are the names of the three persons nominated by the Board of Directors for election as directors at the 2004 Annual Meeting along with certain other information concerning such persons.

~~Name and Year~~ ~~First Became~~ ~~a Director~~ PROPOSAL TO AMEND PROVISIONS OF THE COMPANY’S ARTICLES OF INCORPORATION	~~Age~~		~~Positions &~~ ~~Offices Held~~ ~~With Company~~		~~Principal Occupation or~~ ~~Employment During~~ ~~the Past Five Years~~7

~~Directors Serving Until the 2007 Annual Meeting~~ NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION		9

~~Michael E. Hodge~~ NON-BINDING ADVISORY VOTE ON THE APPOINTMENT OF THE INDEPENDENT PUBLIC REGISTERED ACCOUNTING FIRM	50		~~Director~~	~~President and shareholder~~10
~~2000-Company~~				~~of Hodge Construction~~
~~2000-Bank~~				~~Company~~

~~Richard W. Oberman~~ ~~1984-Company~~	68		~~Director~~	~~President,~~ ~~Oberman Farms, Inc.~~
~~1980-Bank~~

~~Sheldon E. Yoder, D.V.M.~~ ~~1997-Company~~	51		~~Director~~	~~President~~ ~~and shareholder of~~
~~1997-Bank~~				~~Kalona Veterinary Clinic~~

INFORMATION CONCERNING DIRECTORS OTHER THAN NOMINEES	11

~~The following table sets forth certain information with respect to directors~~ CORPORATE GOVERNANCE AND THE BOARDS OF DIRECTORS	13

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	16

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	17

COMPENSATION AND INCENTIVE STOCK COMMITTEE INTERLOCKS AND CERTAIN OTHER TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS	18

COMPENSATION DISCUSSION AND ANALYSIS	19

COMPENSATION AND INCENTIVE STOCK COMMITTEE REPORT	24

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION PAID TO THE NAMED EXECUTIVE OFFICERS	24

RISK MANAGEMENT AND COMPENSATION POLICIES AND PRACTICES	29

AUDIT COMMITTEE	29

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	30

PROPOSALS BY SHAREHOLDERS	30

BOARD NOMINATING PROCESS	31

COMMUNICATION WITH THE BOARD OF DIRECTORS	32

AVAILABILITY OF FORM 10-K REPORT	32

OTHER MATTERS	32

EXHIBIT A – CURRENT ARTICLE IX	33

EXHIBIT B – AMENDED ARTICLE IX	36

EXHIBIT C – CURRENT BYLAWS	38

EXHIBIT D – AMENDED BYLAWS	39

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HILLS BANCORPORATION

131 Main Street

Hills, Iowa 52235

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

To Be Held on April 21, 2014

This Proxy Statement is furnished to shareholders of Hills Bancorporation (the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company for the Annual Meeting of Shareholders to be held April 21, 2014, and any adjournments thereof. This Proxy Statement and form of Proxy enclosed herewith are first being sent to the shareholders of the Company entitled to vote at the Annual Meeting on or about March 21, 2014.

If the accompanying Proxy is properly signed and returned and is not withdrawn or revoked, the shares represented thereby will be voted in accordance with the specifications thereon. If the manner of voting such shares is not indicated on the Proxy, the shares will be voted FOR the election of the nominees for Directors named herein and FOR the approval of Proposals 2, 3, 4 and 5.

If your shares are held in brokerage or similar account, your broker is not permitted to vote on your behalf for either of Proposals 1, 2, 3 or 4 absent voting instructions from you. Consequently, for your vote to be counted in the election of Directors and on the proposal regarding the non-binding advisory vote on executive compensation, you must communicate your voting decisions to your bank, broker or other holder of record before the date of the Annual Meeting.

Shareholders may vote on the Proposals presented at the Annual Meeting as follows:

As to Proposal 1, the election of Directors:

Ÿ	Vote “FOR” all of the ~~Company who will continue to serve subsequent to the 2004 Annual Meeting and who are not~~ nominees for ~~election at~~Director

Ÿ	Withhold votes on all of the ~~2004 Annual Meeting.~~nominees for Director

Ÿ	Withhold votes for one or more nominees

Because the election of Directors is determined by a plurality, the nominees receiving the most votes “FOR” will be elected.

As to Proposal 2, to amend Article IX of the Articles of Incorporation:

Ÿ	Vote “FOR” the proposal

Ÿ	Vote “AGAINST” the proposal

Ÿ	Abstain from voting on the proposal

As to Proposal 3, the non-binding advisory vote on executive compensation:

Ÿ	Vote “FOR” the proposal

Ÿ	Vote “AGAINST” the proposal

Ÿ	Abstain from voting on the proposal

As to Proposal 4, the non-binding advisory vote on the appointment of the Company’s independent registered public accounting firm:

Ÿ	Vote “FOR” the proposal

Ÿ	Vote “AGAINST” the proposal

Ÿ	Abstain from voting on the proposal

Assuming the presence of a quorum, the affirmative vote of a majority of the votes cast by the holders of the Company’s common stock is required to approve each of Proposals 2, 3and 4. An abstention is not a “vote cast.” Abstentions from voting and broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on the outcome of the proposals.

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The Board of Directors recommends that you vote FOR each of the Director nominees named in this Proxy Statement and FOR approval of each of Proposals 2, 3and 4.

Only shareholders of record at the close of business on March 7, 2014, are entitled to notice of, to attend and to vote at the meeting. There were 4,725,865 shares of common stock of the Company outstanding at the close of business on that date, all of which will be entitled to vote. A quorum exists when a majority of the shares entitled to vote are represented at the Annual Meeting in person or by proxy. Abstentions, which include shares present at the meeting in person or by proxy and otherwise entitled to vote, but which are not affirmatively cast with respect to a particular proposal, are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Holders of the shares of common stock of the Company are entitled to one vote per share standing in their names on the record date on all matters. Shareholders do not have cumulative voting rights. If the holder of shares abstains from voting on any matter, or if shares are held by a broker which has indicated that it does not have discretionary authority to vote on a particular matter, those shares will not be counted as votes cast with respect to any matter to come before the meeting and will not affect the outcome of any matter.

The Company will bear the cost of solicitation of proxies. In addition to the use of the mails, proxies may be solicited by officers, Directors and regular employees of the Company, without extra compensation, by telephone, electronic mail, facsimile or personal contact. It will greatly assist the Company in limiting expense in connection with the meeting if shareholders who do not expect to attend in person will return signed proxies promptly whether they own a few or many shares.

A shareholder may revoke his or her Proxy at any time prior to the voting thereof by filing with the Treasurer of the Company at the Company’s principal office at 131 Main Street, Hills, Iowa 52235, a written revocation or a duly executed Proxy bearing a later date. A shareholder may also withdraw the Proxy at the meeting at any time before it is exercised.

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PROPOSAL 1

ELECTION OF DIRECTORS

INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS

The Company currently has eleven Directors with staggered terms of office. The Board of Directors has no reason to believe that any nominee will be unable to serve as a Director, if elected. However, in case any nominee should become unavailable for election, the proxy will be voted for such substitute, if any, as the Board of Directors may designate.

Each Director of the Company also serves as a Director of the Company’s wholly-owned subsidiary, Hills Bank and Trust Company (the “Bank”), which is a commercial bank. The Company anticipates that, following the election of the nominees set forth below, all Directors of the Company will continue to serve as Directors of the Bank. The Directors of the Bank are elected by the vote of the Company as the sole shareholder of the Bank.

Set forth below are the names of the three persons nominated by the Board of Directors for election as Directors of the Company at the 2014 Annual Meeting, along with certain other information concerning such persons.

Name and Year First ~~Became~~ a Become Director		Age			Positions & Offices Held With Company			Principal Occupation or Employment During the Past Five Years and Education Pertaining to Board of Director Qualifications

~~Directors Serving~~Director Nominees Who Will Serve Until the ~~2005~~2017 Annual Meeting

~~Theodore H. Pacha~~ ~~1990-Company~~Emily A. Hughes		55 46			~~Director~~		~~President and owner of THEO~~ ~~Resources (Business Investment~~
~~1990-Bank~~							~~and Consulting), May 1999 to~~
							~~present; previously executive~~
							~~officer and owner of~~
							~~Hawkeye Medical Supply,~~
							~~Inc. (medical supplies)~~

~~Ann Marie Rhodes~~		50			Director		~~The~~Professor and Bouma Fellow in Law, University of Iowa –College of Law since 2011. From 2006 to 2011, associate professor and tenured professor at Washington University School of Law. Ms. Hughes obtained her law degree from the University of Michigan Law School.
~~1993-Company~~2012 - Company						~~Assistant to the Vice President~~
~~1993-Bank~~2012 - Bank
	~~for Health Affairs~~
James A. Nowak		66		Director		Partner - McGladrey & Pullen, LLP (Retired 2004), Cedar Rapids, Iowa. Mr. Nowak is a graduate of the University of Wisconsin and ~~HIPAA~~a certified public accountant.
2004 - Company
2004 - Bank
							~~Privacy Officer, July 2002 to~~
							~~present; Associate Counsel,~~
							~~July 2000 to June 2002;~~
							~~previously Vice President~~
							~~for University Relations~~

~~Ronald E. Stutsman~~		64			~~Director~~		~~Executive officer and~~
~~1984-Company~~							~~shareholder of Eldon C.~~
~~1981-Bank~~							~~Stutsman, Inc. (fertilizer plant)~~

~~Directors Serving Until the 2006 Annual Meeting~~

~~Willis M. Bywater~~		65			~~Director &~~		~~Executive officer and~~
~~1984-Company~~					~~Vice President~~		~~shareholder of Economy~~
~~1979-Bank~~							~~Advertising Company~~
							~~(commercial printing~~
							~~and sales of advertising~~
							~~specialties)~~

~~Thomas J. Gill, D.D.S.~~		57			~~Director~~		~~Dentist - Private Practice~~
~~1993-Company~~
~~1993-Bank~~

~~Donald H. Gringer~~		69			~~Director~~		~~Executive officer and~~
~~1988-Company~~							~~shareholder of Gringer Feed~~
~~1988-Bank~~							~~and Grain (grain elevator)~~

Theodore H. Pacha
~~Dwight O. Seegmiller~~		51	65		Director &and		President and owner of THEO Resources LLC, a business investment and consulting company in Iowa City, Iowa, May 1999 to present. Mr. Pacha was previously the ~~Company~~President and co-owner of Duffy’s Collectible Cars in Cedar Rapids, Iowa. Mr. Pacha previously founded and owned Hawkeye Medical Supply, Inc., a medical supplies company, located in Iowa City, Iowa, until its sale in 1998.
~~1986-Company~~1990 - Company					Vice President			~~and the Bank~~
~~1986-Bank~~	1990 - Bank

~~None~~
Ann Marie Rhodes	60	Director	The University of Iowa – Clinical Associate Professor of Nursing and Instructor College of Law. Ms. Rhodes obtained a nursing degree from The College of Saint Teresa and a masters in nursing from the ~~nominees or directors serves as a director~~University of ~~another company whose securities are registered under~~Iowa. In addition, Ms. Rhodes received her law degree from the ~~Securities Exchange Act~~University of ~~1934 or a company registered under the Investment~~Iowa College of Law.
1993 - Company ~~Act of 1940.~~

1993 - Bank

Additional information regarding the four nominees for election to the Board of is as follows:

Emily A. Hughes: Ms. Hughes was elected to the Board of Directors in 2012. Ms. Hughes presently serves on the Loan Committee, Trust Committee and the Compensation and Incentive Stock Committee of the Board of Directors. Ms. Hughes is a professor and Bouma Fellow in Law at the University of Iowa College of Law. Before joining the University of Iowa College of Law faculty, Ms. Hughes was a professor at Washington University School of Law, and co-director of the Center for Justice in Capital Cases at DePaul University College of Law. Ms. Hughes also worked as a public defender for the Office of the Iowa State Public Defender in Iowa City. Ms. Hughes graduated from the University of Michigan Law School and has a master’s degree in international relations from Yale University. Ms. Hughes is a member of the Missouri, Illinois and Iowa bar associations. Ms. Hughes’experience with the largest employer in the Company’s trade area, the University of Iowa, and her legal expertise provide important insight to the Board of Directors.

