What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-03-18 compared with 2025-03-14 · 368 added, 258 removed, 1887 unchanged (25% of the section changed)

4 unchanged sentences

Repricing risk is the difference between the timing of rate changes and the timing of cash flows.

Basis risk is the difference from changing rate relationships among different yield curve affecting Bank activities.

Basis risk is the difference from changing rate relationships among different yield curve affecting Company activities.

Yield curve risk is the difference from changing rate relationships across the spectrum of maturities.

Option risk is the difference resulting from interest-related options embedded in Bank products.

The Bank’s primary source of interest rate risk exposure arises from repricing risk.

To measure this risk the Bank uses a static gap measurement system that identifies the repricing gaps across the full maturity spectrum of the Bank’s assets and liabilities and an earnings simulation approach.

Option risk is the difference resulting from interest-related options embedded in Company products.

The Company's primary source of interest rate risk exposure arises from repricing risk.

To measure this risk the Company uses a static gap measurement system that identifies the repricing gaps across the full maturity spectrum of the Company's assets and liabilities and an earnings simulation approach.

The gap schedule is known as the interest rate sensitivity report.

The report reflects the repricing characteristics of the Bank’s assets and liabilities.

The report reflects the repricing characteristics of the Company's assets and liabilities.

The report details the calculation of the gap ratio.

This ratio indicated the amount of interest-earning assets repricing within a given period in comparison to the amount of interest-bearing liabilities repricing within the same period of time.

This ratio indicates the amount of interest-earning assets repricing within a given period in comparison to the amount of interest-bearing liabilities repricing within the same period of time.

A gap ratio of 1.0 indicates a matched position, in which case the effect on net interest income due to interest rate movements will be minimal.

5 unchanged sentences

The Company is able to manage these swings to some extent by attempting to control the maturity or rate adjustments of its interest-earning assets and interest-bearing liabilities over given periods of time.

The Bank maintains an Asset/Liability Committee, which meets at least quarterly to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk within the context of the following factors:

The Company maintains an Asset/Liability Committee, which meets at least quarterly to review the interest rate sensitivity position and to review and develop various strategies for managing interest rate risk within the context of the following factors:

1) capital adequacy, 2) asset/liability mix, 3) economic outlook, 4) market characteristics and 5) the interest rate forecast.

In addition, the Bank uses a simulation model to review various assumptions relating to interest rate movement.

In addition, the Company uses a simulation model to review various assumptions relating to interest rate movement.

The Company engages a third party that utilizes a modeling program to measure the Company’s exposure to potential interest rate changes.

4 unchanged sentences

first, the impact on the net interest margin and earnings over one and two year time frames;

and second, the impact on the market value of equity.

and second, the impact on the theoretical market value of equity.

The results of the simulation are compared against approved policy limits.

The model attempts to limit rate risk even if it appears the Bank’s asset and

liability maturities are perfectly matched and a favorable interest margin is present.

The Bank’s policy is to generally maintain a balance between profitability and interest rate risk.

The Bank uses derivative financial instruments, when needed, to manage the impact of changes in interest rates on future interest income or interest expense.

The Bank is exposed to credit-related losses in the event of nonperformance by the counterparties to these derivative instruments, but believe the risk of these losses has been minimized by entering into the contracts with large, stable financial institutions.

The model attempts to limit rate risk even if it appears the Company's asset and liability maturities are perfectly matched and a favorable interest margin is present.

The Company's policy is to generally maintain a balance between profitability and interest rate risk.

The Company uses derivative financial instruments, when needed, to manage the impact of changes in interest rates on future interest income or interest expense.

The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to these derivative instruments, but believes the risk of these losses has been minimized by entering into the contracts with large, stable financial institutions.

In order to minimize the potential effects of adverse material and prolonged increases or decreases in market interest rates on the Company's operations, management has implemented an asset/liability program designed to mitigate the Company's interest rate sensitivity.

1 unchanged sentence

The table set forth below includes the portion of the balances in interest-bearing checking, savings and money market accounts that management has estimated to mature within one year.

The classifications are used because the Bank’s historical data indicates that these have been very stable deposits without much interest rate fluctuation.

The classifications are used because the Company's historical data indicates that these have been very stable deposits without much interest rate fluctuation.

Historically, these accounts would not need to be adjusted upward as quickly in a period of rate increases so the interest risk exposure would be less than the re-pricing schedule indicates.

The FHLB borrowings are classified based on either their due date or if they are callable on their most likely call date based on the interest rate.

T able of Content s

Maturities Days More Than

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Rate Gap at December 31, 2025

$ (672,563) $ (443,203) $ (542,233) $ (563,788) $ (363,560) $ 3,514

Gap Ratio 0.03 2.69 0.53 0.93 2.51 1.12

Cumulative Gap Ratio 0.03 0.46 0.48 0.58 0.75 1.00

T able of Content s

Based on the data following, net interest income should decline with instantaneous increases in interest rates while net interest income should increase with instantaneous declines in interest rates.

2 unchanged sentences

In times of decreasing interest rates, fixed rate assets could increase in value and the lag in re-pricing of interest rate sensitive assets could be expected to have a positive effect on the Company's net interest income.

The following table, which presents principal cash flows and related weighted average interest rates by expected maturity dates, provides information about the Company's loans, investment securities and deposits that are sensitive to changes in interest rates.

The following table, which presents balances and related weighted average interest rates by expected maturity dates, provides information about the Company's loans, investment securities and deposits that are sensitive to changes in interest rates.

Thereafter Total Fair Value

15 unchanged sentences

Average interest rate 3.10 % 2.12 % 1.79 % 86.00 % 74.00 % — % 5.92 %

(1) Includes all available-for-sale investments, federal funds and Federal Home Loan Bank stock.

(1) Includes all available-for-sale investments and Federal Home Loan Bank stock.

(2) Includes NOW and other demand, savings and money market funds.

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As more fully described in Notes 1 and 3 to the financial statements, the ACL is an estimate of lifetime expected credit losses.

The Company uses a discounted cash flow (DCF) model to estimate expected losses for most of the Company’s loan pools that exhibit similar

risk characteristics.

This model calculates an expected loss percentage for each loan class by considering the probability of default, using life-of-loan analysis periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.

The Company uses a discounted cash flow (DCF) model to estimate expected losses for most of the Company’s loan pools that exhibit similar risk characteristics.

This model calculates an expected loss percentage for each loan class by considering the probability of

default, using life-of-loan analysis periods for all loan segments, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.

For each of these loan pools, the Company generates cash flow projections at the instrument level adjusting payment expectations for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default.

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We identified the qualitative adjustment component of the ACL as a critical audit matter.

The principal considerations for our determination included the high degree of subjectivity, particularly as it relates to the qualitative factor framework included in the ACL and the overall aggregation of qualitative factors, and therefore, applying audit procedures required a higher degree of auditor judgement and subjectivity.

In addition, during 2025, the Company identified a material weakness in internal control over financial reporting related to controls surrounding the framework used to determine qualitative adjustments to the ACL, which increased the extent of auditor judgment and audit effort necessary to evaluate the reasonableness of management’s qualitative factors and their aggregation.

How We Addressed the Matter in Our Audit

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◦ The identification of key qualitative factors, including whether the key qualitative factor adjustments are adequately supported and accurately applied.

◦ The qualitative adjustment framework, including controls over governing the development, approval and application of management’s maximum loss rate used to constrain the qualitative allowance available for allocation.

• Evaluated the reasonableness of the key assumptions and data used to develop the qualitative adjustment framework, including considering the key data’s completeness and accuracy within the model.

• Evaluated the mathematical accuracy of the ACL model used, as well as the method for developing the qualitative adjustments.

• Evaluated the reasonableness of the overall ACL amount, including model estimates and qualitative adjustments, and whether the recorded ACL appropriately reflects expected credit losses on the loan portfolio.

We reviewed historical loss statistics and peer-bank information and considered whether they corroborate or contradict the Company’s measurement of the ACL.

