FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-26589, eff. 4/12/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
Commission file number: 0-12668
Hills Bancorporation
Incorporated in Iowa I.R.S. Employer Identification
No. 42-1208067
131 MAIN STREET, HILLS, IOWA
Telephone number: (319) 679-2291
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
SHARES OUTSTANDING
CLASS At July 31, 2001
Common Stock, no par value 1,497,166
HILLS BANCORPORATION
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets, June 30, 2001 (unaudited)
and December 31, 2000
Consolidated statements of income, (unaudited) for three
and six months ended June 30, 2001 and 2000
Consolidated statements of comprehensive income, (unaudited) for
the three and six months ended June 30, 2001 and 2000.
Consolidated statements of stockholders' equity, (unaudited)
for six months ended June 30, 2001 and 2000
Consolidated statements of cash flows (unaudited) for six
months ended June 30, 2001 and 2000
Notes to consolidated financial statements
Item 2. Management's discussion and analysis of financial condition
and results of operations
Part II
OTHER INFORMATION
Item 1. Legal proceedings
Item 2. Changes in securities and use of proceeds
Item 3. Defaults upon senior securities
Item 4. Submission of matters to vote of security holders
Item 5. Other information
Item 6. Exhibits and reports on Form 8-K
COMPUTATION OF EARNINGS PER SHARE
SIGNATURES
HILLS BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, 2001
Unaudited December 31, 2000*
------------ ------------------
ASSETS
Cash and due from banks ......................... $ 32,824 $ 25,669
Investment securities:
Available for sale (amortized cost
June 30, 2001 $157,392;
December 31, 2000 $136,661) ................. 160,998 137,768
Held to maturity (fair value
June 30, 2001 $13,730;
December 31, 2000 $15,676) .................. 13,405 15,509
Stock of Federal Home Loan Bank ............... 7,809 7,789
Federal funds sold ............................... 9,065 28,065
Loans, net ....................................... 640,933 626,873
Property and equipment, net ...................... 18,926 16,499
Accrued interest receivable ...................... 7,838 7,522
Deferred income taxes, net ....................... 2,214 3,286
Other assets ..................................... 7,158 6,770
-------- --------
$901,170 $875,750
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing deposits ..................... $ 77,839 $ 76,087
Interest-bearing deposits ........................ 597,077 576,619
-------- --------
Total deposits ................................ $674,916 $652,706
Federal funds purchased and securities
sold under agreements to repurchase ........... 15,633 16,561
Federal Home Loan Bank notes ..................... 120,668 120,668
Accrued interest payable ......................... 2,713 2,865
Other liabilities ................................ 3,069 2,876
-------- --------
$816,999 $795,676
-------- --------
REDEEMABLE COMMON STOCK HELD BY
EMPLOYEE STOCK OWNERSHIP PLAN
(ESOP) ........................................ $ 11,850 $ 11,550
-------- --------
STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
authorized 10,000,000 shares;
issued June 30, 2001 - 1,497,166 shar
December 31, 2000 - 1,495,483 shares .......... $ 10,241 $ 10,197
Retained earnings ................................ 71,657 69,179
Accumulated other comprehensive income,
unrealized gains (losses) on investme ......... 2,273 698
-------- --------
$ 84,171 $ 80,074
Less, maximum cash obligation related to
ESOP shares ................................... 11,850 11,550
-------- --------
$ 72,321 $ 68,524
-------- --------
$901,170 $875,750
======== ========
* Derived from audited financial statements.
See Notes to Financial Statements.