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James A. Nowak: Mr. Nowak has served as a Director of the Company and the Bank since 2004. Mr. Nowak presently serves as the Chairperson of the Audit Committee and is considered its financial expert. Mr. Nowak also serves on the Compensation and Incentive Stock Committee of the Board of Directors. Mr. Nowak graduated from the University of Wisconsin with a degree in Accounting and is a CPA. Until his retirement in 2004, Mr. Nowak was an audit and accounting partner for McGladrey & Pullen, LLP. In his duties with McGladrey & Pullen, Mr. Nowak had review responsibilities including SEC reporting requirements for clients. Mr. Nowak was with McGladrey & Pullen from 1970 through 2004. Mr. Nowak’s financial knowledge is a valuable contribution to the Board of Directors. Mr. Nowak is an active member of the Cedar Rapids community. Hills Bank currently has three Bank offices in Cedar Rapids and one in neighboring Marion, Mr. Nowak’s knowledge and contacts in this market has been invaluable in assisting with the expansion of this market. Mr. Nowak is a member of the American Institute of Certified Public Accountants and the Iowa Society of Certified Public Accountants.

Theodore H. Pacha: Mr. Pacha was first elected to serve as a Director in 1990 and has also served as a Director of the Bank since 1990. Mr. Pacha is currently the Chairperson of the Board of Directors of the Bank and Vice President of the Company. Mr. Pacha serves on the Employee Stock Ownership Plan Committee and the Compensation and Incentive Stock Committee of the Board of Directors. Mr. Pacha is currently the President and owner of THEO Resources LLC which is a business investment and consulting company in Iowa City, Iowa. Formerly, Mr. Pacha was the President and co-owner of Duffy’s Collectible Cars in Cedar Rapids, Iowa. Mr. Pacha previously founded and owned Hawkeye Medical Supply, Inc. which was a medical supply company and was located in Iowa City, Iowa. Mr. Pacha sold Hawkeye Medical Supply, Inc. in 1998. Mr. Pacha is a life-long Iowa City resident, and a community leader and business person. Mr. Pacha has considerable knowledge of the Iowa City area which is beneficial to the Company, especially its Johnson County, Iowa offices. Mr. Pacha’s business knowledge is a valuable contribution to the Board of Directors. Mr. Pacha is also active in the Iowa City community.

Ann Marie Rhodes: Ms. Rhodes was elected to the Board of Directors in 1993. Ms. Rhodes at that time also became a member of the Board of Directors of the Bank. The Board Committees which Ms. Rhodes serves on are the Trust Committee and the Compensation and Incentive Stock Committee. Ms. Rhodes is a Clinical Associate Professor of Nursing and Instructor in the University of Iowa College of Law. Ms. Rhodes obtained a nursing degree from The College of Saint Teresa, a Masters in Nursing at the University of Iowa and her law degree from the University of Iowa College of Law. Ms. Rhodes’ experience with the largest employer in the Company’s trade area, the University of Iowa, provides important insight to the Board of Directors. Ms. Rhodes is a member of the American and Iowa Bar Associations. In addition, Ms. Rhodes is involved in leadership roles in several community organizations.

None of the nominees currently serves, or has served in the past five years, as a Director of another company whose securities are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or whose securities are subject to the requirements of Section 15(d) of the Exchange Act or a company registered under the Investment Company Act of 1940, as amended. There are no family relationships among the Company’s Directors, nominees for Director and executive officers.

~~INFORMATION CONCERNING THE BOARDS OF DIRECTORS~~

~~Board of Directors of Company~~

The Board of Directors unanimously recommends to the Shareholders a vote “FOR” the election of the above-listed persons as Directors for the Company.

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PROPOSAL 2

To amend Article IX of the Company’s Restated Articles of Incorporation Relating to Limitations on Directors’ Liability to the Company and Mandatory Indemnification of Non-Employee Directors

General

In May 1988, the shareholders of the Company adopted the provisions relating to limitations on directors’ liability to the Company for monetary damages for acts or omissions as a director and indemnification of directors that are set forth in Article IX of the current Restated Articles of Incorporation (the “Articles”). Those indemnification provisions were based upon, and basically restated, the provisions relating to such matters set out in the Iowa Business Corporation Act (the “Iowa Act”) as in effect at that time. The Iowa Act was subsequently amended and restated, with the then existing Chapter 496A being repealed in its entirety, and a new Iowa Act, Chapter 490, being adopted. These amendments to the Iowa Act corresponded with the Model Business Corporation Act (the “Model Act”), a model set of laws prepared by the Committee on Corporate Laws of the Section of Business Law of the American Bar Association, which is followed by approximately half of the states. The amendments to the Iowa Act were designed to, among other things, give Iowa corporations, such as the Company, the same ability to attract and retain qualified individuals to serve as non-employee directors as corporations incorporated in other states that have also adopted the Model Act provisions.

The amendments to the Iowa Act included numerous changes, including:

1.	revisions to the exceptions to the limitation on personal liability for directors, and

2.	the addition of a provision allowing an Iowa corporation to provide in its Articles for mandatory indemnification of directors for:

any obligation to pay to any person for any action taken, or any failure to take any action, as a director, a judgment, settlement, penalty or fine, including an excise tax assessed with respect to an employee benefit plan, and

reasonable expenses, including counsel fees, incurred with respect to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal, except for an obligation or expenses relating to any of the following:

(i)

the receipt of a financial benefit to which the director is not entitled;

(ii)

an intentional infliction of harm on the corporation or its shareholders;

(iii)

a violation of section 490.833 of the Iowa Business Corporation Act; or

(iv)

an intentional violation of criminal law.

Under prior law, and under the Company’s current Articles, in order to indemnify directors for the obligations and expenses described in clauses (a) and (b) above, the Company first must determine whether the director acted in good faith and, depending on the circumstances, in a manner that the director reasonably believed was in, or not opposed to, the best interests of the Company, or in the case of a criminal proceeding, not unlawful, as described in more detail below under the heading “Required Indemnification for Non-employee Directors – Clause (b) of Section 1.” These standards are not defined in the Iowa Act.

In order to implement the 2003 Amendments for the benefit of the Company, and to update and modernize the indemnification provisions of the Company’s Articles, the Board has adopted, subject to shareholder approval, amendments to the Articles to:

replace existing Section 1 of Article IX dealing with the limitation on personal liability of directors for monetary damages with a new clause (a) of Section 1 reflecting the updated provisions of the Iowa Act relating to such limitations on personal liability as described more fully below under the heading “Limitations on Personal Liability for Directors – Clause (a) of Section 1;”

add a new clause (b) to Section 1 requiring the Company to provide indemnification to non-employee directors to the full extent of the Iowa Act without the necessity for the Company to make the determinations as to whether the director acted in good faith and in a manner that the director reasonably believed was in, or not opposed to, the best interests of the Company, ~~meets on~~or in the case of a ~~regularly scheduled basis. During 2003,~~criminal proceeding, not unlawful,” and

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3.	update the language and statutory references in Article IX to conform to the current Iowa Act.

The Board of Directors believes that the purpose of the current Article IX and the indemnification provisions in the Company’s Bylaws was to provide the maximum protection permitted under the Iowa Act for persons who serve as directors and officers of the Company, in order to assist the Company in retaining and attracting highly qualified individuals to serve as directors and officers to manage the business and affairs of the Company. In recent years, investigations, claims, actions, suits or proceedings (including shareholder derivative suits) seeking to impose liability on directors and officers of publicly held corporations have become the subject of much discussion. Such proceedings are typically extremely expensive whatever their eventual outcome. Even in proceedings in which a director or officer is not named as a defendant, such individual may incur substantial expenses or attorneys' fees if he or she is called as a witness. As a result, an individual may conclude that potential exposure to the costs and risks of proceedings in which he may become involved exceeds any benefit to him from serving as a director or officer of a publicly-held corporation. This is especially true in the context of a contest for control of the Company, where participants in such contests may challenge the decisions of the Company's directors by suing them personally. To date, the Company has not had any difficulty in attracting or retaining its present directors and officers and no director or officer has resigned because of the risk of litigation. However, the Board believes that it is appropriate to adopt amendments to the Articles to update Article IX to include the current statutory language and section references, delete the previous statutory language and section references, and continue to provide the maximum protection permitted under the Iowa Act for directors and officers. The Board also believes that it is appropriate to adopt an amendment to the Articles to delete the necessity for the Company to make the determinations as to whether a non-employee director acted in good faith and in a manner that the director reasonably believed was in, or not opposed to, the best interests of the Company, or in the case of a criminal proceeding, not unlawful, as described in more detail below under the heading “Required Indemnification for Non-employee Directors – Clause (b) of Section 1.”

The provisions of Article IX, as amended, would apply to all claims asserted after its approval by the shareholders, regardless of the date of alleged acts or omissions from which they arise. The Company has not received notice of any proceeding against a director or officer of the Company to which the protections and benefits under amended Article IX might apply.

Limitations on Personal Liability for Directors – Clause (a) of Section 1

The effect of the proposed amendment to clause (a) of Section 1 of Article IX of the Articles, dealing with limitations on director liability for monetary damages for acts or omissions as a director, will be to conform that section to the changes in the Iowa Act. The previous exceptions to a director’s liability for monetary damages were for (i) a breach of the director’s duty of loyalty to the corporation or its shareholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law; (iii) a transaction from which the director derived an improper personal benefit; or (iv) liability under Section 496A.44 of the prior Iowa Act. Section 496A.44 related to liability for improper distributions to shareholders, including stock repurchases. A director’s liability for improper distributions to shareholders is addressed in Section 490.833 of the current Iowa Act.

The proposed amendment to clause (a) of Section 1 of Article IX of the Articles would change the exceptions to those set out in Section 490.202(2)(d) of the current Iowa Act, which are for (i) the amount of a financial benefit received by a director to which the director is not entitled; (ii) an intentional infliction of harm on the corporation or the shareholders; (iii) a violation of section 490.833 of the Iowa Act; or (iv) an intentional violation of criminal law.

Required Indemnification for Non-employee Directors – Clause (b) of Section 1

The effect of the proposed amendment to add new clause (b) to Section 1 of Article IX to the Articles will be to require the Company to provide indemnification to non-employee directors for any action taken, or any failure to take any action, as a director, except for those situations in which indemnification is not authorized by the Iowa Act, without the necessity for the Company to first determine whether the director acted in good faith and in a manner that the director reasonably believed was in, or not opposed to, the best interests of the Company, or in the case of a criminal proceeding, not unlawful, as described in more detail below. The exceptions to the Company’s power to provide indemnification are the same exceptions as those contained in the proposed clause (a) of Section 1 under which a director will not be shielded from personal liability for monetary damages for acts or omissions as a director.