• Evaluated the reasonableness of management’s qualitative adjustments by developing independent expectations, assessing consistency with observed portfolio trends and external economic indicators, and evaluating whether the aggregation of qualitative factors appropriately reflected risks not captured by the quantitative model.

/s/ Forvis Mazars, LLP

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Opinion on the Internal Control Over Financial Reporting

We have audited Hills Bancorporation’s (the “Company”) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have audited Hills Bancorporation’s (the “Company”) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment.

• The Company did not maintain effective controls, including certain management review controls and activity-level controls, over the period-end financial reporting process.

• The Company did not maintain effective controls over the segregation of duties, review, posting, and approval of manual journal entries.

• The Company did not maintain effective controls over the review, analysis, approval, and disclosure of related party transactions.

These material weaknesses were considered in determining the nature, timi ng, and extent of auditing procedures applied in our audit of the Company’s consolidated financial statements, and this report does not affect our report dated March 14, 2025, on those consolidated financial statements.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2024 and 2023, and for each of the years in the three-year period ended December 31, 2024, and our report dated March 14, 2025, expressed an unqualified opinion on those financial statements.

• The Company did not maintain effective controls over financial reporting, including certain management review controls and activity-level controls over the period-end financial reporting process and controls to ensure that i) period end financial statements to be filed are correct, and ii) our independent auditor has completed its procedures prior to the filing of period-end financial statements.

• The Company did not maintain effective controls over the review, posting, and approval of manual journal entries.

• The Company did not maintain effective controls over the identification and disclosure of related party transactions.

• The Company did not maintain effective controls over the framework used to determine the qualitative component of the allowance for credit losses on loans and the review process to ensure qualitative adjustments are accurately determined and applied.

• The Company did not maintain effective controls over the determination of estimated useful lives and the timely identification and recording of dispositions of property and equipment.

• Management lacks sufficient depth and structure in the oversight of the financial reporting function and has insufficient staffing levels with specialized technical accounting and internal control expertise to effectively design controls and perform an adequate level of review over the period‑end financial reporting process.

These material weaknesses were considered in determining the nature, timing, and extent of auditing procedures applied in our audit of the Company’s consolidated financial statements, and this report does not affect our report dated March 18, 2026, on those consolidated financial statements.

In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2025 and 2024, and for each of the three years in the period ended December 31, 2025, and our report dated March 18, 2026, expressed an unqualified opinion on those financial statements.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on

the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

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Total deposits 3,367,835 3,346,133

Other short-term borrowings, including Bank Term Funding Program and federal funds purchased (Note 7) 546,636 219,000

Other short-term borrowings, including Bank Term Funding Program and FHLB daily reset advances (Note 7) 586,882 546,636

Federal Home Loan Bank borrowings (Note 8) 64,333 127,050

Accrued interest payable 3,453 9,912

Allowance for credit losses on off-balance sheet credit exposures 2,900 5,110

Allowance for credit losses on off-balance sheet credit exposures (Note 3) 4,501 2,900

Other liabilities 18,157 14,667

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Furniture, equipment and software 7,456 6,757 6,835

Loss on disposal of property and equipment 1,071 — —

Office supplies and postage 2,167 2,043 1,879

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— — — ( 7,710 ) — ( 7,710 )

Other comprehensive loss — — ( 42,537 ) — — ( 42,537 )

Excise tax on shares repurchased — — — ( 66 ) — ( 66 )

Other comprehensive income — — 13,884 — 13,884

Balance, December 31, 2023

$ 63,827 $ 541,329 $ ( 27,176 ) $ ( 62,841 ) $ ( 44,853 ) $ 470,286

Issuance of 20,401 shares of common stock

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Excise tax on shares repurchased — — — ( 102 ) — ( 102 )

Other comprehensive income — — 13,884 — — 13,884

Other comprehensive loss — — ( 124 ) — — ( 124 )

Balance, December 31, 2024

$ 64,644 $ 578,882 $ ( 27,300 ) $ ( 75,282 ) $ ( 48,257 ) $ 492,687

Issuance of 21,213 shares of common stock

6 unchanged sentences

Share-based compensation 36 — — — — 36

Exercise of stock options ( 1,935 shares)

60 — — 60 — 120

Change related to ESOP shares — — — — ( 6,218 ) ( 6,218 )

4 unchanged sentences

— — — ( 15,634 ) — ( 15,634 )

Excise tax on shares repurchased — — — ( 102 ) — ( 102 )

Other comprehensive loss — — 25,996 — — 25,996

Balance, December 31, 2025

$ 65,182 $ 629,068 $ ( 1,304 ) $ ( 90,237 ) $ ( 54,475 ) $ 548,234

See Notes to Consolidated Financial Statements.

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Provision for deferred income taxes ( 2,500 ) 176 ( 1,873 )

Net gain on sale of other real estate owned and other repossessed assets ( 122 ) ( 154 ) ( 86 )

Purchase of state tax credits ( 2,940 ) — —

Net (gain) loss on sale of other real estate owned and other repossessed assets 313 ( 122 ) ( 154 )

Loss from equity method investments 449 — —

Net loss on disposal of property 1,071 616 —

(Increase) in accrued interest receivable ( 2,001 ) ( 1,617 ) ( 4,004 )

(Accretion of discount) amortization of premium on investment securities, net ( 944 ) ( 480 ) 30

(Increase) decrease in other assets ( 851 ) ( 2,596 ) 984

Net accretion of discount on investment securities ( 3,228 ) ( 944 ) ( 480 )

(Increase) in other assets ( 4,007 ) ( 851 ) ( 2,596 )

Amortization of operating lease right of use assets 266 258 292

Amortization of tax credit real estate investments 2,587 — —

(Increase) Decrease in accrued interest and other liabilities ( 2,906 ) 1,591 4,812

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Loans made to customers, net of collections ( 130,477 ) ( 3,664 ) ( 337,687 )

Proceeds on sale of other real estate owned and other repossessed assets 304 815 337

Proceeds on sale of other real estate owned 725 304 815

Proceeds from sale of property and equipment — 4 —

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Net increase (decrease) in deposits 21,702 63,353 ( 74,587 )

Net increase in short-term borrowings, including Bank Term Funding Program and federal funds purchased 328,362 136,939 81,812

Net increase in other short-term borrowings 40,246 328,362 136,939

Principal payments on short-term FHLB borrowings ( 1,439,935 ) — —

Proceeds from the issuance of short-term FHLB borrowings 1,397,785 — —

Principal payments on long-term FHLB borrowings ( 325,567 ) ( 255,224 ) —

2 unchanged sentences

Payments on Federal Reserve Bank borrowings — ( 1 ) ( 3,005 )

Issuance of common stock, net of costs — — 1,242

Stock options exercised — — 238

Proceeds from exercise of stock options 120 — —

Excise tax paid on shares repurchased ( 111 ) ( 56 ) —

Purchase of treasury stock ( 12,902 ) ( 7,710 ) ( 7,906 )

Purchase of common stock ( 15,634 ) ( 12,902 ) ( 7,710 )

Proceeds from the issuance of common stock through the employee stock purchase plan 345 362 398

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The Company considers all investments with original maturities of three months or less to be cash equivalents.

At December 31, 2024 and 2023, cash equivalents consisted primarily of deposits with other banks.

At December 31, 2025 and 2024, cash equivalents consisted primarily of deposits with other banks and federal funds sold.

The Company maintains amounts in due from banks which, at times, may exceed federally insured limits.

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If quoted prices in active markets are not available, fair value is measured using pricing models or other model-based valuation techniques such as present value of future cash flows, which consider prepayment assumptions and other factors such as credit losses and market liquidity.

Unrealized gains and losses are excluded from earnings and reported, net of tax, in other comprehensive income ("OCI").

Unrealized gains and losses are excluded from earnings and reported, net of tax, in other comprehensive income (loss) ("OCI").

Premiums on debt securities are amortized to the earliest call date and discounts on debt securities are accreted over the period to maturity of those securities.

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Agricultural operating loans generally have a term of one year and may have a fixed or variable rate.

Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the Iowa real gross domestic product (GDP) as of December 31, 2023 and the Iowa unemployment rate and the National real gross domestic product (GDP) as of December 31, 2024.

The change is due to the annual reevaluation of key loss drivers for expected credit losses within the Company's loan portfolio.

The change to the National GDP was due to forecast information being more readily available.

The key economic forecast used in estimating expected credit losses for this segment is the Iowa unemployment rate.

Mortgage loans secured by farmland are made to individuals and businesses within the Company's trade area.

The primary source of repayment is the cash flow generated by the collateral underlying the loan.

The secondary

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

repayment source would be the liquidation of the collateral.

The secondary repayment source would be the liquidation of the collateral.

Terms for real estate loans secured by farmland range from one to ten years with an amortization period of 25 years or less.

Generally, interest rates are fixed for mortgage loans secured by farmland.

The change is due to the annual reevaluation of key loss drivers for expected credit losses within the Company's loan portfolio.

The change to the National GDP was due to forecast information being more readily available.

The key economic forecast used in estimating expected credit losses for this segment is the

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Iowa unemployment rate.

1 to 4 Family First and Junior Liens - The 1 to 4 family first and junior liens portfolio segment is comprised of the single family and home equity loan classes, which are underwritten after evaluating a borrower's capacity to repay, credit, and collateral.

5 unchanged sentences

These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment.

Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the all-transactions house price index for Iowa as of December 31, 2023 and the Iowa unemployment rate as of December 31, 2024.

The change is due to the annual reevaluation of key loss drivers for expected credit losses within the Company's loan portfolio.

The change to only Iowa unemployment was due to the Iowa unemployment rate being a significant driver for expected credit losses.

The key economic forecast used in estimating expected credit losses for this segment is the Iowa unemployment rate.

Commercial - The commercial loan portfolio segment is comprised of the commercial real estate mortgage, multifamily residential mortgage, construction/land development and commercial and financial loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantors or other related party's financial position.

2 unchanged sentences

Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity, and availability of long-term financing.

Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate, the all-transactions house price index for Iowa and the Iowa real GDP as of December 31, 2023 and the Iowa unemployment rate and the National real gross domestic product as of December 31, 2024.

The change is due to the annual reevaluation of key loss drivers for expected credit losses within the Company's loan portfolio.

The change to the National GDP was due to forecast information being more readily available and the Iowa unemployment rate being a significant driver for expected credit losses.

The key economic forecast used in estimating expected credit losses for this segment is the Iowa unemployment rate.

Consumer Lending - The Bank offers consumer loans to individuals including personal loans and automobile loans.

4 unchanged sentences

The collateral securing these loans may depreciate over time, may be difficult to recover and may fluctuate in value based on condition.

Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the Iowa real GDP as of December 31, 2023 and the Iowa unemployment rate and the National real gross domestic product as of December 31, 2024.

The change is due to the annual reevaluation of key loss drivers for expected credit losses within the Company's loan portfolio.

The change to the National GDP was due to forecast information being more readily available.

Key economic forecasts used in estimating expected credit losses for this segment include the Iowa unemployment rate and the National real gross domestic product.

Obligations of State and Political Subdivisions – The obligations of state and political subdivisions portfolio segment consists solely of tax‑exempt loans made to state governments, municipalities, school districts, and other political subdivisions.

Underwriting standards for this segment emphasize the borrower’s legal authority to incur debt, the stability and diversity of pledged revenue sources, historical operating performance, budgetary trends, and the overall financial capacity of the governmental entity.

Additional considerations include the strength of taxing authority, the predictability of revenue collections, the presence of voter or legislative appropriation requirements, and the entity’s reliance on state or federal funding.

Repayment of these obligations is generally supported by dedicated revenue streams or general obligation pledges, resulting in credit performance that has historically demonstrated low volatility and limited correlation with broader economic cycles.

Given these characteristics, expected credit losses for this segment are estimated primarily using long‑run historical loss experience and internal credit assessments, and do not incorporate specific forward‑looking macroeconomic forecasts, as management has determined that traditional economic indicators do not meaningfully influence expected loss outcomes for this portfolio.

The allowance level is influenced by loan volumes, loan credit quality indicator migration or delinquency status, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions.

1 unchanged sentence

first, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics;

and second, an asset-specific component involving individual loans that do not share risk characteristics

and second, an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans.

Depending on the nature of the pool of financial assets with similar risk characteristics, the Company uses a discounted cash flow method or remaining life method

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

with other loans and the measurement of expected credit losses for such individual loans.

Depending on the nature of the pool of financial assets with similar risk characteristics, the Company uses a discounted cash flow method or remaining life method to estimate expected credit losses.

to estimate expected credit losses.

Discounted cash flow method :

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Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast.

Management utilizes a qualitative factor framework to provide a qualitative estimate of the expected credit losses inherent in the loan portfolio in relation to potential limitations of the quantitative model.

The default and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio related to:

7 unchanged sentences

(8) the existence and effect of any concentrations of credit and changes in the level of such concentrations;

and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

The framework provides for a level of risk approach to measure risk in each loan segment that may not be captured in the quantitative methodology, including improved risk environment, no additional risk, minimal additional risk, moderate risk and major or significant additional risk.

and (9) the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.The framework provides for a level of risk approach to measure risk in each loan segment that may not be captured in the quantitative methodology, including improved risk environment, no additional risk, minimal additional risk, moderate risk and major or significant additional risk.

The framework also includes a weighting component for management to consider which qualitative factors would have the highest impact on potential loan losses within each loan segment.

12 unchanged sentences

For these loans, we recognize expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs and deferred loan fees and costs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

In these cases, expected credit loss is measured as the difference between the amortized cost

In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral.

The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

basis of the loan and the fair value of the collateral.

The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.

The Company’s estimate of the ACL reflects losses expected over the contractual life of the assets, adjusted for estimated prepayments or curtailments.

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In February 2021, the Company provided construction financing and contributed capital of $ 4.18 million to Del Ray Ridge LP, as limited partner, which owns and operates an affordable housing property in Iowa City, Iowa.

The Company accounts for the investment in this tax credit real estate using the proportional amortization method as provided for under Accounting Standards

The Company accounts for the investment in this tax credit real estate using the proportional amortization method as provided for under Accounting Standards Codification (ASC) 323-740.

The investment qualifies for the proportional amortization method as it meets all of the criteria

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Codification (ASC) 323-740.

The investment qualifies for the proportional amortization method as it meets all of the criteria under ASC 323-740-25-1.

under ASC 323-740-25-1.

Substantially all of the projected benefits are from tax credits and other tax benefits due to the minimum buyout clause included in the partnership agreement.

In July 2024, the Company provided construction financing and contributed capital of $ 2.38 million to SLE Iowa Building, LC, as investor member, which owns and operates a historically preserved mixed use property in Cedar Rapids, Iowa.

An additional $ 1.25 million of contributions to capital will be due upon certain conditions being met which are anticipated to occur in 2025.

Upon certain conditions being met, an additional $ 1.25 million of contributions to capital were made in February 2025.

Additionally, a contribution of $ 1.19 million was made in September 2025 for a geothermal credit.

The Company accounts for the investment in this tax credit real estate using the proportional amortization method as provided for under Accounting Standards Codification (ASC) 323-740.

3 unchanged sentences

Property and equipment is stated at cost less accumulated depreciation.

Depreciation is computed using primarily declining-balance methods over the estimated useful lives of 10 - 40 years for buildings and improvements and 3 - 7 years for furniture and equipment.

Depreciation is computed using the straight-line method over the estimated useful lives of 10 - 40 years for buildings and improvements and 3 - 7 years for furniture and equipment.

Deferred income taxes :

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Subsequent write downs estimated on the basis of later valuations are charged to net loss on sale of other real estate owned and other repossessed assets.

Net operating expenses incurred in maintaining such properties are charged to other non-interest expense.

Net operating expenses incurred in maintaining such properties are charged to other non-interest expense within the outside services line on the statements of income.

Net capital expenditures incurred are capitalized to the property.

