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, 1996

                         Commission file number: 0-12668


                              Hills Bancorporation


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

                       131 MAIN STREET, HILLS, IOWA 52235

                        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, 1996
- --------------------------                                ------------------
Common Stock, no par value                                    1,463,604



                              HILLS BANCORPORATION
                               Index to Form 10-Q

                                     Part I
                              FINANCIAL INFORMATION



Item 1.   Financial Statements

               Consolidated balance sheets, June 30, 1996 (unaudited)
                   and December 31, 1995                                      
               Consolidated statements of income, (unaudited) for three and
                   six months ended June 30, 1996 and 1995                    
               Consolidated statement of stockholders' equity, (unaudited)
               Consolidated statements of cash flows (unaudited) for three and
                   six months ended June 30, 1996 and 1995                   
               Notes to consolidated financial statements                     

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


                                     Part II
                                OTHER INFORMATION

Item 1.   Legal proceedings                                                  

Item 2.   Changes in securities                                            

Item 3.   Defaults upon senior securities                                    

Item 4.   Submission of matters to vote of security holders                  

Item 5.   Other information                                                  

Item 6.   Exhibits and reports on Form 8-K                                   

COMPUTATION OF EARNINGS PER SHARE                                            

SIGNATURES      






                              HILLS BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

                                                          June 30,  December 31,
                                                             1996       1995*
                                                          --------- ------------
                                                          Unaudited   
ASSETS
Cash and due from banks ...............................   $  10,269    $  11,883
Investment securities:
    Available for sale (amortized cost
      June 30, 1996 $105,705;
      December 31, 1995 $99,621) ......................     104,884      100,093
    Held to maturity (fair value
      June 30, 1996 $20,980;
      December 31, 1995 $21,754) ......................      21,036       21,443
Federal funds sold ....................................       9,962       16,080
Loans, net ............................................     327,681      318,546
Property and equipment, net ...........................       6,945        6,996
Accrued interest receivable ...........................       4,468        4,446
Deferred income taxes, net ............................       1,951        1,474
Other assets ..........................................       3,683        3,646
                                                          ---------    ---------
                                                          $ 490,879    $ 484,607
                                                          =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest-bearing deposits ..........................   $  40,228    $  42,927
Interest-bearing deposits .............................     362,330      349,330
                                                          ---------    ---------
    Total deposits ....................................   $ 402,558    $ 392,257
Federal funds purchased and securities
    sold under agreements to repurchase ...............       5,066       10,019
Federal Home Loan Bank notes ..........................      30,727       30,727
Accrued interest payable ..............................       1,826        1,885
Other liabilities .....................................       1,380        1,171
                                                          ---------    ---------
                                                          $ 441,557    $ 436,059
                                                          ---------    ---------

REDEEMABLE COMMON STOCK HELD BY
    EMPLOYEE STOCK OWNERSHIP PLAN
    (ESOP) ............................................   $   5,802    $   5,271
                                                          ---------    ---------

STOCKHOLDERS' EQUITY
Capital stock, common, no par value;
    authorized 1996 10,000,000 shares; 1995
    2,000,000 shares; issued 1996 1,463,604
    shares; 1995 487,773 shares .......................   $   8,925    $   8,925
Retained earnings .....................................      40,915       39,325
Unrealized gains (losses) on debt securities, net .....        (518)         298
                                                          ---------    ---------
                                                          $  49,322    $  48,548
Less maximum cash obligation related to ESOP shares ...       5,802        5,271
                                                          ---------    ---------
                                                          $  43,520    $  43,277
                                                          ---------    ---------
                                                          $ 490,879    $ 484,607
                                                          =========    =========
*   Derived from audited financial statements.


See Notes to Financial Statements.





