Hills Bancorporation is a holding company principally engaged, through its
subsidiary bank, in the business of banking. The Company was incorporated December
12, 1982 and all operations are conducted within the state of Iowa. The Company
became owner of 100% of the outstanding stock of Hills Bank and Trust Company,
Hills, Iowa (“Hills Bank and Trust” or the “Bank”) as
of January 23, 1984 when stockholders of Hills Bank and Trust exchanged their
shares for shares of the Company. Effective July 1, 1996, the Company formed
a new subsidiary, Hills Bank, which acquired for cash all the outstanding shares
of a bank in Lisbon, Iowa. Subsequently an office of Hills Bank was opened in
Mount Vernon, Iowa, a community that is contiguous to Lisbon. Effective November
17, 2000, Hills Bank was merged into the Bank. On September 20, 1996, another
subsidiary, Hills Bank Kalona, acquired cash and other assets and assumed the
deposits of the Kalona, Iowa office of Boatmens Bank Iowa, N.A. Effective October
26, 2001, Hills Bank Kalona was merged into the Bank.
The Bank is a full-service commercial bank extending its services to individuals,
businesses, governmental units and institutional customers. The Bank is actively
engaged in all areas of commercial banking, including acceptance of demand,
savings and time deposits; making commercial, real estate, agricultural and
consumer loans; maintaining night and safe deposit facilities; and performing
collection, exchange and other banking services tailored for individual customers.
The Bank administers estates, personal trusts, and pension plans and provides
farm management, investment advisory and custodial services for individuals,
corporations and nonprofit organizations. In addition, the Bank earns substantial
fees from originating mortgages that are sold on the secondary residential real
estate market without mortgage servicing rights being retained.
Mortgage Loans. The Bank offers residential, commercial and agricultural real
estate loans.
These loans include first and junior liens on 1 to 4 family residences. The
Bank originates 1 to 4 family mortgage loans to individuals and businesses within
its trade area. The Bank sells certain mortgage loans to third parties on the
secondary market. For the loans sold on the secondary market, the Bank does
not retain any percentage of ownership or servicing rights. Interest rates for
residential real estate mortgages are determined by competitive pricing factors
on the secondary market and within the Bank’s trade area. Collateral for
residential real estate mortgages is generally the underlying property. Generally,
repayment of these loans is from monthly principal and interest payments from
the borrower’s personal cash flows and liquidity, and collateral values
are a function of residential real estate values in the markets that the Bank
serves.
Construction Loans. The Bank offers loans both to individuals that are constructing
personal residences and to real estate developers and building contractors for
the acquisition of land for development and the construction of homes and commercial
properties. The Bank makes these loans to established borrowers in the Bank’s
trade area. Construction loans generally have a term of one year or less, with
interest payable at maturity. Interest rate arrangements are variable for construction
projects. Generally, collateral for construction loans is the underlying construction
project.
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