Other real estate is included in other assets on the consolidated balance sheets totaling $ 0.5 million and $ 1.0 million as of December 31, 2025 and 2024, respectively.

Derivative financial instruments :

7 unchanged sentences

No component of the change in the fair value of the hedging instrument is excluded from the assessment of hedge effectiveness.

The Bank does not use derivatives for trading or speculative purposes.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Bank does not use derivatives for trading or speculative purposes.

Earnings per share:

25 unchanged sentences

Property held for customers in fiduciary or agency capacities is not included in the accompanying consolidated balance sheets, as such items are not assets of the Company.

Effect of New Financial Accounting Standards

Accounting guidance adopted in 2024

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323) Accounting for Investments in Tax Credit Structures Using Proportional Amortization Method .

The FASB is issuing this ASU to allow reporting entities to consistently account for equity investments made primarily for the purposes of receiving income tax credits and other income tax benefits.

The ASU permits reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted for all entities in any interim period.

If an entity adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that interim period.

The adoption of the ASU on a prospective basis by the Company on January 1, 2024 did not have a material impact on the financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures .

The FASB is issuing this ASU to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

For public business entities, the amendments are effective for fiscal

Release of income tax effects from accumulated other comprehensive income:

The Company releases income tax effects from accumulated other comprehensive income (“AOCI”) using the specific identification approach.

Under this method, the income tax effects associated with each component of AOCI are released into income in the same period that the related pre‑tax amounts are reclassified from AOCI to earnings.

The Company does not reclassify any stranded tax effects related to changes in federal corporate tax rates and will release such amounts, if any, when the underlying AOCI component is subsequently reclassified to earnings.

Revision of Comparative Disclosure:

During 2025, management identified that certain historical asset disposals had not been reflected in the Company’s property and equipment subledger.

The Company evaluated this matter in accordance with ASC 250, Accounting Changes and Error Corrections , and concluded that the omission was not qualitatively material to any previously issued financial statements.

Because the Company presents property and equipment on the balance sheet on a net basis, this revision did not impact the Company’s previously issued consolidated balance sheets, statements of income, statements of cash flows, or stockholders’ equity.

Accordingly, the Company revised the comparative gross presentation of property and equipment and accumulated depreciation within the related footnote disclosures for the year ended December 31, 2024.

See Note 4 Property and Equipment for additional information.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

A public entity should apply the amendments in this Update retrospectively to all prior periods presented in the financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

The Company adopted the ASU on January 1, 2024.

See disclosure in Note 18.

Accounting guidance pending adoption as of December 31, 2024

Effect of New Financial Accounting Standards

Accounting guidance adopted in 2025

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures .

3 unchanged sentences

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The amendments in this ASU should be applied on a prospective basis.

The Company is in the process of evaluating the impact of this ASU on the financial statements.

The Company adopted this guidance as of December 31, 2025 on a retrospective basis.

See Note 11 Income Taxes for additional information.

In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718) Scope Application of Profits Interest and Similar Awards .

4 unchanged sentences

The amendments in this Update should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments.

The Company is in the process of evaluating the impact of this ASU on the financial statements.

The adoption of the ASU on a prospective basis by the Company on January 1, 2025 did not have a material impact on the financial statements.

Accounting guidance pending adoption as of December 31, 2025

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

14 unchanged sentences

The Company is in the process of evaluating the impact of this ASU on the financial statements.

In November 2025, the FASB issued ASU 2025‑09, Derivatives and Hedging (Topic 815):

Hedge Accounting Improvements, which provides targeted amendments intended to enable entities to apply hedge accounting to a broader range of highly effective economic hedges and to better align hedge accounting outcomes with risk‑management activities.

The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, and early adoption is permitted.

The Company currently has no derivative positions outstanding;

however, because it may enter into derivative or hedging relationships in future periods, the Company is evaluating the guidance to determine the potential impact on its consolidated financial statements and the method of adoption.

At this time, the Company has not yet determined the expected impact of this update upon adoption.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which improves the navigability of the required interim disclosures, provides clarity as to when it is applicable, and provides additional guidance on what disclosures are required in interim reporting periods by establishing a disclosure principle.

The guidance is effective for interim reporting periods beginning in 2028 and can be applied either prospectively or retrospectively.

The Company is currently evaluating the updated guidance to assess the impact and determining its method of adoption

In December 2025, the FASB issued ASU 2025‑12, Codification Improvements, which provides technical corrections, clarifications, and other minor enhancements across numerous areas of the Accounting Standards Codification.

The amendments address 33 issues, including clarifications related to diluted earnings per share, lease receivable disclosures, and other areas where existing guidance was ambiguous or difficult to apply.

The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods.

ASU 2025‑12 contains mixed transition requirements.

Issue 4, relating to diluted EPS, must be adopted retrospectively, while all other amendments may be applied either prospectively or retrospectively, at the entity’s election on an issue‑by‑issue basis.

The Company is currently evaluating the impact of ASU 2025‑12 on its accounting policies, processes, and disclosures;

however, the Company does not expect adoption of this update to have a material effect on its consolidated financial statements.

Investment Securities

4 unchanged sentences

Treasury $ 255,527 26.74 % $ 288,462 30.55 %

Other securities (FHLB, FHLMC and FNMA) 14,848 1.57 % 33,049 4.24 %

Government Agency and GSE securities 4,658 0.49 % 14,848 1.57 %

State and political subdivisions 382,645 40.04 % 362,736 38.42 %

8 unchanged sentences

The carrying amount of available-for-sale securities and their approximate fair values were as follows (Amounts in Thousands):

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Losses) Allowance for Credit Losses Estimated

1 unchanged sentence

Treasury $ 253,925 $ 2,316 $ ( 714 ) $ — $ 255,527

Other securities (FHLB, FHLMC and FNMA) 15,010 — ( 162 ) — 14,848

Government Agency and GSE securities 4,687 — ( 29 ) — 4,658

State and political subdivisions 388,685 3,214 ( 9,254 ) — 382,645

3 unchanged sentences

Treasury $ 294,210 $ 215 $ ( 5,963 ) $ — $ 288,462

Other securities (FHLB, FHLMC and FNMA) 35,156 — ( 2,107 ) — 33,049

Government Agency and GSE securities 15,010 — ( 162 ) — 14,848

State and political subdivisions 383,244 832 ( 21,340 ) — 362,736

1 unchanged sentence

Total $ 979,855 $ 1,101 $ ( 36,820 ) $ — $ 944,136

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and estimated fair value of available-for-sale securities classified according to their contractual maturities at December 31, 2025, were as follows (in thousands) below.

8 unchanged sentences

Therefore, these securities are not included in the maturity categories in the above summary.

As of December 31, 2024, investment securities with a carrying value of $ 250.65 million were pledged to collateralize other borrowings.

As of December 31, 2025, investment securities with a market value of $ 154.03 million were pledged to collateralize other borrowings.

As of December 31, 2025, there were no holdings of securities of any one issuer, other than the U.S.

1 unchanged sentence

Sales proceeds and gross realized gains and losses on available-for-sale securities were as follows (in thousands):

December 31, 2024 December 31, 2023

December 31, 2025

December 31, 2024

Sale proceeds $ 99,040 $ 129,830

1 unchanged sentence

Gross realized losses ( 9,633 ) ( 5,217 )

The following table shows the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and 2023 (Amounts in Thousands):

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Less than 12 months 12 months or more Total

2 unchanged sentences

Treasury 6 $ 29,972 $ ( 69 ) 0.23 % 23 $ 61,637 $ ( 645 ) 1.05 % 29 $ 91,609 $ ( 714 ) 0.78 %

Other securities (FHLB, FHLMC and FNMA) — — — — % 6 14,848 ( 162 ) 1.09 % 6 14,848 ( 162 ) 1.09 %

Government Agency and GSE securities 1 4,658 ( 29 ) 0.62 — — — — 1 4,658 ( 29 ) 0.62

State and political subdivisions 78 47,697 ( 446 ) 0.94 518 159,124 ( 8,808 ) 5.54 596 206,821 ( 9,254 ) 4.47

5 unchanged sentences

Treasury 32 $ 115,094 $ ( 2,555 ) 2.22 % 44 $ 125,590 $ ( 3,408 ) 2.71 % 76 $ 240,684 $ ( 5,963 ) 2.48 %

Other securities (FHLB, FHLMC and FNMA) — — — — % 14 33,049 ( 2,107 ) 6.38 % 14 33,049 ( 2,107 ) 6.38 %

Government Agency and GSE securities — — — — 6 14,848 ( 162 ) 1.09 6 14,848 ( 162 ) 1.09

State and political subdivisions 369 140,021 ( 2,844 ) 2.03 663 163,330 ( 18,496 ) 11.32 1,032 303,351 ( 21,340 ) 7.03

4 unchanged sentences

The unrealized losses are due to changes in interest rates.