                              HILLS BANCORPORATION
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                Three and Six Months Ended June 30, 1996 and 1995
                      (In Thousands, Except Per Share Data)



                                                                      Three Months Ended          Six Months Ended
                                                                            June 30                    June 30
                                                                     ---------------------    ------------------------
                                                                       1996        1995         1996          1995
                                                                     -------     ---------    ----------    ----------
                                                                                                
Interest Income:
    Interest and fees on loans ...............................       $ 7,123     $   6,848    $   14,122    $   13,259
    Interest on investment securities
      Taxable ................................................         1,478         1,210         2,896         2,404
      Non-taxable ............................................           269           260           546           521
    Other interest income ....................................           133            63           301           103
                                                                     -------     ---------    ----------    ----------
    Total interest income ....................................       $ 9,003     $   8,381    $   17,865    $   16,287
                                                                     -------     ---------    ----------    ----------
Interest Expense:
    Interest on deposits .....................................       $ 4,253     $   4,061    $    8,496    $    7,730
    Interest on securities sold under
      agreements to repurchase ...............................            67            76           167           168
    Interest on FHLB borrowings ..............................           488           468           977           834
                                                                     -------     ---------    ----------    ----------

      Total interest expense .................................       $ 4,808     $   4,605    $    9,640    $    8,732
                                                                     -------     ---------    ----------    ----------
      Net interest income ....................................       $ 4,195     $   3,776    $    8,225    $    7,555

Provision for loan losses ....................................           180           180           360           360
                                                                     -------     ---------    ----------    ----------
      Net interest income after
        provision for loan losses ............................       $ 4,015     $   3,596    $    7,865    $    7,195
                                                                     -------     ---------    ----------    ----------
Other Income:
    Real estate origination fees .............................      $     94     $      57    $      205    $       76
    Trust fees ...............................................           223           177           408           328
    Deposit account charges and fees .........................           397           410           772           783
    Other fees and charges ...................................           246           224           527           474
                                                                    --------     ---------    ----------    ----------
                                                                    $    960     $     868    $    1,912    $    1,661
                                                                    --------     ---------    ----------    ----------
Other Expenses:
    Salaries and employee benefits ...........................      $  1,513     $   1,369    $    3,063    $    2,709
    Occupancy expenses .......................................           207           186           419           376
    Furniture and equipment ..................................           254           271           520           524
    F.D.I.C. insurance .......................................             0           203             1           412
    Office supplies and postage ..............................           186           167           362           344
    Other operating ..........................................           619           655         1,221         1,196
                                                                    --------     ---------    ----------    ----------
                                                                    $  2,779     $   2,851    $    5,586    $    5,561
                                                                    --------     ---------    ----------    ----------

      Income before income taxes .............................      $  2,196     $   1,613    $    4,191    $    3,295

Federal and state income taxes ...............................           641           447         1,210           912
                                                                    --------     ---------    ----------    ----------

      Net Income .............................................      $  1,555     $   1,166    $    2,981    $    2,383
                                                                    ========     =========    ==========    ==========
                                                                                                                    
Per common share:     
     Net income ..............................................      $   1.05     $     .79    $     2.02    $     1.62
                         Dividend, January ...................             0             0           .95           .87
                         Weighted average
                          of common outstanding
                          stock ..............................     1,474,643     1,472,397     1,476,216     1,472,397


See Notes to Financial Statements



                              HILLS BANCORPORATION
            UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Six Months Ended June 30, 1996 and 1995
                                 (In Thousands)




                                                             Capital    Retained   Unrealized     ESOP
                                                   Total      Stock     Earnings     Losses    Obligations
                                                 -------     -------    --------   ----------  -----------
                                                                                
Balance, January 1, 1996 ...................     $43,277     $ 8,925     $39,325     $   298     $(5,271)
Net income .................................       2,981           0       2,981           0           0
Change related to ESOP shares ..............        (531)          0           0           0        (531)
Cash dividends ($.95 per share) ............      (1,391)          0      (1,391)          0           0
Unrealized gains (losses) on debt
  securities, net ..........................        (816)          0           0        (816)          0
                                                 -------     -------     -------     -------     -------
Balance, June 30, 1996 .....................     $43,520     $ 8,925     $40,915     $  (518)    $(5,802)
                                                 =======     =======     =======     =======     =======


Balance, January 1, 1995 ...................     $36,447     $ 8,915     $35,336     $(2,594)    $(5,210)
Net income .................................       2,383           0       2,383           0           0
Change related to ESOP shares ..............        (116)          0           0           0        (116)
Cash dividends ($.87 per share) ............      (1,268)          0      (1,268)          0           0
Unrealized gains (losses) on
  debt securities, net .....................       2,309           0           0       2,309           0
                                                 -------     -------     -------     -------     -------
Balance, June 30, 1995 .....................     $39,755     $ 8,915     $36,451     $  (285)    $(5,326)
                                                 =======     =======     =======     =======     =======


See Notes to Financial Statements.



