Hills Bancorporation's Business Segments

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.

Hills Bancorporation provides a comprehensive suite of financial products and services across multiple segments to meet the diverse needs of its customers, ranging from individuals to businesses in various sectors. Below is an extensive breakdown of the key segments, products, and services offered by Hills Bancorporation:

1. Mortgage Loans

Hills Bancorporation facilitates a variety of mortgage loans designed to cater to residential, commercial, and agricultural real estate borrowers. The following details highlight the features of their mortgage offerings:

- Residential Mortgage Loans: These loans cater to individuals and businesses looking to purchase 1 to 4 family residences. The bank provides mortgage loans secured by the property itself, originating loans in its designated trade area. In addition, the bank opts to sell certain originated mortgage loans to third parties in the secondary market, without retaining any ownership or servicing rights.

- Interest Rates: The interest rates for residential mortgages are influenced by competitive factors both in the secondary market and within the banks geographical reach. Borrowers typically repay these loans through monthly principal and interest payments derived from their personal cash flows, contingent upon the value of the underlying residential properties.

Construction Loans

Hills Bancorporation also offers construction loans aimed at individuals and developers:

- Personal Construction Loans: These loans assist individuals in building personal residences.

- Commercial Construction Loans: Aimed at real estate developers and contractors, these loans finance land acquisition and the construction of various properties.

- Loan Terms: Construction loans generally have a term of one year or less, with interest typically payable at maturity. The interest rates on these loans are usually variable, and the underlying collateral is typically the construction project itself.

Commercial and Financial Loans

This category encompasses a broad spectrum of loans designed for business clients:

- Business Loans: Hills Bancorporation provides commercial loans to contractors, retailers, and other businesses, offering products such as lines of credit for operational expenses and term loans for equipment acquisition.

- Secured and Unsecured Loans: While most commercial loans are secured, the bank may issue unsecured loans based on the overall financial position of the borrower. Terms for these loans generally range from one to five years, with options for both fixed and variable interest rates.

- Repayment Assessment: The underwriting process emphasizes a borrowers reported cash flow, with collateral value also playing a significant role in the risk assessment and repayment potential.

Agricultural Loans

Focusing on the unique needs of the agricultural sector, Hills Bancorporation offers a tailored set of agricultural loans:

- Loan Types: These loans finance various agricultural operations, including production costs and the purchase of livestock and machinery.

- Collateralization: Agricultural loans are primarily secured by crops and machinery.

- Repayment Risks: Agricultural borrowers may face external challenges such as adverse weather, disease in livestock, declining market prices, and regulatory impacts. Consequently, the banks agricultural loans often carry a term of one year and may have either fixed or variable interest rates.

Consumer Lending

To accommodate personal financing needs, Hills Bancorporation provides several consumer loan products:

- Personal Loans: These are typically smaller in size and include options for various personal finance needs.

- Automobile Loans: Aimed at financing vehicle purchases, these loans generally feature shorter terms and lower balances, making them accessible for consumers.

Summary

Hills Bancorporation’s offerings reflect a strategic approach to meet the financial needs of diverse customer segments. From mortgage and construction loans to specialized agricultural financing and consumer lending, the bank is positioned to support its clients across various stages of their financial journeys. With a keen focus on assessing cash flow, collateral, and market conditions, Hills Bancorporation strives to mitigate risks and facilitate sustainable lending practices. Each product and service is designed to provide flexibility and responsiveness to the changing needs of its clientele, reinforcing the bank’s commitment to supporting its communitys financial health and growth.