The Company completed a balance sheet repositioning related to its investment securities portfolio in December 2024.

This consisted of the sale of lower-yielding AFS debt securities with an amortized cost of $ 135.05 million, resulting in a pre-tax realized loss on the sale of $ 5.22 million, which was recorded in December of 2024.

The Company completed several balance sheet repositioning transactions related to its investment securities portfolio throughout the last four months of 2025.

This consisted of the sale of lower-yielding AFS debt securities resulting in a pre-tax realized loss on the sales of $ 9.63 million in total for 2025.

All of the proceeds from the sale of these securities were used to purchase AFS debt securities at higher yields to improve income going forward, while maintaining the liquidity provided by the investment portfolio.

2 unchanged sentences

The fair value is expected to recover as the securities approach maturity.

Treasury and other securities are issued and guaranteed by U.S.

government-sponsored entities and agencies.

The mortgage-backed securities and collateralized mortgage obligations have implied U.S.

government guarantees of the agency securities.

The Company evaluates if a credit loss exists by monitoring to ensure it has adequate credit support considering the nature of the investment, number and significance of investments in an unrealized loss position, collectability or delinquency issues, the underlying financial statements of the issuers, credit ratings and subsequent changes thereto, and other available relevant information.

The Company evaluates whether a credit loss exists by monitoring to ensure it has adequate credit support considering the nature of the investment, number and significance of investments in an unrealized loss position, collectability or delinquency issues, the underlying financial statements of the issuers, credit ratings and subsequent changes thereto, and other available relevant information.

Considering the above factors, management has determined that no allowance for credit losses is necessary for the securities portfolio as of December 31, 2025.

112 unchanged sentences

Ending balance $ 283 $ 1,407 $ 2,841 $ 73 $ 363 $ 88 $ 55 $ 5,110

Credit loss expense (benefit) for off-balance sheet credit exposures is included in credit loss expense (benefit) on the consolidated statement of income for the years ended December 31, 2024, 2023 and 2022.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit loss expense (benefit) for off-balance sheet credit exposures is included in credit loss expense on the consolidated statements of income for the years ended December 31, 2025, 2024 and 2023.

Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations.

1 unchanged sentence

The Company differentiates its lending portfolios into loans sharing common risk characteristics for which expected credit loss is measured on a pool basis and loans not sharing common risk characteristics for which credit loss is measured individually.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The below are descriptions of the credit quality indicators:

36 unchanged sentences

A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories.

Potential indicators of a special mention would include past due payments, overdrafts, management issues, poor financial performance, industry issues, or the need for additional short-term

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Potential indicators of a special mention would include past due payments, overdrafts, management issues, poor financial performance, industry issues, or the need for additional short-term borrowing.

The ability to continue to make payments is in question;

7 unchanged sentences

Adverse credit scores or history of payment deficiencies could be noted.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized.

13 unchanged sentences

The following tables present the credit quality indicators and origination years by type of loan in each category as of December 31, 2025 (amounts in thousands):

December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 200 $ 747 $ 55 $ 152 $ 586 $ 119 $ 7,912 $ 9,771

7 unchanged sentences

Commercial and Financial

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 797 $ 411 $ 940 $ 74 $ 45 $ 269 $ 4,491 $ 7,027

6 unchanged sentences

Current period gross write-offs $ 473 $ 809 $ 358 $ 167 $ 46 $ 105 $ 170 $ 2,128

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Construction, 1 to 4 Family Residential

December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ — $ — $ —

6 unchanged sentences

Current period gross write-offs $ — $ 155 $ — $ — $ 144 $ 99 7 $ 405

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Construction, Land Development and Commercial

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ 262 $ 604 $ 866

7 unchanged sentences

Mortgage, Farmland

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 858 $ 420 $ 1,901 $ 1,883 $ — $ 4,169 $ 60 $ 9,291

7 unchanged sentences

Mortgage, 1 to 4 Family First Liens

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 1,881 $ — $ 886 $ 3,139 $ 500 $ 2,852 $ 218 $ 9,476

6 unchanged sentences

Current period gross write-offs $ — $ 153 $ 322 $ 279 $ 104 $ 69 $ 20 $ 947

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mortgage, 1 to 4 Family Junior Liens

December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ 12 $ — $ 4 $ 143 $ 159

6 unchanged sentences

Current period gross write-offs $ — $ 24 $ 149 $ 62 $ 36 $ 120 $ 37 $ 428

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mortgage, Multi-Family

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 2,322 $ — $ — $ 275 $ 30,052 $ 21,295 $ — $ 53,944

7 unchanged sentences

Mortgage, Commercial

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 3,575 $ 96 $ — $ — $ 2,057 $ 12,291 $ 9,299 $ 27,318

7 unchanged sentences

Loans to Individuals

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 40 $ — $ — $ — $ — $ — $ — $ 40

9 unchanged sentences

Obligations of State and Political Subdivisions

December 31, 2024 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ 2,461 $ — $ 2,461

6 unchanged sentences

Current period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —

December 31, 2025

2022 2021 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 9,673 $ 1,674 $ 3,782 $ 5,535 $ 33,240 $ 43,722 $ 22,727 $ 120,353

7 unchanged sentences

The following tables present total loans by risk categories and gross charge-offs by year of origination as of December 31, 2024 (amounts in thousands):

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 1,039 $ 74 $ 683 $ — $ 35 $ — $ 3,935 $ 5,766

7 unchanged sentences

Commercial and Financial

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 781 $ 131 $ 220 $ 120 $ 266 $ — $ 7,438 $ 8,956

9 unchanged sentences

Construction, 1 to 4 Family Residential

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ — $ 10,366 $ 10,366

7 unchanged sentences

Construction, Land Development and Commercial

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 910 $ — $ — $ — $ — $ 87 $ 880 $ 1,877

7 unchanged sentences

Mortgage, Farmland

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 1,805 $ 1,770 $ 3,734 $ 1,734 $ 127 $ — $ 80 $ 9,250

7 unchanged sentences

Mortgage, 1 to 4 Family First Liens

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 3,575 $ 6,675 $ 9,533 $ 1,324 $ 209 $ 562 $ 1 $ 21,879

9 unchanged sentences

Mortgage, 1 to 4 Family Junior Liens

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ — $ 13 $ 13

7 unchanged sentences

Mortgage, Multi-Family

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ 5,541 $ 2,857 $ 8,048 $ 79 $ 1 $ 16,526

7 unchanged sentences

Mortgage, Commercial

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 1,529 $ 1,389 $ — $ 2,066 $ 12,428 $ 248 $ 3,858 $ 21,518

7 unchanged sentences

Loans to Individuals

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ — $ 1 $ 1

9 unchanged sentences

Obligations of State and Political Subdivisions

December 31, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ — $ — $ — $ — $ — $ 3,138 $ — $ 3,138

6 unchanged sentences

Gross write-offs for period $ — $ — $ — $ — $ — $ — $ — $ —

December 31, 2024

2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Excellent $ 9,639 $ 10,039 $ 19,711 $ 8,101 $ 21,113 $ 4,114 $ 26,573 $ 99,290

52 unchanged sentences

As of December 31, 2025 and 2024, accruing loans past due 90 days or more were 0.07 % and 0.03 % of total loans, respectively.