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three and Six Months Ended June 30, 2001 and 2000
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
------------------ ----------------
June 30 June 30
------- -------
2001 2000 2001 2000
--------------------------------------
Interest Income:
Interest and fees on loans .......... $13,175 $12,225 $26,169 $23,863
Interest on investment securities:
Taxable ........................... 1,982 1,902 3,770 3,735
Non-taxable ....................... 475 429 932 845
Interest on federal funds sold ...... 299 95 812 267
------- ------- ------- -------
Total interest income ............... $15,931 $14,651 $31,683 $28,710
------- ------- ------- -------
Interest Expense:
Interest on deposits ................ $ 6,857 $ 5,928 $13,927 $11,334
Interest on securities sold under
agreements to repurchase 160 129 343 262
Interest on FHLB borrowings ......... 1,766 1,897 3,513 3,850
------- ------- ------- -------
Total interest expense .............. $ 8,783 $ 7,954 $17,783 $15,446
------- ------- ------- -------
Net interest income ................. $ 7,148 $ 6,697 $13,900 $13,264
Provision for loan losses .............. 225 201 450 474
------- ------- ------- -------
Net interest income after provision
for loan losses $ 6,923 $ 6,496 $13,450 $12,790
------- ------- ------- -------
Other income:
Loan origination fees ............... $ 337 $ 65 $ 483 $ 112
Trust fees .......................... 616 578 1,210 1,167
Deposit account charges and fees .... 792 630 1,502 1,199
Other expenses:
Salaries and employee benefits ...... $ 2,906 $ 2,620 $ 5,689 $ 5,280
Occupancy ........................... 419 331 858 671
Furniture and equipment ............. 640 509 1,248 995
Office supplies and postage ......... 301 259 583 500
Other operating ..................... 1,301 1,163 2,440 2,331
------- ------- ------- -------
$ 5,567 $ 4,882 $10,818 $ 9,777
------- ------- ------- -------
Income before income taxes .......... $ 3,680 $ 3,479 $ 7,019 $ 6,667
Federal and state income taxes ......... 1,146 1,080 2,178 2,064
------- ------- ------- -------
Net income .......................... $ 2,534 $ 2,399 $ 4,841 $ 4,603
======= ======= ======= =======
Earning per common share:
Basic ............................. $ 1.69 $ 1.60 $ 3.23 $ 3.08
Diluted ........................... 1.68 1.59 3.21 3.05
See Notes to Financial Statements
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 2001 and 2000
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30 June 30
2001 2000 2001 2000
------------------ ------------------
Net Income ..................................... .$ 2,534 $ 2,399 $ 4,841 $ 4,603
------- ------- ------- -------
Other comprehensive income:
Unrealized gains (losses) on debt securities . 156 137 2,498 (230)
Income tax effect of unrealized gains (losses) (57) (51) (923) 85
------- ------- ------- -------
Other comprehensive income (loss) . 145 86 1575 (145)
------- ------- ------- -------
Comprehensive Income ......................... $ 2,633 $ 2,485 $ 6,416 $ 4,458
======= ======= ======= =======
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 2001 and 2000
(In Thousands)
Less
Maximum
Accumulated Cash
Other Obligation
Capital Retained Comprehensive To ESOP
Stock Earnings Income Shares Total
----- -------- ------ ---------- -----
C>
Balance, December 31, 2000 $ ........ $10,197 $ 69,179 $ 698 $ (11,550) $ 68,524
Net income ........................ - - - 4,841 - - - - - - 4,841
Cash dividends ($1.60 per share) .. - - - (2,393) - - - - - - (2,393)
Change related to ESOP shares ..... - - - - - - - - - (300) (300)
Issuance of 1,683 shares of common
stock .. 44 - - - - - - - - - 44
Income tax benefit related to stock
based compensation ............. - - - 30 - - - - - - 30
Other comprehensive income ........ - - - - - - 1,575 - - - 1,575
---------- -------- --------- ---------- --------
Balance, June 30, 2001 .............. $10,241 $ 71,657 $ 2,273 $ (11,850) $ 72,321
========== ======== ========= ========== ========
Less
Maximum
Accumulated Cash
Other Obligation
Capital Retained Comprehensive To ESOP
Stock Earnings Income Shares Total
----- -------- ------ ---------- -----
Balance, December 31, 1999.......... $ $10,214 $61,984 $ (981) $(10,953) $ 60,264
Net income ...................... - - - 4,603 - - - - - - 4,603
Cash dividends ($1.45 per share) - - - (2,169) - - - - - - (2,169)
Change related to ESOP shares ... - - - - - - - - - (391) (391)
Other comprehensive income (loss) - - - - - - (145) - - - (145)
-------- --------- ---------- -------- --------
Balance, June 30, 2000 .......... $ $10,214 $ 64,418 $ (1,126) $(11,344) $ 62,162
======== ========= ========== ======== ========
See Notes to Financial Statements.