Currently, the rights and obligations of the Company to provide indemnification to directors and officers are set forth in Article IX of the Articles and in the Company’s bylaws, and in Sections 490.851 through 490.859 of the Iowa Act. Under the relevant provisions, as a condition to providing indemnification the Company must determine that:

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the director or officer acted in good faith;

·	the director or officer reasonably believed:

in the case of conduct in the person’s official capacity, that his conduct was in the best interests of the ~~Company held an annual meeting, one special meeting~~Company;

in all other cases, that his conduct was at least not opposed to the best interests of the Company; and ~~twelve regular meetings.~~

·	in the case of any criminal proceeding, the person had no reasonable cause to believe his conduct was unlawful.

These standards are not defined in the Iowa Act and, consequently, may be difficult to apply under a particular set of facts. The Board of Directors believes that non-employees who agree to serve as directors should be entitled to the maximum protection permitted under the Iowa Act in order to assist the Company in retaining and attracting highly qualified individuals to serve as non-employee directors and assist management directors in the oversight of the business and affairs of the Company.

Employee Stock Ownership Plan

~~The Bank sponsors a tax-qualified income plan for the employees~~years. For each of the Bank ~~known as~~Named Executive Officers, the ~~Hills Bank and Trust Company Employee Stock Ownership Plan (the “ESOP”). The ESOP is described~~figures include contributions in ~~and operated in accordance with~~ the provisions of the written plan document. The Bank is the trustee of the ESOP assets. The ESOP is a defined contribution plan designed primarily to reward eligible employees for long and loyal service by providing them with retirement benefits. The ESOP is designed and intended to invest primarily in Common Stock issuedfollowing amounts made by the Company and, in so doing, to provide for employee participation in the equity ownership of the Company. The ESOP may also provide benefits in the event of death, disability or other termination of employment prior to retirement. Any benefits payable under the ESOP will be based solely upon the amounts contributed for the benefit of a participant and any changes in the value of those contributions while they are held in the ESOP. The total number of participants in the ESOP as of January 1, 2004, was 305.

Participating employees are entitled to direct the trustee of the ESOP how to vote the Common Stock of the Company held for their benefit and allocated to their accounts under the ESOP. The trustee of the ESOP will have voting discretion with regard to all other Common Stock of the Company owned by the ESOP, if any. All Common Stock of the Company owned by the ESOP has been allocated to participating employees.

~~Each calendar year the~~ Bank contributes to the ESOP such amount as may be determined by the Board of Directors or as may be required to make any payments of principal and interest due on any loan made to the Trustee of the ESOP. The ESOP does not require or allow contributions by participating employees. Distributions of benefits from the ESOP to plan participants or their beneficiaries can be made either in cash or in Common Stock of the Company. In recent years, distributions have been made partly in cash and partly in Common Stock of the Company. Subject to certain exceptions, contributions to the ESOP are fully vested after seven (7) years of service with the Bank.

~~The following table indicates the amount accrued pursuant to the ESOP for each named executive officer or group during 2003:~~

Name of Individual
or Number in Group Capacities in
Which Served Amounts
Accrued

Dwight O. Seegmiller Director and President of the $ 2,000
Company; Director and President
of the Bank
Thomas J. Cilek Secretary of the Company; $ 1,861
Senior Vice President of the Bank
James G. Pratt Treasurer of the Company; $ 2,000
Senior Vice President of the Bank

All Executive Officers
as a Group (3 persons) $ 5,861
All Other Participating
Employees (302 persons) $ 101,918

Profit Sharing Plan

The Bank is the trustee of the Hills Bank and Trust Company Profit Sharing Plan (the “Profit Sharing Plan”). The Profit Sharing Plan is operated in accordance with the provisions of the written plan document. Employees of the Bank are eligible to participate in the Profit Sharing Plan. The Profit Sharing Plan, like the ESOP, is designed primarily to reward eligible employees for long and loyal service by providing them with retirement benefits. The Profit Sharing Plan is a defined contribution plan and is invested in assets other than equity securities of the Company. Any benefits payable under the Profit Sharing Plan will be based solely upon the amounts contributed by the Bank for the benefit of a participant and any changes in the value of those contributions while they are held in the Profit Sharing Plan. The Profit Sharing Plan does not require or allow contributions by participating employees. Subject to certain exceptions, contributions to the Profit Sharing Plan, ~~are fully vested after seven (7) years of service with the Bank.~~

~~The following table indicates the amount accrued pursuant~~ESOP and Bank matching contributions to the ~~Profit Sharing~~401(k) Plan for ~~each named executive officer or group during 2003:~~

the last three fiscal years:

Name of Individual
or Number in Group Capacities in
Which Served Amounts
Accrued

Dwight O. Seegmiller Director and President of the
Company; Director and President
of the Bank $ 16,000
Thomas J. Cilek Secretary of the Company;
Senior Vice President of the Bank $ 14,889
James G. Pratt Treasurer of the Company;
Senior Vice President of the Bank $ 16,000
All Executive Officers
as a Group (3 persons) $ 46,889
All Other Participating
Employees (302 persons) $ 815,347

(1)

The amounts included in the Executive Contributions and Registrant Contributions columns are also included in the “Salary” column and the Incentive Stock Committee, participated in deliberations concerning executive compensation matters during 2003. Under rules of the Securities and Exchange Commission, the Bank is required to disclose that it has had certain business relationships during 2003 with Economy Advertising Company, a commercial printing and specialty advertising firm. Mr. Bywater is an executive officer and principal shareholder of Economy Advertising Company. During 2003, the Bank paid the sum of $232,391 to Economy Advertising Company for commercial printing services and for the purchase of calendars and other specialty advertising items. The Bank contemplates that it will purchase a similar amount of goods and services from Economy Advertising Company during 2004. Such business relationships have been entered into“Bonus” columns, respectively, in the ~~ordinary course~~Summary Compensation Table. Amounts shown as Executive Contributions represent voluntary salary deferral elections by the named executive.

(2)

Amounts included in this column of ~~business of the Bank~~$16,379 for Dwight O. Seegmiller and ($27) for Shari DeMaris are also included in the ~~opinion of management, the prices charged for the goods and services provided by Economy Advertising Company are at least as favorable to the Bank as prices generally charged by similar businesses~~“Change in Nonqualified Deferred Compensation Earnings” column in the ~~area for such goods and services.~~

~~The Board of Directors of~~Summary Compensation Table. These amounts represent the ~~Bank does not believe that the participation by Mr. Bywater in the deliberations concerning executive~~market returns on deferred compensation ~~has provided the executive officers of the Bank with more favorable compensation arrangements than would have been the case absent his participation in such deliberations.~~

balances.

~~REPORT ON EXECUTIVE COMPENSATION~~ Under rules established by the Securities and Exchange Commission, the Company is required to provide certain information in regard to the compensation and benefits provided to Dwight Seegmiller, as President of the Company and the Bank, and the other two executive officers of the Company and the Bank. The disclosure requirements for these three individuals (the “executive officers”) include information set forth in various compensation tables contained in this Proxy Statement and a report explaining the rationale and matters considered in making fundamental executive compensation decisions affecting those individuals. Decisions regarding executive officer salaries, bonuses and contributions to the ESOP and the Profit Sharing Plan are made by the Board of Directors of the Bank, with Mr. Seegmiller abstaining from deliberations and voting on such matters. Decisions regarding the grant of awards to executive officers pursuant to the Incentive Stock Plan are made by the Incentive Stock Committee of the Board of Directors of the Company, consisting of the nine non-employee directors (all directors but Mr. Seegmiller). In fulfillment of the disclosure requirements, the Board of Directors of the Bank and the Incentive Stock Committee of the Company have prepared the following report. ~~Compensation Policy~~ This report describes the current compensation policy as endorsed by the Board of Directors of the Bank and the Incentive Stock Committee and the resulting actions taken in arriving at 2003 compensation as reported in the various compensation tables. The executive compensation program of the Bank has been designed to:

•·		~~provide a pay for performance policy that differentiates compensation amounts based upon corporate and individual performance;~~

•		provide compensation opportunities which are comparable to those offered by other Iowa-based financial institutions, thus allowing the Bank to compete for and retain talented executives who are essential to the long-term success of the Company and the Bank; and

•		~~align the interest of the executive officers with the long-term interest of the Company’s shareholders through the ownership of Company Common Stock.~~

The executive compensation program is comprised of salary, opportunities for annual cash bonuses, participation in the ESOP and opportunities for long-term incentives pursuant to awards granted under the Incentive Stock Plan and participation in the Profit Sharing Plan. An executive officer’s salary is based on a number of factors, including the Bank’s performance as compared to internally established goals for the most recently ended fiscal year and to the performance of other Iowa-based financial institutions, the individual officer’s level of responsibility within the Bank and comparisons to salaries paid to officers holding similar positions in other Iowa-based financial institutions. The award of an annual cash bonus is made in the discretion of the Board of Directors and not pursuant to any formal plan or formula. A bonus, if granted, is based on the individual performance of the executive officer and the achievement of financial performance goals of the Bank, as established in the Bank’s annual budget and business plan. The Bank, as plan sponsor of the ESOP, makes an annual ESOP contribution which is allocated among all participating employees of the Bank, including the executive officers, based on their annual salaries. In 2003, the Bank, as sponsor of the Profit Sharing Plan, made a Profit Sharing Plan contribution which was allocated among all participating employees of the Bank, including the executive officers, based on their annual salaries. The amount of the ESOP contribution and the amount of the Profit Sharing Plan contribution are determined in the discretion of the Board of Directors and are based on the achievement of financial performance goals of the Bank as established in the Bank’s annual budget and business plan. The Incentive Stock Committee uses the award of stock options to officers to align their interests with those of the shareholders; however, significant vesting periods are also used to encourage retention as employees. The amount of options granted is determined by reviewing the practices of other financial institutions based on information provided by an outside consultant to the Board of Directors.

In 1993, Section 162(m) of the Internal Revenue Code was amended to place limits on the deductibility of compensation in excess of $1 million paid to executive officers of publicly held companies. The Board of Directors of the Bank does not believe, however, that the amendment has had or will have any impact on the compensation policies followed by the Board.

President’s Compensation

Mr. Seegmiller’s base salary was increased to $299,262 for 2003 from $275,400 the prior year. The base salary reflected consideration of (i) an assessment of the Bank’s performance during 2002 as compared to goals set in the Bank’s annual budget and business plan for 2002, (ii) a comparison of the Bank’s performance as compared with that of other Iowa-based financial institutions, and (iii) compensation data provided by comparative industry surveys. Each year, management of the Bank prepares, and the Board of Directors approves, an annual budget and business plan containing financial performance goals measured primarily in terms of earnings per share, asset quality, return on assets and return on stockholders’ equity. In setting Mr. Seegmiller’s salary for 2003, the Board reviewed the goals established for 2002 and determined that such goals had been achieved by the Bank. The Board also reviewed the Bank’s performance as compared to that of other Iowa-based financial institutions of similar asset size. Compensation data for other Iowa-based financial institutions of similar asset size is also provided through surveys independently prepared by the Iowa Bankers Association. The survey reviewed by the Board in setting Mr. Seegmiller’s 2003 salary contained information on salaries paid during 2002 to the chief executive officers of 14 Iowa-based banks with deposits in excess of $225 million. The Board also reviewed the compensation data from SNL Financial comparing the salaries of CEOs of midwest banks from similar asset sized banks. While the foregoing factors are not specifically weighted in the decision-making process, primary emphasis is placed on the Bank’s performance during the previous year as compared to the internally-established goals. Review of comparable compensation data is used primarily as a check to ensure that the salary established is within the range of salaries paid to other chief executive officers of midwest-based financial institutions. Although the Board reviewed a number of objective factors as described above in setting Mr. Seegmiller’s salary for 2003, the amount was based on a subjective determination by the Board.

Mr. Seegmiller was awarded no cash bonus in 2003. Mr. Seegmiller received additional compensation that represents the contributions which the Bank did not make, due to limitations under statutory and administrative rules, to the ESOP and the Profit Sharing Plan.