The average balance of the accruing loans past due 90 days or more decreased in 2024 as compared to 2023.

The average balance of the accruing loans past due 90 days or more increased in 2025 as compared to 2024.

The average 90 days or more past due accruing loan balance per loan was $ 0.23 million as of December 31, 2025 compared to $ 0.17 million as of December 31, 2024.

30 unchanged sentences

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

Year Ended December 31, 2024 Year Ended December 31, 2023

Amortized Cost Basis at December 31, 2024 % of Total Class of Financing Receivable Amortized Cost Basis at December 31, 2023 % of Total Class of Financing Receivable

Mortgage, Farmland $ 2,188 Term extension 0.79 % $ 1,219 Term extension 0.43 %

Agricultural 1,999 Term extension 1.68 % 2,556 Term extension 2.21 %

Mortgage, commercial 1,214 Term extension 0.24 % 312 Term extension 0.07 %

Construction land development and commercial 1,555 Term extension 0.56 % — —%

Year Ended December 31, 2025

Year Ended December 31, 2024

Year Ended December 31, 2023

Amount % of Total Class of Financing Receivable Amount % of Total Class of Financing Receivable Amount % of Total Class of Financing Receivable

Agricultural Term extension $ — — % $ 1,999 1.68 % $ 2,556 2.21 %

Commercial and financial Term extension 1,279 0.43 1,717 0.57 — —

Construction, 1 to 4 family residential Term extension 51 0.06 — — — —

Construction land development and commercial Term extension 119 0.05 1,555 0.56 — —

Mortgage, Farmland Term extension — — 2,188 0.79 1,219 0.43

Mortgage, 1 to 4 family first liens Term extension 174 0.01 — — — —

Mortgage, commercial Term extension 353 0.06 1,214 0.24 312 0.07

Mortgage, commercial (1) Interest Only 411 0.07 — — — —

Total $ 2,387 $ 8,673 $ 4,087

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:

Year Ended December 31, 2024 Year Ended December 31, 2023

Loan Type Financial Effect Loan Type Financial Effect

Mortgage, Farmland Provided a payment deferral, which temporarily reduced monthly payment amounts for the borrowers.

Mortgage, Farmland Added a weighted-average 5.3 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Agricultural Added a weighted-average 5.3 year to the life of loans, which reduced monthly payment amounts for the borrowers.

Agricultural Added a weighted-average 0.08 year to the life of loans, which reduced monthly payment amounts for the borrowers.

Mortgage, commercial Added a weighted-average 3.6 year to the life of loans, which reduced monthly payment amounts for the borrowers.

Mortgage, commercial None

Construction land development and commercial Added a weighted-average 5.2 year to the life of loans, which reduced monthly payment amounts for the borrowers.

Construction land development and commercial None

Commercial and financial Added a weighted-average 2.2 year to the life of loans, which reduced monthly payment amounts for the borrowers.

Commercial and financial Added a weighted-average 5.1 year to the life of loans, which reduced monthly payment amounts for the borrowers.

(1) Modification converted loan from principal and interest payments to interest-only and the interest rate remained unchanged.

Modification reduced monthly payment amounts for the borrower.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the years ended December 31, 2025, 2024, and 2023:

2025 2024 2023

Loan Type Added Weighted Average Life (Years) Added Weighted Average Life (Years) Added Weighted Average Life (Years)

Agricultural — 5.3 0.1

Commercial and financial 1.3 2.2

Construction, 1 to 4 family residential 0.8 — —

Construction land development and commercial 0.8 5.2

Mortgage, Farmland (1) — — 5.3

Mortgage, 1 to 4 family first liens 1.0 — —

Mortgage, commercial 7.0 3.6

(1) In 2024, the modification to mortgage, farmland provided a payment deferral, which temporarily reduced monthly payment amounts for the borrowers.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

There were no financing receivables that had a payment default during the period and were modified in the 12 months before default to borrowers experiencing financial difficulty.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no financing receivables that had a payment default during the period and were modified in the 12 months before default to borrowers experiencing financial difficulty.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

2 unchanged sentences

Current 30-89 Days Past Due 90+ Days Past Due

Mortgage, Farmland $ 2,188 $ — $ —

Agricultural 1,999 — —

Mortgage, commercial 798 416 —

Construction land development and commercial 1,555 — —

Commercial and financial $ 1,279 $ — $ —

Construction, 1 to 4 family residential 51 — —

Construction land development and commercial 119 — —

Mortgage, 1 to 4 family first liens 175 — —

Mortgage, commercial 763 — —

$ 2,387 $ — $ —

1 unchanged sentence

Current 30-89 Days Past Due 90+ Days Past Due

Agricultural $ 1,999 $ — $ —

Commercial and financial 1,301 — 416

Construction land development and commercial 1,555 — —

Mortgage, Farmland 2,188 — —

Mortgage, commercial 798 416 —

$ 7,841 $ 416 $ 416

Payment Status (Amortized Cost Basis) for Year Ended December 31, 2023

Current 30-89 Days Past Due 90+ Days Past Due

Agricultural $ 2,556 $ — $ —

Mortgage, Farmland 1,219 — —

Mortgage, commercial 312 — —

4 unchanged sentences

Primary Type of Collateral

Real Estate Accounts Receivable Equipment Other Total ACL Allocation

Real Estate Equipment Total ACL Allocation

(Amounts In Thousands)

13 unchanged sentences

Primary Type of Collateral

Real Estate Accounts Receivable Equipment Other Total ACL Allocation

Real Estate Equipment Total ACL Allocation

(Amounts In Thousands)

12 unchanged sentences

$ 33,269 $ 226 $ 33,495 $ 222

The changes in the ACL in 2024 compared to 2023 is the result of the following factors:

Iowa unemployment remained steady throughout 2024, therefore management's unemployment forecast when considering improvements in national unemployment forecasts was adjusted lower overall which resulted in a decrease to the ACL;

slight decrease in loan volume which resulted in a decrease;

changes in prepayment and curtailment rates resulting in an increase;

decreases in the individually analyzed loans

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

changes in qualitative factors determined necessary by management which resulted in a decrease;

and an increase due to increased charge-offs and therefore higher loss rates.

The decrease in the allowance for credit losses on off-balance sheet credit exposures is primarily a result of decreased outstanding unfunded commitments as of December 31, 2024.

The extent to which collateral secures collateral-dependent loans is provided in the previous individually analyzed loans table and changes in the extent to which collateral secures its collateral-dependent loans are described below.

Collateral-dependent loans decreased $ 2.06 million from December 31, 2024 to December 31, 2025.

Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and loans made to borrowers with financial difficulties.

Collateral-dependent loans include any loan

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

that has been placed on nonaccrual status, accruing loans past due 90 days or more and loans made to borrowers with financial difficulties.

Collateral-dependent loans also include loans that, based on management’s evaluation of current information and events, the Company expects to be unable to collect in full according to the contractual terms of the original loan agreement.

25 unchanged sentences

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

Depreciation is computed using the straight‑line method over the estimated useful lives of the related assets, which range from 3 to 40 years.

Expenditures for maintenance and repairs are expensed as incurred, while major improvements are capitalized.

The major classes of property and equipment and the total accumulated depreciation are as follows:

3 unchanged sentences

Furniture and equipment 13,687 12,089

99,015 95,183

Construction in progress 1,737 25

Property and equipment, gross 66,302 62,634

Less accumulated depreciation 30,262 26,766

Net $ 35,868 $ 34,230

Property and equipment, net $ 36,040 $ 35,868

The Bank leases branch offices, parking facilities and certain equipment under operating leases.

The leases have remaining lease terms of 2 years to 10 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 4 years.

The leases have remaining lease terms of 1 year to 9 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 4 years.

As the options are reasonably certain to be exercised, they are recognized as part of the right-of-use assets and lease liabilities.

1 unchanged sentence

Included in this were $ 0.44 million and $ 0.46 million of operating lease costs, respectively, $ 0.03 million and $ 0.03 million of short term lease costs, respectively, and $ 0.01 million and $ 0.06 million of variable lease costs, respectively.