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2001 and 2000
(In Thousands)
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................... $ 4,841 $ 4,603
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation ......................................... 964 680
Provision for loan losses ............................ 450 474
Deferred income taxes ................................ 149 161
(Increase) decrease in accrued interest receivable ... (316) (740)
Amortization of bond discount ........................ 58 33
(Increase) in other assets ........................... (559) 378
Amortization of intangibles .......................... 171 172
Increase in accrued interest and other liabilities ... 41 182
-------- -------
Net cash provided by operating activities ............ $ 5,799 $ 5,943
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities:
Available for sale ................................... $ 34,587 $ 13,531
Held to maturity ..................................... 2,104 1,568
Purchase of investment securities, available for sale .... (55,397) (16,489)
Federal funds sold, net .................................. 19,000 6
Loans made to customers, net of collections .............. (14,510) (40,427)
Purchases of property and equipment ...................... (3,391) (2,237)
-------- -------
Net cash (used in) investing activities .............. $(17,607) $(44,048)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits .................. $ 22,210 $ 36,791
Net increase (decrease) in fed funds purchased and
securities sold under agreements to repurchase .... (928) (10,961)
Borrowings from FHLB ................................. - - - 40,000
Payments on FHLB notes ................................ - - - (23,000)
Issuance of stock upon exercise of stock options ..... 44 - - -
Income tax benefits on stock options exercised ....... 30 - - -
Dividends paid ....................................... (2,393) (2,169)
-------- ---------
Net cash provided by financing activities ......... $ 18,963 $ 40,661
-------- ---------
Increase in cash and due from banks ............... $ 7,155 $ 2,556
CASH AND DUE FROM BANKS
Beginning ............................................ 25,669 21,765
-------- ---------
Ending ............................................... $ 32,824 $ 24,321
======== =========
SUPPLEMENTAL DISCLOSURES
Cash payments for:
Interest paid to depositors and others ............ $ 14,079 $ 11,121
Interest paid on other obligations ................ 3,856 4,112
Non-cash financing transaction,
increase in maximum cash obligation related
to ESOP shares ................................... 300 391
See Notes to Financial Statements.
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Interim Financial Statements
Interim consolidated financial statements have not been examined
by independent public accountants, but include all adjustments
(consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of
the results for these periods. The results of operation for the
interim periods are not necessarily indicative of the results for
a full year.
In reviewing these financial statements, reference should be made
to the Notes to Financial Statements contained in the Financial
Statements for the year ended December 31, 1999.
There were no changes in accounting policies which had a
significant effect on the interim consolidated financial
statements for the periods presented.
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash
items in process of clearing). Cash flows from demand deposits,
NOW accounts, savings accounts, and federal funds purchased and
sold are reported net since their original maturities are less
than three months. Cash flows from loans and time deposits are
presented as net increases or decreases.