A contribution of $18,000 was made to Mr. Seegmiller’s ESOP and Profit Sharing Plan accounts during 2003. The size of the contribution (as limited by the Internal Revenue Code) was determined as a function of Mr. Seegmiller’s 2003 salary and the size of the contribution made by the Bank, as plan sponsor, to the ESOP and Profit Sharing Plan for the benefit of all employees of the Bank eligible to participate in the ESOP and Profit Sharing Plan. For 2003, the ESOP and Profit Sharing Plan contributions made by the Bank amounted to 9% of the aggregate salaries paid to all Bank employees eligible to participate in the plans. The size of the ESOP and Profit Sharing Plan contributions are determined by the Board of Directors in its discretion based on its assessment of whether the Bank achieved the goals established in the annual budget and business plan for 2003. Once the size of the ESOP and Profit Sharing Plan contributions were determined, such contributions were allocated among the ESOP and Profit Sharing Plan accounts of all eligible employees of the Bank, including Mr. Seegmiller, based on their annual salaries for 2003.

~~Compensation for Other Executive Officers~~

Effective January 1, 2003, the Board of Directors increased the base salaries of the two other executives, Mr. Cilek and Mr. Pratt, to $186,113 and $224,534 respectively. No cash bonuses were awarded in 2003. Mr. Cilek and Mr. Pratt each received additional compensation representing the contributions which the Bank did not make, due to limitations under statutory and administrative rules, to the ESOP and the Profit Sharing Plan. The salaries were based on the same considerations as the compensation decisions for the President of the Bank and those considerations described under the Compensation Policy. Additionally, contributions were made to the ESOP accounts and the Profit Sharing Plan accounts of the other two executive officers, the size of which were determined in accordance with the same procedure as used for all employees of the Bank.

	~~BOARD OF DIRECTORS~~
	~~HILLS BANK AND TRUST COMPANY~~

	~~INCENTIVE STOCK COMMITTEE~~
	~~HILLS BANCORPORATION~~

	~~Willis M. Bywater~~	~~Theodore H. Pacha~~
	~~Thomas J. Gill, D.D.S.~~	~~Ann Marie Rhodes~~
	~~Donald H. Gringer~~	~~Ronald E. Stutsman~~
	~~Michael E. Hodge~~	~~Sheldon E. Yoder~~
	~~Richard W. Oberman~~

~~LOANS TO AND CERTAIN OTHER TRANSACTIONS WITH~~
~~EXECUTIVE OFFICERS AND DIRECTORS~~

Certain of the officers and directors of the Company, their associates or members of their families, were customers of, and have had transactions with, the Bank from time to time in the ordinary course of business, and additional transactions may be expected to take place in the ordinary course of business in the future. All loans and commitments included in such transactions have been made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. In the opinion of management of the Bank, such loan transactions do not involve more than the normal risk of collectibility or present other unfavorable features.

During the past year, the Bank and the Company have maintained business relationships with certain companies partially owned or operated by members of the Board of Directors of the Company through the purchase of varying amounts of goods and services from such companies. All such business relationships have been entered into in the ordinary course of business of the Bank and the Company and, in the opinion of management, the prices charged for such goods and services have been at least as favorable to the Bank and the Company as prices generally charged by similar businesses in the area for such goods and services. Management of the Company anticipates that the Bank and the Company will continue to maintain such business relationships on a similar basis to the extent that such goods and services are required by the Bank and the Company in the future.

~~INDEPENDENT AUDITORS~~

~~CHANGE OF AUDITORS IN 2003~~

On May 13, 2003, upon the recommendation and approval of its Audit Committee, Hills Bancorporation (“Hills”) terminated its relationship with McGladrey & Pullen LLP (“McGladrey & Pullen”) as its independent auditor and appointed the firm of KPMG, LLP (“KPMG”) to be Hills’ Auditor for the 2003 fiscal year. Representatives of KPMG will attend the shareholders’ meeting. KPMG will have the opportunity to make a statement and will be able to respond to questions.

McGladrey & Pullen’s audit reports on Hills’ consolidated financial statements for each of the fiscal years ended December 31, 2002 and 2001 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the two fiscal years ended December 31, 2002 and 2001 and the subsequent interim preceding the decision to change independent auditors, there were no disagreements with McGladrey & Pullen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to McGladrey & Pullen’s satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with the audit reports on Hills’ consolidated financial statements for such years, and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

In the years ended December 31, 2002 and 2001 and up to May 13, 2003, the date of KPMG’s engagement, Hills did not consult KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Hills’ consolidated financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

AUDIT AND OTHER FEES

Audit Fees:

The aggregate audit fees incurred for professional services rendered by KPMG for the year ended December 31, 2003, were $93,400. This amount includes fees necessary to perform an audit and quarterly reviews in accordance with Generally Accepted Auditing Standards and services that generally only the independent auditor can reasonably provide, such as the review of Hills’ financial statements including Form 10-Q and Form 10-K filed with the Securities and Exchange Commission. Additional audit fees relate to attestation services required pursuant to the Federal Deposit Insurance Corporation Improvement Act. All of the audit fees and services were pre-approved by the Audit Committee.

Tax Fees:

Fees of $14,000 were incurred for the services rendered by KPMG for the year ended December 31, 2003, for professional services performed by the tax division of KPMG. More specifically, these services include current year income tax preparation and year-end tax planning. All of the tax fees and services were pre-approved by the Audit Committee.

All Other Fees:

~~For the year ended December 31, 2003, no fees were incurred for services rendered by KPMG, other than the services described under “Audit Fees,” and “Tax Fees.”~~

The report of the Audit Committee that follows shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement or future filings into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates the information by reference, and shall not otherwise be deemed filed under such Acts.

~~March 9, 2004~~

~~To the Board of Directors:~~

The Audit Committee consists of the following members of the Board of Directors: Thomas J. Gill, Ann Marie Rhodes, and Sheldon E. Yoder. Each of the members of the Audit Committee is independent as defined under the rules of the NASDAQ Stock Market.

~~We have~~ reviewed and discussed ~~with management~~ the Company’s audited financial statements as of and for the year ended December 31, ~~2003.~~

~~We have~~ 2013 with its management and BKD LLP, the Company’s independent registered public accounting firm;

discussed with ~~the independent auditors, KPMG, L.L.P.,~~BKD LLP the matters required to be discussed by the Statement ofon Auditing Standards No. 61 ~~Communication with Auditing Committees,~~ as amended, ~~issued~~(AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the ~~Auditing Standards~~Public Company Accounting Oversight Board ~~of the American Institute of Certified Public Accountants.~~

~~We have~~ in 3200T; and

received and reviewed the written disclosures and ~~the~~ letter from ~~KPMG, L.L.P.,~~BKD LLP required by ~~Independence Standard No. 1, Independence Discussions~~the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit ~~Committees, as amended, issued by the Independence Standard Board,~~Committee concerning independence and we have discussed with the auditors the auditors’ independence.

(1)

Audit fees related to the audit of the Company’s annual financial statements, internal control over financial reporting conducted in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and services related to evaluation of the Company’s internal controls as required by the Federal Deposit Insurance Corporation Improvement Act, as amended, for the fiscal years 2013 and 2012 and for its required reviews of the Company’s unaudited interim financial statements included in its Form 10-Q for the years 2013 and 2012.

(2)

Tax fees generally related to professional service rendered for tax compliance, tax advice and tax planning.

(3)

Fees paid in 2012 were to KPMG LLP. Fees of $8,750 related to two Form S-8 filings during 2012 and $13,750 related to the transition in the Company’s ~~Annual Report on Form 10-K for the year ended December 31, 2003 for filing with the Securities and Exchange Commission.~~

independent registered public accounting firm.


	~~Audit Committee~~ ~~Thomas J. Gill~~ ~~Ann Marie Rhodes~~ ~~Sheldon E. Yoder~~

PROPOSALS BY SHAREHOLDERS

~~Shareholder proposals intended to be presented at the Annual Meeting of Shareholders to be held in 2005 must be received by the Company no later than November 20, 2004~~

Audit Committee Pre-Approval Policy

The Company’s Audit Committee pre-approves all audit, audit-related, tax and other services proposed to be provided by the Company’s independent registered public accounting firm prior to engaging the independent registered public accounting firm for that purpose. The charter of the Audit Committee sets forth this approval requirement. All of the audit fees, audit-related fees and the tax fees for 2013 and 2012 were pre-approved by the Audit Committee.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

On August 14, 2012, the Audit Committee selected BKD LLP as the Company’s independent registered public accounting firm and dismissed its previous auditor KPMG LLP, in each case effective with the quarter ended September 30, 2012.

The audit reports of KPMG LLP on the Company’s consolidated financial statements as of and for the years ended December 31, 2011 and 2010 did not contain an adverse opinion or a disclaimer of an opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 31, 2011 and 2010 and from January 1, 2012 through August 14, 2012, there were no disagreements with KPMG LLP on any matter of accounting principles or practices, financial statement disclosure or audit scope or procedures.

Representatives of BKD LLP are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

PROPOSALS BY SHAREHOLDERS

Shareholder proposals intended to be presented at the Annual Meeting of Shareholders to be held in 2014 must be received by the Company no later than November 21, 2014 for inclusion in the Company’s proxy statement and form of proxy relating to that meeting. Proposals should be submitted to the Company at its principal executive offices at 131 Main Street, Hills, Iowa 52235. Proposals from shareholders for next year’s annual meeting received by the Company after February 4, 2015 will be considered untimely. With respect to such proposals, the Company will vote all shares for which it has received proxies in the interest of the Company as determined in the sole discretion of its Board of Directors. The Company also retains its authority to discretionarily vote proxies with respect to shareholder proposals received by the Company after November 21, 2014 but prior to February 4, 2015, unless the proposing shareholder takes the necessary steps outlined in Rule 14a-4(c)(2) under the Securities Exchange Act of 1934 to ensure the proper delivery of proxy materials related to the proposal.

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BOARD NOMINATING PROCESS

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

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

The process by which the Board identifies and evaluates nominees for Director is described below. The size of the Board is established by the Company’s Bylaws. In the event any vacancy would reduce the number of Directors to less than eleven, the Board will consider various potential candidates for Director. Candidates may come to the attention of the Board through current Board members, shareholders, or other persons. Nominees recommended by shareholders will be evaluated in the same manner as other nominees. The Board has never paid fees to any third party to identify, evaluate, or to assist in identifying or evaluating, potential nominees, and it does not anticipate that it will be necessary to do so in the future.

The Board is not obligated to nominate any particular candidate for election. Candidates will be evaluated at meetings of the Board. In evaluating possible candidates for membership on the Board of Directors, the Board will seek to achieve a balance of knowledge, experience, and capability on the Board and will consider the qualifications of possible candidates based on the criteria described below. Members of the Board should have the highest professional and personal ethics and values, excellent personal and professional reputations, and must satisfy any necessary regulatory requirements to serve as Directors. They should have broad experience at the policy-making level in business, government, education, technology, or public interest. They should be committed to furthering the long-term as well as short-term interest of the Company and its shareholders, and in doing so they should be willing to consider the effect of any action on the Company’s shareholders, employees, suppliers, creditors and customers, and on the communities in which the Company and its subsidiary operate. They should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all Directors’ duties for the Company. The Board deems it a requirement that members of the Board reside within the trade area of the Bank and the Company. The Board of Directors reserves the right to modify these qualifications from time to time. The Board nominating process has no formal diversity policy. However, the Board of Directors is committed to considering diversity including experience, gender and ethnicity in the nomination process.