                              HILLS BANCORPORATION
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 1996 and 1995
                                 (In Thousands)


                                                                                     1996        1995
                                                                                   --------    --------
                                                                                         
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .....................................................................   $  2,981    $  2,383
Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation ...............................................................        412         405
    Provision for loan losses ..................................................        360         360
    (Increase) decrease in accrued interest receivable .........................        (22)       (377)
    Amortization of bond discount ..............................................        266         257
    (Increase) in other assets .................................................        (37)        (94)
    Increase in accrued interest and other liabilities .........................        150         351
                                                                                   --------    --------
    Net cash provided by operating activities ..................................   $  4,110    $  3,285
                                                                                   --------    --------

CASH FLOWS FROM  INVESTING  ACTIVITIES  
Proceeds  from  maturities of investment securities:
    Available for sale .........................................................   $  6,000    $  8,000
    Held to maturity ...........................................................      2,852       2,127
Purchase of investment securities
    Available for sale .........................................................    (12,321)     (9,319)
    Held to maturity ...........................................................     (2,474)     (1,481)
Federal funds sold, net ........................................................      6,118       1,875
Loans made to customers, net of collections ....................................     (9,495)    (15,527)
Purchases of property and equipment ............................................       (361)       (618)
                                                                                   --------    --------
    Net cash (used in) investing activities ....................................   $ (9,681)   $(14,943)
                                                                                   --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in deposits ........................................   $ 10,301    $ (3,806)
    Net increase (decrease) in securities sold
       under agreements to repurchase ..........................................     (4,953)      1,776
    Borrowings from FHLB .......................................................          0      15,000
    Dividends paid .............................................................     (1,391)     (1,268)
                                                                                   --------    --------
       Net cash provided by financing activities ...............................   $  3,957    $ 11,702
                                                                                   --------    --------
       Increase (decrease) in cash and due from banks ..........................   $ (1,614)   $     44

CASH AND DUE FROM BANKS
    Beginning ..................................................................   $ 11,883      10,805
                                                                                   --------    --------
    Ending .....................................................................   $ 10,269    $ 10,849
                                                                                   ========    ========

SUPPLEMENTAL DISCLOSURES Cash payments for:
       Interest paid to depositors and others ..................................   $  8,555    $  7,596
       Interest paid on other obligations ......................................      1,144       1,002
    Non-cash financing transactions:
       Increase in maximum cash obligation related
        to ESOP shares .........................................................        531         116
       Net unrealized gains (losses) on debt securities ........................       (816)      2,309


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.

         For purposes of reporting cash flows,  cash and due from banks includes
         cash on hand  and  amounts  due from  banks  (including  cash  items in
         process of clearing).  Cash flows from demand  deposits,  NOW accounts,
         savings accounts, and federal funds purchased and sold are reported net
         since their original  maturities are less than three months. Cash flows
         from  loans  and  time  deposits  are  presented  as net  increases  or
         decreases.


Note 2.  Loans

         The  following  tables  set  forth  the  composition  of loans  and the
         allowance for loan losses:

                                                            (In thousands)
                                                                June 30
                                                       -------------------------
                                                         1996             1995
                                                       --------         --------

          Agricultural .........................       $ 18,983         $ 18,016
          Commercial and financial .............         26,501           27,776
          Real estate, construction ............          8,707            9,068
          Real estate, mortgage ................        248,745          236,349
          Loans to individuals .................         31,641           30,924
                                                       --------         --------
                                                       $334,577         $322,133
          Less allowance for loan losses .......          6,896            6,529
                                                       --------         --------
                                                       $327,681         $315,604
                                                       ========         ========

              Transactions in the allowance for loan losses are as follows:

                                                               (In thousands)
                                                                 Six months
                                                                ended June 30
                                                             ------------------
                                                              1996        1995
                                                             ------      ------

              Balance, beginning ..........................  $6,740      $6,210
                Provision charged to expense...............     360         360
                Net charge-offs ...........................    (204)        (41)
              Balance, ending .............................  $6,896      $6,529
                                                             ======      ======

         The  following   summarizes   the  Company's   nonaccrual,   past  due,
         restructured and impaired loans:

                                                                (In thousands)
                                                                   June 30
                                                             -------------------
                                                              1996         1995
                                                             ------       ------

          Nonaccrual ......................................  $  339       $  205
          Accruing loans, past due 90 days or more ........     777        1,062
          Restructured loan ...............................       0            0
          Impaired loans ..................................   5,820            *

         * Not determined prior to adoption of FASB Statement No. 114.