Note 2. Loans
The following tables set forth the composition of loans and the
llowance for loan losses:
(In thousands)
June 30
2001 2000
---- ----
Agricultural ................. $ 32,213 $ 30,131
Commercial and financial ..... 39,311 35,927
Real estate, construction .... 40,840 40,417
Real estate, mortgage ........ 505,730 477,892
Loans to individuals ......... 33,165 30,927
-------- --------
$651,259 $615,294
Less allowance for loan losses 10,326 9,960
-------- --------
$640,933 $605,334
======== ========
Transactions in the allowance for loan losses are as follows:
(In thousands)
Six Months
Ended June 30
2001 2000
---- ----
Balance, beginning ........... $ 10,428 $ 9,750
Provision charged to expense 450 474
Net charge-offs ............ (552) (264)
-------- --------
Balance, ending .............. $ 10,326 $ 9,960
======== ========
HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following summarizes the Company's nonaccrual, past due, restructured
and impaired loans:
(In thousands)
June 30
2001 2000
--------- --------
Nonaccrual ............................. $1,993 $ - - -
Accruing loans, past due 90 days or more 1,627 2,172
Restructured loan ...................... - - - - - -
Impaired loans ......................... $7,708 8,837
Note 3. Earnings Per Share
Basic net income per share amounts are computed by dividing net
income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share are computed by
dividing net income by the weighted average number of common
shares outstanding during the period plus the number of potential
dilutive common shares attributable to the Company's stock option
plan.
Note 4. Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued
Statement 141, "Business Combinations" and Statement 142,
"Goodwill and Other Intangible Assets." Statement 141 eliminates
the pooling method for accounting for business combinations;
requires that intangible assets that meet certain criteria be
reported separately from goodwill; and requires negative goodwill
arising from a business combination to be recorded as an
extraordinary gain. Statement 142 eliminates the amortization of
goodwill and other intangibles that are determined to have an
indefinite life; and requires, at a minimum, annual impairment
tests for goodwill and other intangible assets that are
determined to have an indefinite life. The provisions of the
Statements are generally effective January 1, 2002. The Company
anticipates that goodwill will be evaluated for impairment and
that the amortization of substantially all goodwill will be
suspended on January 1, 2001. Annual goodwill amortization totals
$261,000.
In July 2001, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 102, "Selected Loan Loss Allowance
Methodology and Documentation Issues." The bulletin does not
change accounting guidance for the Allowance for Loan Losses, but
does provide significant interpretation of the manner in which
institutions should develop and document their methodology for
calculating the allowance for loan losses, as well as measuring
the adequacy of such. Management is in the early stages of
comparing its documentation and methodology to determine what
changes and adjustments to the allowance for loan losses will be
needed. This process is anticipated to be completed in the 4th
quarter of 2001.
PART I, ITEM 2.
HILLS BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Information
Forward looking information relating to the financial results or strategies of
the Company are made in the Management's Discussion and Analysis. The following
paragraphs identify forward looking statements and the risks that need to be
considered when reading those statements.
Forward looking statements include such words as believe, expect, anticipate,
target, goal, objective and other words with similar meaning. The Company is
under no obligation to update such statements.
The risks involved in the operations and strategies of the Company include
competition from other financial institutions, changes in interest rates,
changes in economic or market conditions and changes in regulatory factors.
These risks, which are not all inclusive, cannot be estimated.
Recent Activities
During the second quarter of 2001 Hills Bank and Trust Company began
construction of a new Eastside Iowa City branch office to replace the currently
leased location. The new 5,800 square feet one story building will have three
drive-up lanes and a drive-up ATM when it opens in December 2001. In the first
quarter 2001 the Company relocated personnel and equipment from several
locations to the Bank's new bank operations center building addition in Hills,
Iowa to help centralize all bank operations. In addition, the 6,000 square feet
expansion and remodeling of the Coralville office location was completed in the
first quarter if 2001.
Financial Position
Assets as of June 30, 2001 totaled $901.2 million and represent an $81.9 million
increase in assets from one year ago. Net loans increased in the last year by
$35.6 million with the majority of this increase in real estate loans. The local
economy continues to be strong and the housing market,with interest rates lower
than one year ago, is still experiencing growth.
The Banks also increased the investment securities portfolio by $24.9 million
compared to June 30,2000. Investment rates on U.S. Treasury securities in 2001
continued to decrease. For example, most rates with maturities up to 10 years
are 150 to 225 basis points less than one year ago. These rates have a direct
effect on investment securities rates, loan rates including secondary market
loans and on cost of funds that consist of both deposits and borrowings from the
Federal Home Loan Bank.