Shareholders who wish to recommend an individual for consideration by the Board as a nominee should provide information to the Board sufficient for it to fully evaluate the experience and character of the potential candidate. Advance notice of the shareholder’s recommended nominee for election to the Board must be given to the Company’s Treasurer in accordance with the mailing instructions provided in the section below captioned “Communication with the Board of Directors”. In order to be considered for nomination by the Board of Directors in connection with the Annual Meeting of Shareholders to be held in 2015, such advance notice of must be received by the Company no later than November 21, 2014. A shareholder’s recommendation should set forth: (i) as to each person whom the shareholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director, if elected); and (ii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the recommendation is made, (A) the name and address of such shareholder, as they appear on the Company’s books, and of such beneficial owner, (B) the number of shares of Common Stock that are owned (beneficially or of record) by such shareholder and such beneficial owner, (C) a description of all arrangements or understandings between such shareholder and such beneficial owner and any other person or persons (including their names) in connection with the nomination, and (D) a representation that such shareholder or its agent or designee intends to appear in person or by proxy at the annual meeting to place such candidate in nomination for election as a Director. All candidates that meet the criteria to be considered for nomination will be evaluated by the Board of Directors as indicated in the previous paragraph, and the Board of Directors retains absolute discretion to either approve for nomination or reject any candidate recommended for consideration by a shareholder.

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COMMUNICATION WITH THE BOARD OF DIRECTORS

The Board of Directors has established a process for shareholders of the Company to send communications to the Board. Any shareholder desiring to communicate with the Board or one or more individual Board members may write to the Treasurer of the Company at the following address:

	Hills Bancorporation
	Board of Directors
	c/o Treasurer
	131 Main Street ~~Hills, Iowa 52235.~~ ~~BOARD NOMINATING PROCESS~~ The Company does not have a standing nominating committee of the Board of Directors or a committee performing similar functions. Historically, changes in the membership of the Company’s Board of Directors have been relatively infrequent. In the view of the Board of Directors the amount of nominating activity does not justify the establishment of such a committee. The Board of Directors has directly performed and expects that it will continue to be capable of directly performing all nominating functions. Therefore, the Board of Directors has concluded that such a committee is not needed. In connection with its performance of such nominating functions, the Board of Directors does not have a charter. All directors would participate in the consideration of director nominees. Each of the directors, with the exception of Mr. Seegmiller, is independent as defined under the rules of the NASDAQ Stock Market. If one or more positions on the Board of Directors were to become vacant for any reason, the vacancy would be filled by the Board of Directors and all directors would participate in the selection of a person to fill each such vacancy.

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

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

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

COMMUNICATION WITH THE BOARD OF DIRECTORS


	~~Hills Bancorporation~~ ~~Board of Directors~~ ~~c/o Treasurer~~ ~~131 Main Street~~ Hills, IA 52235

The Treasurer of the Company has been instructed to forward all such communications to all Board members. The Board of Directors has adopted a policy requiring that a copy of all communications addressed to any member of the Board of Directors in his or her capacity as a Director be promptly provided to the Treasurer of the Company for distribution to all other members of the Board of Directors. All Directors will review any communication from a shareholder directed to the Board of Directors or to any one or more individual Board members in such capacity. The President and Chief Executive Officer of the Company will determine if any shareholder communication not addressed to Board members should be reviewed by the Board.

AVAILABILITY OF FORM 10-K REPORT

Copies of the Company’s Annual Report to the Securities and Exchange Commission (Form 10-K), including the financial statements and schedules thereto, for the fiscal year of the Company ended December 31, 2013, are made available by the Company, through its internet website (www.hillsbank.com) free of charge.

OTHER MATTERS

Management of the Company knows of no other matters which will be presented for consideration at the 2014 Annual Meeting of Shareholders other than those stated in the Notice of 2014 Annual Meeting, which is part of this Proxy Statement, and management does not intend to present any such other business. If any other matters do properly come before the meeting, it is intended that the persons named in the accompanying proxy will vote thereon in accordance with their judgment. The proxy will also have the power to vote for the adjournment of the meeting from time to time.

A copy of the Annual Report of the Company for the year ended December 31, 2013, is being mailed to shareholders together with this Proxy Statement. Such report is not incorporated in this Proxy Statement and is not to be considered a part of the proxy soliciting material.

The Treasurer of the Company has been instructed to forward all such communications to all Board members. The Board of Directors has adopted a policy requiring that a copy of all communications addressed to any member of the Board of Directors in his or her capacity as a director be promptly provided to the Treasurer of the Company for distribution to all other members of the Board of Directors. All directors will consider any communication from a shareholder directed to the Board of Directors or to any one or more individual Board members in such capacity. The President and Chief Executive Officer of the Company will determine if any shareholder communication not addressed to Board members should be considered by the Board.

AVAILABILITY OF FORM 10-K REPORT

Copies of the Company’s Annual Report to the Securities and Exchange Commission (Form 10-K) including the financial statements and schedules thereto for the fiscal year of the Company ended December 31, 2003, will be mailed when available without charge (except for exhibits) to a holder of shares of the Common Stock of the Company upon written request to James G. Pratt, Treasurer, Hills Bancorporation, 131 Main Street, Hills, Iowa 52235.

OTHER MATTERS

Management of the Company knows of no other matters which will be presented for consideration at the Annual Meeting of Shareholders other than those stated in the Notice of Annual Meeting which is part of this Proxy Statement, and management does not intend itself to present any such other business. If any other matters do properly come before the meeting, it is intended that the persons named in the accompanying proxy will vote thereon in accordance with their judgment. The proxy will also have the power to vote for the adjournment of the meeting from time to time.

A copy of the Annual Report of the Company for the year ended December 31, 2003, is mailed to shareholders together with this Proxy Statement. Such report is not incorporated in this Proxy Statement and is not to be considered a part of the proxy soliciting material.


	By Order of the Board of Directors

	/s/ Dwight O. Seegmiller

March 21, 2014	Dwight O. Seegmiller
Hills, Iowa	President and CEO

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EXHIBIT A

CURRENT ARTICLE IX

The current version of Article IX of the Articles reads as follows:

ARTICLE IX

Section 1. A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for a breach of the director’s duty of loyalty to the corporation or its shareholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law; (iii) for a transaction from which the director derived an improper personal benefit; or (iv) under section 496A.44 of the Iowa Business Corporation Act. Any repeal or modification of this Section1 by the shareholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability, or any other right or protection, of a director of the corporation with respect to any state of facts existing at or prior to the time of such repeal or modification.

Section 2.

(a)

The corporation shall indemnify and advance expenses to any person who was or is a party to or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including a grand jury proceeding), by reason of the fact that such person

(i)

is or was a director or officer of the corporation;

(ii)

while a director or officer of the corporation, is or was serving at the request of the corporation as a director, officer, employee, agent, partner or trustee (or in a similar capacity) of another corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan; or

~~March 22, 2004~~
~~Hills, Iowa~~(iii)

Exhibit A

CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF HILLS BANCORPORATION

I. Purposewhile a director or officer of the Committee

~~The purpose~~corporation, is or was serving as a director, officer, employee or agent of any majority owned subsidiary of the ~~Audit Committee (the “Committee”) is to oversee the accounting and financial reporting processes~~corporation or as a trustee or agent of any employee benefit plan of any such majority owned subsidiary of the ~~Company~~corporation, to the maximum extent it is empowered to indemnify and ~~the audits~~advance expenses to a director by section 496A.4A of the ~~financial statements~~Iowa Business Corporation Act against reasonable expenses (including attorneys’ fees), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by such person in connection with such claim, action, suit or proceeding or any appeal thereof; provided, however, that except as provided in subsection (b) of this Section 2 with respect to proceedings seeking to enforce rights of indemnification, entitlement to such indemnification shall be conditional upon the corporation being afforded the opportunity to participate directly on behalf of such person in such claim, action, suit or proceeding or any settlement discussions relating thereto, and with respect to any settlement or other nonadjudicated disposition of any threatened or pending claim, action, suit or proceeding, entitlement to indemnification shall be further conditional upon the prior approval by the corporation of the ~~Company.~~

II. Composition of the Committee

~~The Committee~~proposed settlement or nonadjudicated disposition. Such approval shall be ~~comprised of three or more directors, as determined~~made (A) by the Board of Directors each of whom shall be independent directors, as defined under Rule 10A-3 of the Securities Exchange Act of 1934. All members of the Committee shall be able to read and understand the Company’s basic financial statements.

III. Meetings and Procedures

~~The Committee shall fix its own rules of procedure, which shall be consistent with the Bylaws of the Company and this Charter. The Committee shall meet as provided~~ by ~~its rules, which shall be at least four times annually or more frequently as circumstances require. The Board shall designate one member of the Committee as its Chairperson. A~~ majority ~~of the members of the Committee shall constitute a quorum for the transaction of business at any meeting and action of the Committee shall be authorized by the affirmative~~ vote of a ~~majority~~quorum consisting of directors not at the time parties to the claim, action, suit or proceeding, or (B) by special legal counsel selected by the Board of Directors by vote as set forth in clause “(A)” of this subsection (b), or, if the requisite quorum of the ~~members present at~~full Board cannot be obtained therefore, by a ~~meeting at~~majority vote of the full Board, in which ~~a quorum is present.~~

~~Following each~~selection of such special legal counsel directors who are parties to any such claim, action, suit or proceeding may participate. Approval or disapproval by the corporation of any proposed settlement or other nonadjudicated disposition shall not subject the corporation to any liability to or require indemnification or reimbursement of any party who the corporation would not otherwise have been required to indemnify or reimburse. The right to indemnification conferred in this Section 2 shall include the right to payment or reimbursement by the corporation of expenses incurred in connection with any such claim, action, suit or proceeding in advance of its ~~meetings,~~final disposition; provided, however, that the ~~Committee~~payment or reimbursement of such expenses incurred by a director or officer in advance of the final disposition of such claim, action, suit or proceeding shall ~~deliver~~be made only upon delivery to the corporation of a ~~report~~written undertaking, by or on behalf of such director or officer or repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified under this Section 2 or otherwise, along with a written affirmation by such director or officer of such person’s good faith belief that such person has met the applicable standard of conduct necessary to require indemnification by the corporation pursuant to this Section 2 or otherwise.

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(b)

Any indemnification or advancement of expenses required under this Section 2 shall be made promptly upon, and in any event within thirty (30) days after, the written request of the person entitled thereto. If the corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty (30) days of the date such request is received by the corporation, the person seeking indemnification or advancement of expenses as granted by this Section 2 may at any time within the applicable statute of limitations bring suit against the corporation in any court of competent jurisdiction to establish such person’s right to indemnity or advancement of expenses. Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification in any such action or proceeding shall also be indemnified by the corporation. It shall be a defense to any action brought against the corporation to compel indemnification (other than an action brought to enforce a claim for the advancement of expenses pursuant to this Section 2 where the written affirmation of good faith and undertaking to repay as required by section 496A.4A of the Iowa Business Corporation Act have been received by the corporation) that the claimant has not met the standard of conduct set forth in section 496A.4A of the Iowa Business Corporation Act, but the burden of proving such defense shall be on the ~~meeting~~corporation. Neither

(i)

the failure of the corporation (including its Board of Directors, independent legal counsel or the shareholders) to have made a determination prior to the ~~Board, including a description~~commencement of ~~all actions taken~~such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in section 496A.4A of the Iowa Business Corporation Act, nor

(ii)

the fact that there has been an actual determination by the ~~Committee at~~corporation (including its Board of Directors, independent legal counsel or the ~~meeting.~~ shareholders) that the claimant has not met such applicable standard of conduct, shall create a presumption that the claimant has not met the applicable standard of conduct.