 

                                PART I, ITEM 2.
                              HILLS BANCORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF THE FINANCIAL CONDITION AND RESULTS OF OPERATION



The  consolidated  balance  sheet of Hills  Bancorporation  as of June 30,  1996
reflects  total  assets of $490.9  million  which is an increase of $6.3 million
from  December  31,  1995.  Net loans are $327.7  million  which  represents  an
increase of $9.1 million from December 31, 1995. Compared to one year ago, total
assets have  increased  from $461.7 million to $490.9 million for an increase of
$29.2 million. Also since June 1995, net loans increased $11.7 million to $327.7
million as of June 30, 1996.  These loan increases were primarily  single family
residential  loans in the Iowa City and Coralville area.  Investment  securities
total  $125.9  million as of June 30,  1996,  an increase of $4.4  million  from
December 31, 1995 and a $11.8 million  increase in investment  securities  since
June 30, 1995.  Federal  funds sold  decreased  during the first half of 1996 by
$6.1  million  and have  increased  from June 30,  1995 to June 30, 1996 by $4.3
million. Interest rates on investment securities increased during the six months
ended June 30, 1996 resulting in a net change in unrealized losses on investment
securities of $1,293,000. This had the effect of decreasing stockholders' equity
by $816,000 at June 30, 1996.  Comparing  this  component of equity between June
30, 1995 to June 30, 1996 a decrease of $233,000 was shown.

Deposits (when federal funds purchased and securities  sold under  agreements to
repurchase are included) as of June 30, 1996 totaled $407.6 million, an increase
of $5.3 million in six months.  June 30, 1996 deposits,  including  repos,  have
grown $29.8 million since June 30, 1995. Borrowings from the FHLB have decreased
from  $35,758,000 to $30,727,000  during the last twelve months with no increase
in borrowings occurring in the first half of 1996.

Significant  changes  in  the  balance  sheet  are  subject  to  asset-liability
management,  which  encompasses both the management of interest rate sensitivity
and the maintenance of adequate liquidity.  Interest rate sensitivity management
attempts to provide the optimal  level of net  interest  income  while  managing
exposure to risks associated with interest rate movements.  Liquidity management
involves  planning to meet anticipated  funding needs.  Management  monitors the
rate  sensitivity  and  liquidity  positions  on an  on-going  basis  and,  when
necessary,  appropriate action is taken to minimize any adverse effects of rapid
interest rate movements or any unexpected liquidity concerns.

In January 1996, Hills Bancorporation paid a dividend of $.95 per share, a 9.20%
increase  from the $.87 paid in January 1995.  Stockholders'  equity at June 30,
1996 and December 31, 1995 reflects an adjustment for unrealized  gains (losses)
on debt securities, net of income taxes.

The total stockholders' equity as of June 30, 1996 (before the reduction for the
ESOP shares) as a percent of total assets was 10.05%.  Under risk-based  capital
rules, total capital is 14.34% of risk-adjusted assets,  compared to the current
8% requirement.

The  consolidated  net  income  for the six  months  ended  June  30,  1996  was
$2,981,000  compared to $2,383,000 for the same period ended June 30, 1995. This
is an increase of $598,000 representing an earnings per share for the six months
of $2.02 compared to $1.62 for the same six months in 1995. Net interest  income
for 1996 is up by  $908,000  over 1995 and is  primarily  the  result of earning
assets being $33.7 million  higher in 1996 compared to 1995.  The provisions for
loan  losses  are the same for  both  periods  presented  and is  reflective  of
management's  assessment of the loan portfolio.  Net income for the three months
ended June 30, 1996 and 1995 was $1,555,000 and $1,166,000;  respectively.  This
represents  an increase in earnings per common share of $.26 from $.79 per share
to $1.05 per share. The primary factors for the increases are an increase of net
interest  income  (due to a  higher  volume  of  earning  assets)  and  F.D.I.C.
insurance savings of $203,000.