These increases in loans and securities were funded by a significant deposit
growth in the last year of $76.0 million. Because the growth of deposits the
Company reduced its borrowing from the Federal Home Loan Bank by $5 million.
Since June 30, 2000. Due to the continued loan demand and challenges for funding
sources, asset-liability management continues to be very important. The
asset-liability encompasses both the management of interest rate sensitivity and
the maintenance of adequate liquidity. Interest rate sensitivity management
attempts to provide the optimal level of net interest income while managing
exposure to risks associated with interest rate movements. Liquidity management
involves planning to meet anticipated funding needs. Management monitors the
rate sensitivity and liquidity positions on an on-going basis and, when
necessary, appropriate action is taken to minimize any adverse effects of rapid
interest rate movements or any unexpected liquidity concerns. The Company
believes it will be able to maintain sufficient liquidity.
In January 2001, Hills Bancorporation paid a dividend of $2,393,000 or $1.60 per
share, a 10.34% increase from the $1.45 paid in January 2000. After payment of
the dividend and adjustment to accumulated other comprehensive income,
stockholders' equity as of June 30, 2001 totaled $72,321,000. The total
stockholders' equity of Hills Bancorporation as of June 30, 2001 before the
reduction for the ESOP shares, totaled 9.34% of total assets. Under risk-based
capital rules, the total risk based capital is 14.58% of risk adjusted assets,
and substantially in excess of required minimums.
Liquidity
The Company actively monitors and manages its liquidity position with the
objective of maintaining sufficient cash flows to fund operations, meet client
commitments, take advantage of market opportunities and provide a margin against
unforeseeable liquidity needs. Federal funds sold, loans held for sale and
investment securities available for sale are readily marketable assets.
Maturities of all investment securities are managed to meet the Company's normal
liquidity needs. Investment securities available for sale may be sold prior to
maturity to meet liquidity needs, to respond to market changes or to adjust the
Company's interest rate risk position. Readily marketable assets, as defined
above, comprised 17.8% of the Company's total assets at June 30, 2001.
Net cash provided from Company operations is another primary source of
liquidity. For the six months ended June 30, 2001 and 2000, net cash provided by
operating activities was $5,799,000 and $5,943,000, respectively. The Company's
trend of increasing cash flows from operations is expected to resume in the
foreseeable future due to the Company's growth.
The Company has historically maintained a stable deposit base and a relatively
low level of large deposits, which result in a low dependence on volatile
liabilities. As of June 30, 2001, the Company had advances of $120,668,000 from
the FHLB of Des Moines. These advances were used as a means of providing both
long- and short-term, fixed-rated funding for certain assets and managing
interest rate risk. The Company had additional borrowing capacity available from
the FHLB of approximately $176 million at June 30, 2001.
The combination of high levels of potentially liquid assets, low dependence on
volatile liabilities and additional borrowing capacity provided sufficient
liquidity for the Company at June 30, 2001.
Results of Operations
Net income for the quarter and six months ended June 30, 2001 compared to the
same periods in 2000 had increases of $135,000 and $238,000, respectively. For
both periods the changes were the result of significant increases in net
interest income which was the result of increases in average earning assets from
the prior year and higher real estate loan origination fees. Average earning
assets were approximately $80.0 million higher for the six months ended June 30,
2001 compared to the same period in 2000. Other income, which included loan
origination fees, increased over the prior periods by $459,000 for the three
months ended June 30, 2001 and $733,000 for the six month ended June 30, 2001.
Loan origination fees for the quarter and six months in 2001 increased $272,000
and $371,000, respectively, as interest rates decreased during the first six
months of 2000. The lower interest rates contributed to refinancing and new real
estate loan orginations. Trust fees, deposit account charges and other fees
increased $187,000 for the three months ended March 31, 2001 and $362,000 for
the six months ended June 30, 2001 compared to comparable periods in 2000. Trust
fees increased $43,000 for the six months ended June 30, 2001 compared to the
same period in 2000. The increase in trust fees was realized because of new
trust assets under management and despite the reduction in assets due to the
stock market. Deposit account charges and fees increased $162,000 and $303,000
for the three and six months period ending June 30, 2001 compared to comparable
periods ended June 30, 2000 due to both volume changes and fee increases.