In the event that the applicable standard of conduct has been met as to some claims, actions, suits or proceedings, but not as to others, a person who has a right of indemnification pursuant to this Section 2 shall be indemnified against all expenses (including attorney fees) actually and reasonably incurred by such person in connection with the claim, action, suit or proceeding as to which the applicable standard has been met. Nothing contained in this subsection (b) shall limit the obligation, duty or ability of the corporation to indemnify such person as provided elsewhere in this Section 2.

(c)

The ~~Committee shall keep written minutes~~provisions of ~~its meetings, which minutes~~this Section 2 shall be ~~maintained with~~deemed a contract between the ~~books~~corporation and ~~records~~each director or officer who serves in either such capacity at any time while this Section 2 and the relevant provisions of the ~~Board.~~

IV. Committee Responsibilities

~~The Committee has the following responsibilities:~~

~~Review~~Iowa Business Corporation Act are in effect, and ~~reassess the adequacy~~any repeal or modification of any such law or of this ~~Charter annually~~Section 2 shall not adversely affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any claim, action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.

(d)	The corporation shall indemnify and ~~recommend~~advance expenses to any ~~proposed changes~~person who was or is a witness in or is threatened to ~~the Board for approval.~~

2.	Review the Company’s annual audited financial statements prior to filing with the Securities and Exchange Commission. Discuss with management and the independent auditors significant issues regarding accounting principles, critical accounting policies, accounting practices and related judgments.

3.	~~Be available (or designate the Chairman~~be made a witness in any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including a grand jury proceeding), by reason of the ~~Committee to be available)~~fact that such person

(i)

is or was a director or officer of the corporation, or

	(ii)	while a director or officer of the corporation, is or was serving at the request of the ~~independent auditors, management,~~corporation as a director, officer, employee, agent, partner or ~~the Board, to discuss the Company’s quarterly financial results either before earnings release~~trustee (or in a similar capacity) of another corporation, partnership, joint venture, trust, other enterprise, or ~~before filing, as considered appropriate in the circumstances.~~

4.	Participate, to the extent appropriate as determined by the Committee, in meetings with management, the internal auditor and the independent auditors to review the Company’s major financial risk exposures (meaning the financial reporting process and the safeguarding of assets) and the steps management has taken to monitor and control such exposures.

5.	~~Review significant findings reported by the independent auditors and the internal auditors and any response to such findings by management.~~

6.	~~Appoint the Company’s independent auditor.~~

7.	~~Receive and review the appropriate annual engagement letter and approve the fees and compensation to be paid to the independent auditor for the annual audit and quarterly reviews.~~

8.	~~Review with the independent auditor the audit~~employee benefit plan, ~~and pre-approve all audit and non-audit services to be provided by the independent auditor thereunder.~~

9.	~~Review, periodically, the Committee’s policy regarding the engagement of the Company’s independent auditor~~ or ~~other accounting firms.~~

~~10.~~(iii)

~~Consider~~while a director or office of the corporation, is or was serving as a director, officer, employee or agent of any ~~reports~~majority owned subsidiary of the corporation or ~~communications, and responses by management thereto, submitted~~as a trustee or agent of any employee benefit plan of any such majority owned subsidiary of the corporation to the ~~Committee~~same extent that such person would be entitled to indemnification and advancement of expenses under this Section 2 if such person were, or were threatened to be made, a party to such claim, action, suit or proceeding, against reasonable expenses (including attorneys’ fees) actually and reasonably incurred by ~~independent auditors that are required~~such person in connection with such claim, action, suit or ~~referred to in SAS 61 (as amended) relating to the audit~~proceeding or ~~other professional standards. There are a number of possible events triggering reports requiring attention~~any appeal thereof.

(e)	Except as limited by section 496A.4A of the ~~Committee.~~

~~11.~~	~~Attempt to resolve all disagreements between the Company’s independent auditors and management regarding financial reporting.~~

~~12.~~	On an annual basis (or more often if considered necessary), receive from the independent auditor the letter required by Independence Standards Board Statement No. 1 (and any related amendments), and discuss with the independent auditor, all significant relationships it has with the Company that could impair the auditor’s independence.

~~13.~~	~~Evaluate the performance of the independent auditor and, if so determined by the Committee, replace the independent auditor.~~

~~14.~~	~~Review the Annual Audit Plan for internal audit.~~

~~15.~~	~~Assure preparation of the Committee Report required to be included in the Company’s annual proxy statement.~~

~~16.~~	~~Advise the Board~~Iowa Business Corporation Act with respect to proceedings by or in the ~~Company’s policies~~right of the corporation, the indemnification and ~~procedures regarding compliance with applicable laws and regulations and with~~advancement of expenses provided by or granted pursuant to this Section 2 shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise; provided, however, that in no event shall any such provision or agreement provide indemnification to a person who was or is a director of the ~~Company’s Sarbanes-Oxley Code~~corporation

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(i)

for a breach of ~~Ethics as reported~~a director’s duty of loyalty to the ~~Committee by regulatory agencies, external~~corporation or its shareholders,

(ii)

for acts or omissions of a director not in good faith or which involve intentional misconduct or knowing violation of the law,

(iii)

for a transaction from which the director derived an improper personal benefit, or

(iv)

for liability of a director arising under section 496A.44 of the Iowa Business Corporation Act.

(f)	This Section 2 shall be applicable to all claims, actions, suits or proceedings commenced after the effective date hereof, whether arising from acts or omissions occurring before or after the effective date hereof. Each person who is now serving or who shall hereafter serve as a director or officer of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided for in this Section 2, and ~~internal auditors~~such rights of indemnification shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the heirs, executors, administrators and legal ~~counsel.~~

~~17.~~	Toor person representatives of such a person. If this Section 2 or any portion hereof shall be invalidated on any ground by a court of competent jurisdiction, then the extent appropriate as determined by the Committee, review with the Company’s legal counsel legal matters that may have a material impact on the financial statements, the Company’s compliance policies and any material reportscorporation shall nevertheless indemnify each director or ~~inquiries received from regulators or governmental agencies.~~

~~18.~~	~~Meet as needed with the Chief Executive Officer, Chief Financial Officer, the internal auditor and/or the independent auditor in executive sessions.~~

~~19.~~	Assure procedures are developed and in place for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employeesofficer of the ~~Company~~corporation to the maximum extent permitted by any applicable portion of ~~concerns regarding questionable accounting~~this Section 2 that shall not have been invalidated.

(g)	Notwithstanding anything in this Section 2 to the contrary, except with respect to proceedings initiated by a director or ~~auditing matters.~~

~~20.~~	Conduct investigations to address disagreements, if any, between management and the independent auditor or to address compliance with laws and regulations and the Company’s Sarbanes-Oxley Code of Ethics.

~~21.~~	~~Discuss with management the timing and process for implementing rotation~~officer of the ~~lead audit partner, the concurring partner and any other active audit engagement team partner.~~

~~22.~~	~~Establish hiring policies governing employment by the Company or its subsidiary~~corporation to enforce rights of ~~employees of, or persons who have recently been employees of, the independent auditor.~~

~~V. Evaluation of the Committee~~

~~The Committee shall, on an annual basis, evaluate its performance~~indemnification to which such person is entitled under this ~~Charter. In conducting this review,~~Section 2 or otherwise, the ~~Committee~~corporation shall ~~evaluate whether this Charter appropriately addresses~~indemnify any such person in connection with a claim, action, suit or proceeding (or part thereof) initiated by such person only if the ~~matters that are~~initiation of such claim, action, suit or ~~should be within its scope. The Committee shall address all matters that the Committee considers relevant to its performance.~~

The Committee shall deliver to the Board a report setting forth the results of its evaluation, including any recommended amendments to this Charter and any recommended changes to the Company’s or the Board’s policies or procedures.

VI. Investigations and Studies: Outside Advisers

The Committee shall have the authority to conduct any investigation appropriate to fulfilling its responsibilities and to retain, without need of approval of the engagement by the Board or management at Company expense, special legal, accounting or other consultants to advise the Committee. The Committee may request any officer or employee of the Company, the Company’s outside counsel, the internal auditor, or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

VII. Adoption of Charter

~~This charter~~proceeding (or part thereof) was ~~adopted~~authorized by the Board of ~~Directors on March 9, 2004.~~

Directors.

(h)

The corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan against any liability asserted against such person and incurred by such person in such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Section 2, the Iowa Business Corporation Act or otherwise. If any such directors’ and officers’ liability and corporation reimbursement insurance policy purchased by the corporation provides coverage for acts which are not within the scope of the provisions of this Article IX, the person(s) covered by such policy shall be entitled to the benefit of such insurance protection for any liability whatsoever resulting from such acts (to the extent of the policy provisions and limits only) notwithstanding anything in this Article IX to the contrary. The corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or similar arrangements), as well as enter into contracts providing for indemnification to the maximum extent permitted by law and including as part thereof any or all of the foregoing, to ensure the payment of such sums as may become necessary to effect full indemnification. The corporation’s obligation to make indemnification and pay expenses pursuant to this Section 2 shall be in excess of any insurance purchased and maintained by the corporation and such insurance shall be primary. To the extent that indemnity or expenses of a person entitled to indemnification and payment of expenses pursuant to this Section 2 are paid on behalf of or to such person by such insurance such payments shall be deemed to be in satisfaction of the corporation’s obligation to such person to make indemnification and pay expenses pursuant to this Section 2.

[END]

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EXHIBIT B

AMENDED ARTICLE IX

The amended version of Article IX of the Articles as adopted by the Board would read as follows:

Article IX

Section 1.

(a)

A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for any action taken, or any failure to take any action, as a director, except for liability for any of the following: (i) the amount of a financial benefit received by a director to which the director is not entitled; (ii) an intentional infliction of harm on the corporation or the shareholders; (iii) a violation of section 490.833 of the Iowa Business Corporation Act; or (iv) an intentional violation of criminal law.

(b)

The corporation shall indemnify a non-employee director for (i) any obligation to pay to any person for any action taken, or any failure to take any action, as a director, a judgment, settlement, penalty or fine, including an excise tax assessed with respect to an employee benefit plan, and (ii) reasonable expenses, including counsel fees, incurred with respect to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal, except for an obligation or expenses relating to any of the following: (i) the receipt of a financial benefit to which the director is not entitled; (ii) an intentional infliction of harm on the corporation or its shareholders; (iii) a violation of section 490.833 of the Iowa Business Corporation Act; or (iv) an intentional violation of criminal law.

(c)

If the Iowa Business Corporation Act is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be automatically eliminated or limited to the fullest extent permitted by the Iowa Business Corporation Act, as so amended.

Section 2. The corporation shall indemnify and advance expenses to any person who was or is a party or witness, or is threatened to be made a party or witness, to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, including grand jury proceedings, by reason of the fact that such person is or was a director or officer of the corporation or, while a director or officer of the corporation is, or was serving at the request of the corporation as a member, director, trustee, officer, partner, employee or agent of another foreign or domestic corporation, or of a partnership, company, joint venture, trust of other enterprise, including service with respect to employee benefit plans, against reasonable costs, charges, expenses, attorney’s fees, judgments, fines, penalties and amounts reasonably paid in settlement to the extent actually incurred by such person in connection with such claim, action, suit or proceeding, or in connection with an appeal thereof, to the full extent of and in a manner consistent with and limited by the Iowa Business Corporation Act, as the same now exists or may hereafter be amended or changed, or any successor or substitute law (but, in the case of any such amendment or change, only to the extent that such amendment or change empowers the corporation to provide broader indemnification than said law empowered the corporation to provide prior to such amendment or change).

Section 3.