For the years ended December 31, 2024 and 2023, cash paid for amounts included in the measurement of operating lease liabilities was $ 0.46 million and $ 0.42 million, respectively, and right-of-use assets obtained in exchange for lease obligations was none and $ 0.31 million, respectively.

For the years ended December 31, 2025 and 2024, cash paid for amounts included in the measurement of operating lease liabilities was $ 0.44 million and $ 0.46 million, respectively, and no right-of-use assets were obtained in exchange for lease obligations.

As of December 31, 2025 and 2024, operating lease right-of-use assets included in other assets were $ 1.60 million and $ 1.87 million, respectively.

2 unchanged sentences

Discount rates used were determined from FHLB borrowing rates for comparable terms.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2025, maturities of lease liabilities were as follows:

5 unchanged sentences

Total operating lease liabilities $ 1,707

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest - Bearing Deposits

6 unchanged sentences

$ 2,771,605 $ 2,765,090

Brokered deposits totaled $ 34.75 million and $ 24.22 million as of December 31, 2024 and 2023, respectively, with a weighted average interest rate of 4.51 % and 5.35 % as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, brokered deposits of $ 34.75 million are included in savings deposits.

At December 31, 2023, brokered deposits of $ 24.22 million were included in savings deposits .

Included in savings, were brokered deposits totaling $ 35.17 million and $ 34.75 million as of December 31, 2025 and 2024, respectively, with a weighted average interest rate of 4.12 % and 4.51 % as of December 31, 2025 and 2024, respectively.

Time deposits have a maturity as follows:

11 unchanged sentences

(Amounts In Thousands)

Federal funds purchased, FHLB, interest rate 4.62 %

$ 437,636 $ —

Bank Term Funding Program, interest rates 2024 4.76 %;

FHLB daily reset advances, interest rate 2025 3.98 %;

$ 586,882 $ 437,636

Bank Term Funding Program, interest rate 2024 4.76 %

$ 586,882 $ 546,636

The Company has federal funds lines available totaling $ 175.00 million from multiple correspondent banking relationships as of December 31, 2024 and 2023, respectively, that is secured by available for sale securities.

The Company's bank term funding program borrowings are secured by available for sale securities.

The weighted average interest rate on these borrowings outstanding as of December 31, 2024 was 4.77 %.

The Company's FHLB federal funds purchased are secured by collateral provided by the Company's 1 to 4 family residential, commercial and agricultural real estate first mortgages as discussed in Note 8.

The weighted average interest rate on these borrowings outstanding as of December 31, 2024 was 5.31 %.

The Company also has availability to borrow from the Federal Reserve Bank Discount Window of $ 100 million as of December 31, 2024 that is secured by available for sale securities.

The Company has federal funds lines available totaling $ 175.00 million from multiple correspondent banking relationships as of December 31, 2025 and 2024, respectively.

Of the total federal funds lines available, $ 48.49 million is secured by available for sale securities, and the remaining fed funds lines available are unsecured.

The Company's bank term funding program borrowings were secured by available for sale securities.

As of December 31, 2025 there were no borrowings from the bank term funding program.

The Company's FHLB daily reset advances are secured by collateral provided by the Company's 1 to 4 family residential, commercial real estate, agricultural real estate first mortgages and multi-family loans as discussed in Note 8.

The weighted average interest rate on these borrowings outstanding wa s 3.98 % and 4.62 % as of December 31, 2025 and 2024, respectively.

The Company also has availability to borrow from the Federal Reserve Bank Discount Window of $ 105.54 million and $ 100.00 million as of December 31, 2025 and 2024, respectively, that is secured by available for sale securities.

HILLS BANCORPORATION

2 unchanged sentences

As of December 31, 2025 and 2024, the borrowings were as follows:

(Effective interest rates as of December 31, 2024) (Amounts In Thousands)

(Effective interest rates as of December 31, 2025)

(Amounts In Thousands)

Due 2027, 3.87 % to 4.58 %

40,000 40,000

Due 2025, 4.49 % to 5.31 %

Due 2027, 3.87 % to 4.58 %

Due 2030, 4.06 %

$ 64,333 $ 127,050

1 unchanged sentence

The Company’s investment in FHLB stock was $ 32.06 million and $ 28.02 million at December 31, 2025 and 2024, respectively .

Collateral is provided by the Company’s 1 to 4 family residential, commercial and agricultural real estate first mortgages equal to various percentages of the total outstanding notes.

The Company has the ability to borrow against 1-4 family first mortgages, agricultural real estate, commercial real estate and multi-family loans totaling $ 996.70 million as of December 31, 2024 and $ 1,078.91 million as of December 31, 2023 and there was $ 564.69 million and $ 296.65 million borrowed against this collateral as of December 31, 2024 and 2023, respectively.

See Note 7 for federal funds purchased.

The Company has the ability to borrow against and had provided 1-4 family first mortgages, agricultural real estate, commercial real estate and multi-family loans totaling $ 1.051 billion as of December 31, 2025 and $ 996.70 million as of December 31, 2024 and there was $ 651.22 million and $ 564.69 million borrowed against this collateral as of December 31, 2025 and 2024, respectively.

See Note 7 for FHLB daily reset advances.

Accumulated Other Comprehensive Loss

7 unchanged sentences

The Company has an Employee Stock Purchase Plan (the “ESPP”).

For each quarterly offering period, eligible employees can elect to contribute from 1 % to 15 % of his or her compensation.

For each quarterly offering period, eligible employees can elect to contribute from 1.00 % to 15.00 % of their compensation.

The purchase price is the lesser of 90.00 % of the fair market value on the first day of the offering period or the last day of the offering period.

The maximum dollar amount any one employee can elect to contribute in a year is $ 10,000 .

During the year ended December 31, 2024, 5,864 shares of stock were purchased by employees of the Bank through the ESPP.

6,550 shares of stock were purchased by employees of the Bank through the ESPP for the year ended December 31, 2023.

Through the ESPP 5,078 , 5,864 , and 6,550 shares of stock were purchased by employees of the Bank during the years ended December 31, 2025, 2024, and 2023, respectively.

The Company has an Employee Stock Ownership Plan (the "ESOP") to which it makes discretionary cash contributions.

11 unchanged sentences

The Company has a profit-sharing plan with a 401(k) feature, which provides for discretionary annual contributions in amounts to be determined by the Board of Directors.

The Company made a 4.50 % or $ 1.37 million contribution to the profit sharing plan for the year ended December 31, 2024.

The Company made a 4.50 % or $ 1.40 million contribution to the profit sharing plan for the year ended December 31, 2023.

The Company made a 4.50 % or $ 1.28 million contribution to the profit sharing plan for the year ended December 31, 2022.

The Company made matching contributions under its 401(k) plan of $ 0.28 million in 2024, $ 0.28 million in 2023, and $ 0.27 million in 2022 and each such amount is included in salaries and employee benefits expense.

The Company made a 4.50 % or $ 1.44 million, $ 1.37 million, and $ 1.40 million in contribution to the profit sharing plan for the years ended December 31, 2025, 2024, and 2023, respectively.

The Company recorded matching contributions under its 401(k) plan to salaries and employee benefits expense of $ 0.29 million in 2025, $ 0.28 million in 2024, and $ 0.28 million in 2023.

The Company provides a deferred compensation program for executive officers.

This program allows executive officers to elect to defer a portion of their salaried compensation for payment by the Company at a subsequent date.

The executive officers can defer up to 30 % of their base compensation and up to 100 % of any bonus into the deferral plan.

The executive officers can defer up to 30 % of their base compensation.

Any amount so deferred is credited to the executive officer’s deferred compensation account and converted to units equivalent in value to the fair market value of a share of stock in Hills Bancorporation.

22 unchanged sentences

Expected dividend yield was based on historical dividend rates.

Significant assumptions at the date of grant on May 14, 2024 include the risk-free interest rate of 4.35 %, expected option life of 7.5 years, expected volatility of 39 % and expected dividends of 1.62 %.

There were 3,528 and zero stock options granted in 2024 and 2023, respectively.