Other  income of the bank was  $1,912,000  compared  to  $1,661,000  for the six
months  ended  June 30,  1996 and  1995,  respectively.  Loan  origination  fees
amounted to $205,000 for the six month  period  ended June 30, 1996  compared to
only $76,000 in 1995.  Trust fees were  $408,000 and $328,000 for the six months
ended June 30, 1996 and 1995,  respectively and represents primarily an increase
in accounts under management.

Other expenses have increased from  $5,561,000 for the six months ended June 30,
1995 to  $5,586,000  for the period ended June 30, 1996. Of this net increase of
$25,000,  salaries and employee benefits accounted for a $354,000 increase. This
is a  combination  of salary  increases  and the number of full-time  equivalent
employees increasing from June 30, 1995 to June 30, 1996 by eight employees. For
the six months  ended June 30, 1996  compared  to the same  period in 1995,  the
major  increase  in net  income is  accounted  for by a  reduction  of  F.D.I.C.
insurance premiums from $412,000 in 1995 to $1,000 in 1996. Occupancy, furniture
and  equipment,  office  supplies  and  the  other  operating  expenses  totaled
$2,522,000  for the six months ending June 30, 1996  compared to $2,440,000  for
the same period in 1995.  Federal and state  income taxes for 1996 are more than
in 1995, primarily the result of increased income before taxes.

The  Bank's  principal  sources  of funds  continues  to be  prepayment  of loan
principal and current amortized loan payments.  In addition,  funds are provided
from current operations.  All of the funds are used to fulfill loan commitments,
make short-term investments, and fund any deposit withdrawals needed.

In February  1996, the Company  announced the stock  purchase of a Lisbon,  Iowa
bank  holding  company and the  purchase  of certain  assets and  assumption  of
deposits of the Kalona, Iowa branch office of Boatmen's Bank of Iowa, Inc. It is
expected that both banks will be owned by the Company and operated as separately
chartered banks. Both acquisitions were subject to various regulatory approvals,
including a separate state bank charter for the Kalona Bank. The  acquisition of
the Lisbon  holding  company was completed on July 12, 1996 and the total assets
of its bank were $17.3 million.

The Kalona branch office at Boatmen's Bank has deposits of about $22 million. It
is expected that the Kalona  acquisition  will be completed in the third quarter
of 1996.

The  acquisitions  of the two banks is  expected  to  require an  investment  of
approximately  $6,000,000.  The funds for the  acquisitions  are  expected to be
provided from federal funds sold and the maturities of investment securities.

Other than these acquisitions,  the Company has no material commitments or plans
which will materially affect its liquidity or capital resources. The acquisition
of property and equipment may be in cash  purchases,  or they may be financed if
favorable terms are available.



                              HILLS BANCORPORATION
                           PART II - OTHER INFORMATION


Item 1.   Legal Proceedings

          There are no material pending legal proceedings.

Item 2.   Changes in Securities

          There were no changes in securities.

Item 3.   Defaults upon Senior Securities

          Hills Bancorporation has no senior securities.

Item 4.   Submission of Matters to a Vote of Security Holders

          At the Annual  Meeting  held on April 15, 1996,  the security  holders
          approved the following:

            (a) To  adopt a  proposed  amendment  to the  Restated  Articles  of
                Incorporation  increasing  the  authorized  capital stock of the
                Company  from  2,000,000  to  10,000,000  shares of common stock
                without par value.  This enabled the Company to effect a 3-for-1
                stock split on April 17, 1996.

            (b) Elected  William H. Olin,  DDS;  Theodore  H.  Pacha;  Ann Marie
                Rhodes;  and Ronald E. Stutsman to three-year terms to the Board
                of Directors expiring at the 1999 Annual Meeting.

Item 5.   Other Information

          None

Item 6.  Exhibits and Reports on Form 8-K

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

          (b) Reports on Form 8-K No reports on Form 8-K have been filed  during
              the quarter ended June 30, 1996.






                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned and thereunto duly authorized.

                                                      HILLS BANCORPORATION
                                                          (Registrant)



August 13, 1996                                  /s/ Dwight O. Seegmiller
- ---------------------------                      -------------------------------
Date                                             Dwight O. Seegmiller, President
                                                 (Duly authorized officer of the
                                                      registrant)


                                                 /s/ James G. Pratt
                                                 -------------------------------
                                                 James G. Pratt, Treasurer
                                                 (Principal Financial Officer)