(a)

The rights to indemnification hereunder shall be construed to be a contract between the corporation and each person who is now serving or shall hereafter serve as a director or officer of the corporation, and any repeal or modification of the Iowa Business Corporation Act or other relevant law shall not adversely affect any rights or obligations then existing with respect to any state of facts existing at or prior to the time of such repeal or modification. Any repeal or modification of this Article IX by the shareholders of the corporation shall be prospective only, and shall not adversely affect any right to indemnification hereunder of a director or officer of the corporation with respect to any state of facts existing at or prior to the time of such repeal or modification. Each person who is now serving or who shall hereafter serve as a director or officer of the corporation shall be deemed to be serving in reliance upon the rights to indemnification provided hereunder, and such rights to indemnification shall continue as to any person who has ceased to serve in such capacity and shall inure to the benefit of the heirs and personal representative of such person.

(b)

The indemnification provided hereunder shall not be deemed exclusive of any other rights to which the persons indemnified may be entitled under any bylaw, agreement, vote of disinterested directors or otherwise, both as to activity in such person’s official capacity and as to activity in another capacity while holding such office, and shall continue as to a person who has ceased to be a director of officer.

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(c)

The corporation’s obligation to make indemnification and pay expenses pursuant to this Article IX shall be in excess of any insurance purchased and maintained by the corporation. To the extent that indemnity or expenses of a person entitled to indemnification and payment of expenses pursuant to this Article IX are paid on behalf of or to such person by such insurance, such payments shall be deemed to be in satisfaction of the corporation’s obligation to such person to make indemnification and pay expenses pursuant to this Article IX.

(d)

If a claim for indemnity under this Article IX is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expenses of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required affirmation and undertaking, if any is required, has been tendered to the corporation) that the claimant has not met any applicable standard of conduct which makes it permissible under the Iowa Business Corporation Act for the corporation to indemnify the claimant for an amount claimed under Section 2 of this Article IX, but the burden of proving such defense shall be on the corporation. The failure of the corporation (including its Board of Directors, independent legal counsel or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met any such applicable standard of conduct shall not be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(e)

The corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan against any liability asserted against such person and incurred by such person in such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article IX, the Iowa Business Corporation Act, or otherwise. If any such directors’ and officers’ liability and corporation reimbursement insurance policy purchased by the corporation provides coverage for acts which are not within the scope of the provisions of this Article IX, the person(s) covered by such policy shall be entitled to the benefit of such insurance protection for any liability whatsoever resulting from such acts (to the extent of the policy provisions and limits only) notwithstanding anything in this Article IX to the contrary. The corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or similar arrangements), as well as enter into contracts providing for indemnification to the maximum extent permitted by law and including as part hereof any or all of the foregoing, to ensure payment of such sums as may become necessary to effect full indemnification.

[END]

Table of Contents

EXHIBIT C

CURRENT BYLAWS

The current Article XI of the Bylaws reads as follows:

ARTICLE XI. Indemnification of Officers and Directors

Section 1. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of “nolo contendere” of its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 2. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action of suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which the Corporation is incorporated or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court in which the Corporation is incorporated or such other court shall deem proper.

Section 3. The Corporation may indemnify any person who is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the extent and under the circumstances provided by paragraphs 1 and 2 of this Article with respect to the person who is or was a director or officer of the Corporation. The Corporation shall indemnify any person who is or was a director or officer of the Corporation and is or was threatened to be made a party to an action, suit or proceeding by reason of the fact that he is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the extent and under the circumstances provided by paragraphs 1 and 2 of this Article.

Section 4. Any indemnification under paragraph 1, 2 and 3 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth therein. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum (as defined in the By-laws of the Corporation) consisting of directors who were not parties to such action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders.

Section 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors of the Corporation in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article.

Section 6. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, By-law, agreement, vote of the stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, an shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 7. By action of its Board of Directors, notwithstanding any interest of the directors in the action, the Corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or would be required to indemnify him against such liability under the provisions of this Article or of the Iowa Business Corporation Act.

[END]

Table of Contents

EXHIBIT D

AMENDMENT TO BYLAWS

If Proposal 2 is approved by the shareholders, the Board of Directors anticipates amending Article XI of the Bylaws to read as follows:

ARTICLE XI. Indemnification of Employees and Agents

Section 1. The Corporation may indemnify any person who is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, and who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent allowed under the Iowa Business Corporation Act.

Section 2. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, agreement or otherwise, and shall continue as to a person who has ceased to be an employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 3. By action of its Board of Directors, notwithstanding any interest of the directors in the action, the Corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or would be required to indemnify him against such liability under the provisions of this Article or of the Iowa Business Corporation Act.

Table of Contents

PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

Proxy — HILLS BANCORPORATION

This Proxy is Solicited on Behalf of the Board of Directors for the Annual Meeting of Shareholders to be held on Monday, April 21, 2014

The undersigned hereby constitutes and appoints Michael E. Hodge, John W. Phelan and Shari J. DeMaris, or any one or more of them, the proxies and attorneys of the undersigned, each with full power of substitution (the action of majority of them or their substitutes present and acting to be in any event controlling), for and in the name, place, and stead of the undersigned to attend the Annual Meeting of Shareholders of HILLS BANCORPORATION (the “Corporation”) to be held at the Hills Community Center, Hills, Iowa, on Monday, April 21, 2014, at 4:00 p.m. local time, and any adjournment thereof, and to vote as directed herein all shares of common stock of the Corporation held of record by the undersigned on March 7, 2014, with all powers the undersigned would possess if personally present at such meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement.

This Proxy when properly executed will be voted in the manner directed herein by the undersigned. If no direction is given, this Proxy will be voted FOR each of the nominees identified under Proposal 1 and FOR each of Proposals 2 and 3. In addition, this Proxy will be voted in accordance with the recommendations of management on all matters for which notice was not received by the Company at least 45 days before the anniversary of the mailing date of the Company’s proxy materials for the immediately preceding Annual Meeting of Shareholders.

PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.

(CONTINUED ON REVERSE SIDE)

Non-Voting Items

Change of Address — Please print new address below.

~~THIS PAGE INTENTIONALLY LEFT BLANK~~

IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.

Name and Year First Become Director	Age	Positions & Offices Held With Company	Principal Occupation or Employment During the Past Five Years and Education Pertaining to Board of Director Qualifications

Directors Serving Until the 2015 Annual Meeting

Michael S. Donovan 2007 - Company 2007 - Bank	51	Director	Farmer and President of Donovan & Sons, Ltd., a local Johnson County, Iowa family farm corporation, and partner in PVP1, LLP, a local pork production operation. Mr. Donovan is a graduate of North Iowa Area Community College.



Thomas J. Gill, D.D.S. 1993 - Company 1993 - Bank	67	Director	Dentist - Private Practice in Coralville, Iowa since 1980. Dr. Gill is a graduate of the University of Iowa College of Dentistry.

Dwight O. Seegmiller 1986 - Company 1986 - Bank	61	Director & President	President of the Company and the Bank. Mr. Seegmiller is a graduate of Iowa State University’s Agricultural Business Honors Program and the Stonier Graduate School of Banking at Rutgers University. He joined the Company in 1975 and has ~~established a committee (the “Incentive Stock Committee”) consisting~~been President of the ~~nine non-employee directors (all directors but~~Company since 1986. Prior to 1986, Mr. ~~Seegmiller)~~Seegmiller was the Senior Vice President of Lending.



Thomas R. Wiele 2012 - Company 2012 - Bank	61	Director	President, Dealer and Operator of Wiele Motor Company, located in West Liberty and Columbus Junction, Iowa. Mr. Wiele is also a part-time farmer.

Name and Year First Become Director	Age	Positions & Offices Held With Company	Principal Occupation or Employment During the Past Five Years and Education Pertaining to ~~administer~~Board of Director Qualifications

Director Serving Until the 2016 Annual Meeting

Michael E. Hodge	60	Director	President and ~~grant awards under~~shareholder of Hodge Construction Company, an Iowa City, Iowa business. Mr. Hodge obtained a BS in civil engineering from the ~~Hills Bancorporation~~ University of Iowa.
2000 ~~Stock Option~~- Company
2000 - Bank

John W. Phelan	59	Director	Former General Sales Manager with KZIA Z102.9 and ~~Incentive Plan (the “Incentive Stock Plan”). The Incentive Stock Committee held two meetings during 2003. All members~~KGYM 1600ESPN radio stations (2010 - 2011); formerly Vice President and General Manager of Cedar Rapids Television Company, d/b/a KCRG-TV9 in Cedar Rapids, Iowa, the local ABC affiliate.
2007 - Company
2007 - Bank

Sheldon E. Yoder, D.V.M.	61	Director	President and shareholder of Kalona Veterinary Clinic, P.C., located in Kalona, Iowa. Dr. Yoder is a graduate of the ~~Incentive Stock Committee attended both meetings. Directors are not compensated for meetings~~Iowa State University College of ~~the Incentive Stock Committee.~~ ~~During 2003, options to purchase up to 6,200~~Veterinary Medicine. He has been President of Kalona Veterinary Clinic since 1978.
1997 - Company
1997 - Bank

Compensation Item	Company		Bank

Annual Retainer (paid quarterly):
Chairperson of the Board		N/A	$	16,000
Board Member		N/A		12,000

Meeting Fees:
Board Meetings	$	300		500
Committee:
Audit		N/A		300
Compensation and Incentive Stock		N/A		N/A
Employee Stock Ownership Plan / Profit Sharing		N/A		300
Loan		N/A		300
Trust		N/A		300

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)

Michael S. Donovan	$	26,250	$	-	$	-	$	-	$	-	$	-	$	26,250
Thomas J. Gill, D.D.S.		24,950		-		-		-		-		-		24,950
Michael E. Hodge		28,550		-		-		-		-		-		28,550
Emily A. Hughes		27,650		-		-		-		-		-		27,650
James A. Nowak		25,550		-		-		-		-		-		25,550
Theodore H. Pacha		30,450		-		-		-		-		-		30,450
John W. Phelan		25,950		-		-		-		-		-		25,950
Ann Marie Rhodes		27,950		-		-		-		-		-		27,950
Thomas R. Wiele		24,950		-		-		-		-		-		24,950
Sheldon E. Yoder, D.V.M.		24,950		-		-		-		-		-		24,950

Name and Address of Beneficial Owner	Total Shares Beneficially Owned	Sole Voting and Investment Power		Shared Voting and Investment Power		Percent of Class

Hills Bank and Trust Company, as trustee of the Hills Bank and Trust Company Employee Stock Ownership Plan (the “ESOP”) 131 Main Street Hills, Iowa 52235	409,953	15,630	(1)	394,323	(2)	8.66%

SCHEDULE 14A

SCHEDULE 14A INFORMATION

Employee Stock Ownership Plan

Profit Sharing Plan

Performance Graph

Compensation Committee Interlocks and Insider Participation

REPORT ON EXECUTIVE COMPENSATION

Compensation Policy

President’s Compensation

AUDIT AND OTHER FEES

Audit Fees:

Tax Fees:

All Other Fees:

PROPOSALS BY SHAREHOLDERS

BOARD NOMINATING PROCESS

COMMUNICATION WITH THE BOARD OF DIRECTORS

AVAILABILITY OF FORM 10-K REPORT

OTHER MATTERS

Exhibit A

CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF HILLS BANCORPORATION

I. Purposewhile a director or officer of the Committee

II. Composition of the Committee

III. Meetings and Procedures

IV. Committee Responsibilities

VI. Investigations and Studies: Outside Advisers

VII. Adoption of Charter

Name and Address of Beneficial Owner	Total Shares Beneficially Owned	Sole Voting and Investment Power	Shared Voting and Investment Power		Percent of Class

Hills Bank and Trust	147,172	0	147,172	(1)	9.70%
Company, as trustee
of the Hills Bank
and Trust Company
Employee Stock
Ownership Plan
(the “ESOP”)
131 Main Street
Hills, Iowa 52235


~~NOTE:~~

~~(1)~~(2)	Consists of shares of Company Common Stock allocated to the accounts of employees of the Bank who are eligible to participate in the ESOP. Employees are entitled to direct the trustee how to vote shares allocated to their accounts.