Other expenses for the quarter ended June 30, 2001 were $5,567,000 compared to
$4,882,000 for the same time frame in 2000. For the six months ended June 30,
2001 other expenses totaled $10,818,000, an increase of $1,041,000 from the
first six months in 2000. Salaries and benefits accounted for $409,000 of the
increase and were direct result of salary adjustments in 2001 and staff
additions at various locations. The new operations center in Hills and the
Coralville expansion accounted for the major change in the occupancy expense and
furniture and equipment expenses, which increased $440,000 for the six months
ended June 30, 2001 compared to June 30, 2000.
Earnings per share, both basic and diluted, increased for the quarter ended June
30, 2001 compared to 2000. For the period ended June 30, 2001 basic and diluted
earnings per share totaled $1.69 and $1.68 in comparison to $1.60 and $1.59 for
the quarter ended June 30, 2000. Earnings per share for the six months ended
June 30, 2001 and June 30, 2000 were $3.23 and $3.08 for basic earnings per
share and $3.21 and $3.05 for diluted earnings per share.
Market Risk Management
Market risk is the risk of earnings volatility that results from adverse changes
in interest rates and market prices. The Company's market risk is comprised
primarily of interest rate risk arising form its core banking activities of
lending and deposit taking. Interest rate risk is the risk that changes in
market interest rates may adversely affect the Company's net interest income.
Management continually develops and applies strategies to mitigate this risk.
Management does not believe that the Company's primary market risk exposures and
how those exposures have been managed to-date in 2001 changed significantly when
compared to 2000.
Asset/Liability Management
The Company has a fully integrated asset/liability management system to assist
in managing the balance sheet. The process, which is used to project the results
of alternative investment decisions, includes the development of simulations
that reflect the effects of various interest rate scenarios on net interest
income. Management analyzes the simulations to manage interest rate risk, the
net interest margin and levels of net interest income.
The goal is to structure the balance sheet so that net interest margin
fluctuates in a narrow range during periods of changing interest rates. The
Company currently believes that net interest income would fall by less than 5
percent if interest rates increased or decreased by 300 basis points over a
one-year time horizon. This is within the Company's policy limits.
To improve net interest income and lessen interest rate risk, management
continues its strategy of de-emphasizing fixed-rate portfolio residential real
estate loans with long repricing periods. The Company continues to focus on
reducing interest rate risk by emphasizing growth in variable-rate consumer and
commercial loans. Other actions include the use of fixed-rate Federal Home Loan
Bank (FHLB) advances as alternatives to certificates of deposit, active
management of the available for sale investment securities portfolio to provide
for cash flows that will facilitate interest rate risk management.
The highly competitive banking environment in Iowa also greatly impacts the
Company's net interest margin. The effect of competition on net interest income
is difficult to predict.
HILLS BANCORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
There were no changes in securities.
Item 3. Defaults upon Senior Securities
Hills Bancorporation has no senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Annual Meeting held on April 16, 2001, the security
holders approved the following:
1. Election of Michael E. Hodge, Richard W. Oberman and Sheldo
E. Yoder, DVM to three-year terms to the Board of Directors
expiring at the 2004 AnnualMeeting.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit See exhibit II - Statement Re Computation of Earnings
Per Common Share
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
ended June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
HILLS BANCORPORATION
(Registrant)
August 14, 2001 /s/ Dwight O. Seegmiller
- ------------------- ------------------------------------------
Date Dwight O. Seegmiller, President
(Duly authorized officer of the registrant)
August 14, 2001 /s/ James G. Pratt
- ------------------- --------------------------------------------
Date James G. Pratt, Treasurer
(Principal Financial Officer)