~~NOTES:~~

(1)	This figure includes ~~2,055~~ shares subject to currently exercisable stock options granted ~~in 1997 to one director~~ pursuant to the ~~Hills Bancorporation 1993~~2010 Stock Option and Incentive ~~Stock~~ Plan. ~~The exercise price of~~For Directors, the ~~options granted in 1997 is $40.00 per share. These options were granted in tandem with dividend equivalents. These~~ options will expire onten years after the ~~earlier of April 19, 2007~~grant date or two years after the ~~director’s~~Director’s term of service on the Board of Directors of the Company ~~ends.~~ends, whichever occurs first. For Non-Director Executive Officers, the options expire ten years after the grant date. Details of the stock options are as follows:


(2)	This figure includes shares held by the Bank’s ESOP which have been allocated to the executive officers for voting purposes. The following number of shares have been allocated under the ESOP to the executive officers for voting purposes: Mr. Seegmiller -13,741; Mr. Cilek - 9,023; Mr. Pratt - 11,095; all executive officerspurposes as ~~a group - 33,859.~~follows:

Name		ESOP Shares

Shari J. DeMaris		395
Timothy D. Finer		12,753
Marty J. Maiers		18,955
Steven R. Ropp		9,551
Dwight O. Seegmiller		44,025
Bradford C. Zuber		13,548

Members of the Compensation and Incentive Stock Committee

Michael S. Donovan	Theodore H. Pacha, Chairperson
Thomas J. Gill, D.D.S.	John W. Phelan
Michael E. Hodge	Ann Marie Rhodes
Emily A. Hughes	Thomas R. Wiele
James A. Nowak	Sheldon E. Yoder, D.V.M.

Name / Age / Position with Company for last five years (1)	Year	Salary ($)				Bonus ($)				Stock Awards ($)				Option Awards ($)				All Other Compensation ($)(6)				Total ($)

Company
Dwight O.	2013	$	405,656	(2	)	$	17,616	(3	)	$	-			$	-			$	22,950			$	446,222
Seegmiller,
61, President	2012		392,656	(2	)		16,766	(3	)		-				-				22,500				441,103
and Principal								(3	)
Executive	2011		370,000	(2	)		16,200	(3	)		-				-				22,050				408,250
Officer

Shari J. DeMaris	2013		190,000	(2	)		2	(3	)										18,977				208,979
Secretary,
44, Treasurer	2012		135,000				-	(3	)		34,500	(4	)		37,905	(5	)		13,477				220,882
and Principal
Financial
Officer

Bank
Timothy D. Finer,	2013		153,920				-				-				-				124,306	(7	)		278,226
52, Senior Vice
President,	2012		148,000				-				-				-				124,735	(7	)		272,735
Director of
Real Estate	2011		144,000				-				-				-				118,393	(7	)		262,393
Lending

Marty J. Maiers,	2013		178,880				-				-				-				43,370	(7	)		222,250
56, Senior Vice
President,	2012		172,000				-				-				-				89,114	(7	)		261,114
Director of
Retail Banking	2011		168,000				-				-				-				58,334	(7	)		226,334

Steven R. Ropp,	2013		153,920				-				-				-				36,420	(7	)		190,340
53, Senior Vice
President,	2012		148,000				-				-				-				35,871	(7	)		183,871
Director of
Commercial	2011		144,000				-				-				-				49,063	(7	)		193,063
Banking

Bradford C. Zuber,	2013		174,720				-				-				-				17,343				192,063
57, Senior Vice
President,	2012		168,000				-				-				-				16,723				184,723
Director of
Trust Services	2011		164,000				-				-				-				45,454	(7	)		209,454

	(1)	Mr. Seegmiller, a Named Executive Officer of the Company, has held his position for the past five years. Ms. DeMaris has been a Named Executive Officer of the Company since November 1, 2012. All Bank named executive officers ofhave held their respective positions for the ~~Company:~~
past five years.

					Long Term Compensation

					Awards
Name and Principal Position	Year	Salary ($)	Bonus ($) (1)		Securities Underlying Options/SARS	All Other Compensation ($) (2)

Dwight O. Seegmiller	2003	299,262		11,926	0		111,369
President of	2002	275,400		9,540	0		42,902
Company and	2001	270,000		11,700	0		25,246
Bank

Thomas J. Cilek	2003	186,113		0	0		29,658
Secretary of	2002	172,910		0	0		19,465
Company; Senior	2001	169,512		0	0		17,150
Vice President
of Bank

James G. Pratt	2003	224,534		4,453	0		38,057
Treasurer of	2002	208,658		2,866	0		23,421
Company;	2001	204,540		5,154	0		17,534
Senior Vice
President of Bank


~~NOTES:~~

~~(1)~~(3)	Consists of additional cash compensation paid in lieu of contributions to the ESOP and the Hills Bank and Trust Company Profit Sharing Plan (the “Profit Sharing Plan”) that could not be made by the Bank because of Internal Revenue Code limits on such contributions.

	(6)	For each of the ~~named executive officers,~~Company Named Executive Officers, the figures shown consist ~~partially~~ of contributions in the following amounts made by the Bank to the ~~ESOP and the~~ Profit Sharing Plan and ESOP for the ~~specified year:~~


	~~The remaining portion of the figures shown consist of above-market returns on deferred compensation accrued during the specified year based on the change in the value of the Company’s common stock.~~


~~NOTES:~~

~~(1)~~	Value realized is the difference between the fair market value of the stock when the options were exercised and the option price of $26.17. Added to this value is an amount equal to the dividend equivalents paid on the option shares exercised which was $12.87 per share. Each participant paid ordinary income taxes rates on these non-qualified stock options for the value realized and the Company received an income tax deduction.

~~(2)~~	Options were granted in tandem with dividend equivalents. Dividend equivalents entitle the holder of the option to receive, upon exercise of the option, a cash payment equal to the dividends paid with respect to the shares purchased from the date the option was granted through the date the option was exercised.

~~(3)~~	~~All options granted were subject to a five-year vesting requirement and are now fully vested.~~

~~(4)~~	~~These dollar values were calculated by determining the difference between the fair market value of the securities underlying the options and the exercise or base price of the options at~~last three fiscal year-end. Options were granted at an exercise price equal to the then fair market value of the underlying stock which was determined by the Incentive Stock Committee of the Board of Directors to be equal to the then book value per share ($26.17) of the stock. The fair market value of stock as of December 31, 2003 is $101.00 per share. Since no established trading market exists for the Company’s common stock the price of $101.00 is based on the last known selling price in December, 2003. The book value per share of the stock as of December 31, 2003 is $73.60 computed on the same method as the $26.17 book value used at the date the options were granted.

Name of Individual or Number in Group	Capacities in Which Served	Amounts Accrued

Dwight O. Seegmiller	Director and President of the	$	2,000
	Company; Director and President
	of the Bank
Thomas J. Cilek	Secretary of the Company;	$	1,861
	Senior Vice President of the Bank
James G. Pratt	Treasurer of the Company;	$	2,000
	Senior Vice President of the Bank

All Executive Officers
as a Group (3 persons)		$	5,861
All Other Participating
Employees (302 persons)		$	101,918

	Defined Contribution Profit Sharing Plan		Employee Stock Ownership Plan		401(k) Plan		Total All Other Compensation
Company
Dwight O. Seegmiller
2013	$	-	$	22,950	$	-	$	22,950
2012		-		22,500		-		22,500
2011		-		22,050		-		22,050

Shari J. DeMaris
2013		-		17,079		1,898		18,977
2012		-		12,129		1,348		13,477

Bank
Timothy D. Finer
2013		-		13,776		1,531		15,307
2012		-		13,262		1,473		14,735
2011		-		12,954		1,439		14,393

Marty J. Maiers
2013A		-		15,980		1,776		17,756
2012		-		15,415		1,713		17,128
2011		-		15,056		1,678		16,734

Steven R. Ropp
2013		-		13,750		1,528		15,278
2012		-		13,251		1,472		14,723
2011		-		12,954		1,439		14,393

Bradford C. Zuber
2013		-		15,608		1,734		17,342
2012		-		15,051		1,672		16,723
2011		-		14,743		1,638		16,381


	1998		1999		2000		2001		2002		2003

HILLS BANCORPORATION	$	100.00	$	123.37	$	138.51	$	150.27	$	164.69	$	193.08
REGIONAL-SQOUTHWEST BANKS	$	100.00	$	90.05	$	116.20	$	122.91	$	138.85	$	183.95
NASDAQ MARKET INDEX	$	100.00	$	176.37	$	110.86	$	88.37	$	61.64	$	92.68

Name	Year	Gain on Stock Options Exercised ($)

Timothy D. Finer	2013	$	109,000
	2012		110,000
	2011		104,000

Marty J. Maiers	2013		25,614
	2012		71,986
	2011		41,600

Steven R. Ropp	2013		21,142
	2012		21,148
	2011		34,670

Bradford C. Zuber	2011		29,073

	Option Awards									Stock Awards
Name	# of Securities Underlying Options (#) Exercisable		# of Securities Underlying Unexercisable Options (#) Unexercisable		Equity Incentive Plan Awards # of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Exercise Date	# of Shares or Units of Stockw That Have Not Been Vested (#)		Market Value of Shares or Units of Stock that Have Not Vested ($)		Equity Incentive Plan Awards: # of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Shari J. DeMaris		-		1,500		-	$	69.00	10/09/22		500	$	37,500		-	$	-

	Executive Contributions in 2013 ($)(1)		Registrant Contributions in 2013 ($)(1)		Aggregate Earnings in 2013 ($)(2)		Aggregate Withdrawals/ Distributions during 2013 ($)	Aggregate Balance at December 31, 2013 ($)

Dwight O. Seegmiller	$	40,536	$	17,616	$	311,172	None	$	3,895,216

Shari J. DeMaris		3,795		2		131	None		3,929

	Audit Committee

	James A. Nowak, Chairperson
	Michael S. Donovan
	John W. Phelan

SCHEDULE 14A

SCHEDULE 14A INFORMATION

Employee Stock Ownership Plan

Profit Sharing Plan

Performance Graph

Compensation Committee Interlocks and Insider Participation

REPORT ON EXECUTIVE COMPENSATION

Compensation Policy

President’s Compensation

AUDIT AND OTHER FEES

Audit Fees:

Tax Fees:

All Other Fees:

PROPOSALS BY SHAREHOLDERS

BOARD NOMINATING PROCESS

COMMUNICATION WITH THE BOARD OF DIRECTORS

AVAILABILITY OF FORM 10-K REPORT

OTHER MATTERS

Exhibit A

CHARTER OF THE AUDIT COMMITTEEOF THE BOARD OF DIRECTORS OF HILLS BANCORPORATION

I. Purposewhile a director or officer of the Committee

II. Composition of the Committee

III. Meetings and Procedures

IV. Committee Responsibilities

VI. Investigations and Studies: Outside Advisers

VII. Adoption of Charter

CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF HILLS BANCORPORATION

	Years Ended December 31,
	2013		2012

Audit fees (1)	$	210,600	$	211,050
Tax fees (2)		26,100		25,300
All other fees (3)		-		22,500
Total Fees	$	236,700	$	258,850