The intrinsic value of options exercised was $ 0.00 million, $ 0.00 million and $ 0.26 million for 2024, 2023 and 2022, respectively.

Significant assumptions for the options granted in 2024 on May 14, 2024 include the risk-free interest rate of 4.35 %, expected option life of 7.5 years, expected volatility of 39 % and expected dividends of 1.62 %.

Significant assumptions for the options granted in 2025 on May 13, 2025 include the risk-free interest rate of 4.29 %, expected option life of 7.5 years, expected volatility of 34 % and expected dividends of 1.53 %.

There were 4,800 and 3,528 shares of stock options granted in 2025 and 2024, respectively.

There were 1,935 and zero shares of stock options exercised in 2025 and 2024, respectively.

The intrinsic value of options exercised was $ 0.04 million, $ 0.00 and $ 0.00 for 2025, 2024 and 2023, respectively.

HILLS BANCORPORATION

8 unchanged sentences

Balance, December 31, 2022

Exercised ( 7,220 )

5,805 $ 62.00 6.40 58

Balance, December 31, 2023

5,805 $ 62.00 5.40 $ 23

Granted 3,528

Balance, December 31, 2024

9,333 $ 64.27 6.28 $ 72

Granted 4,800

Exercised ( 1,935 )

Balance, December 31, 2025

12,198 $ 68.85 7.19 $ 154

Other pertinent information related to the options outstanding at December 31, 2025 is as follows:

2 unchanged sentences

68.00 3,528 101 months —

75.00 4,800 113 months —

As of December 31, 2025, the outstanding options have a weighted-average exercise price of $ 68.85 per share and a weighted average remaining contractual term of 7.19 years.

6 unchanged sentences

The Compensation and Incentive Stock Committee is also authorized to grant awards of restricted common stock.

A summary of the restricted stock option activity for the year ended December 31, 2024 is as follows:

A summary of the restricted stock award activity for the year ended December 31, 2025 is as follows:

2020 Stock Option and Incentive Plan 2010 Stock Option and Incentive Plan

1 unchanged sentence

Balance, December 31, 2024

Authorization of shares — —

87,556 28,300

Granted 21,213 $ 77.83 — $ —

Forfeited 10,445 67.00 1,600 59.13

Vested 6,094 63.34 11,100 53.74

Balance, December 31, 2025

The Company authorized the issuance of 20,401 shares in 2024, 24,393 shares in 2023, and 18,935 shares in 2022 to certain employees.

The vesting period for these awards is five years and the Bank amortizes the expense on a straight line basis during

92,230 15,600

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the vesting period.

The Company authorized the issuance of 21,213 shares in 2025, 20,401 shares in 2024, and 24,393 shares in 2023 to certain employees.

The vesting period for these awards is five years and the Bank amortizes the expense on a straight line basis during the vesting period.

The expense relating to these awards for the years ended December 31, 2025, 2024 and 2023 was $ 0.72 million, $ 0.99 million and $ 0.85 million, respectively.

5 unchanged sentences

State 3,561 2,751 2,596

Current expense 17,689 12,423 12,171

Federal ( 2,213 ) 127 ( 2,215 )

State ( 287 ) 49 342

Deferred expense (benefit) ( 2,500 ) 176 ( 1,873 )

$ 15,189 $ 12,599 $ 10,298

1 unchanged sentence

Deferred tax assets and liabilities at December 31, 2025, 2024, and 2023 were as follows:

2025 2024 2023

(Amounts In Thousands)

5 unchanged sentences

Unrealized losses on investment securities 407 8,490 8,419

State tax credits 2,940 — —

State net operating loss 1,206 1,364 1,286

Other 210 — —

Gross deferred tax assets $ 22,299 $ 25,140 $ 25,265

5 unchanged sentences

Prepaid expenses 567 499 495

Other 31 26 178

Gross deferred tax liabilities $ 2,626 $ 2,644 $ 2,708

Net deferred tax assets $ 18,467 $ 21,132 $ 21,271

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has recorded a deferred tax asset for the future tax benefits of Iowa net operating loss carry-forwards.

4 unchanged sentences

At December 31, 2025 and 2024, the Company believes it is more likely than not that the Iowa net operating loss carry-forwards will not be realized.

A valuation allowance related to the remaining deferred tax assets has not been provided because management believes it is more likely than not that the results

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of future operations will generate sufficient taxable income to realize the deferred tax assets.

The valuation allowance increased by $ 78,000 and $ 99,000 for the years ended December 31, 2024 and 2023, respectively.

The net change in the deferred income taxes for the years ended December 31, 2024, 2023 and 2022 is reflected in the consolidated financial statements as follows:

Year Ended December 31,

2024 2023 2022

(Amounts In Thousands)

Consolidated statements of income $ 176 $ ( 1,873 ) $ ( 1,307 )

Consolidated statements of stockholders' equity ( 37 ) 4,663 ( 13,629 )

$ 139 $ 2,790 $ ( 14,936 )

A valuation allowance related to the remaining deferred tax assets has not been provided because management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

The valuation allowance decreased by $ 158,000 and and increased by $ 78,000 for the years ended December 31, 2025 and 2024, respectively.

Income tax expense for the years ended December 31, 2025, 2024, and 2023 are less than the amounts computed by applying the maximum effective federal income tax rate to the income before income taxes because of the following items:

3 unchanged sentences

(Amounts In Thousands)

Expected tax expense $ 12,643 21.0 % $ 10,180 21.0 % $ 12,782 21.0 %

Tax-exempt interest ( 1,985 ) ( 4.1 ) ( 1,349 ) ( 2.8 ) ( 1,216 ) ( 2.0 )

Interest expense limitation 335 0.7 187 0.4 47 0.1

US federal statutory rate $ 15,895 21.00 % $ 12,643 21.00 % $ 10,180 21.00 %

State income taxes, net of federal income tax benefit (1) 2,349 3.10 2,212 3.70 2,321 4.79

Income tax credits ( 769 ) ( 1.00 ) ( 475 ) ( 0.80 ) ( 475 ) ( 0.98 )

Nontaxable or nondeductible items

Tax-exempt interest ( 2,767 ) ( 3.60 ) ( 1,985 ) ( 3.30 ) ( 1,349 ) ( 2.78 )

Interest expense limitation 355 0.50 335 0.60 187 0.39

Other ( 229 ) ( 0.30 ) ( 132 ) ( 0.30 ) ( 126 ) ( 0.30 )

Other Adjustments 355 0.10 1 — ( 440 ) ( 0.90 )

$ 15,189 19.80 % $ 12,599 20.90 % $ 10,298 21.22 %

(1) State taxes in Iowa made up the majority (greater than 50 percent) of the tax effect in this category.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of income taxes paid for the years ended December 31, 2025, 2024, and 2023were as follows:

Year Ended December 31,

2025 2024 2023

(Amounts In Thousands)

Total income taxes paid

US federal $ 6,458 $ 9,512 $ 10,817

US state and local

Iowa — 377 1,237

Total $ 6,458 $ 9,889 $ 12,054

Federal income tax expense for the years ended December 31, 2025, 2024, and 2023 was computed using the consolidated effective federal tax rate.

5 unchanged sentences

No interest or penalties on these unrecognized tax benefits has been recorded.

As of December 31, 2024, the Company does no t anticipate any significant increase or decrease in unrecognized tax benefits during the twelve month period ending December 31, 2025.

As of December 31, 2025, the Company does not anticipate any significant increase or decrease in unrecognized tax benefits during the twelve month period ending December 31, 2026

Cash paid for income taxes represents amounts paid in cash to taxing authorities during the period.

For the year ended December 31, 2025, the Company did not make any cash payments for state income taxes, as state income tax liabilities were satisfied through the utilization of purchased state tax credits.

Accordingly, no cash payments for state income taxes are reflected in the cash paid for income taxes disclosure.

On July 4, 2025, the U.S.

government enacted significant tax legislation commonly referred to as the One Big Beautiful Bill Act (the “Act”).

The Act includes numerous provisions affecting federal income taxation, including extensions and modifications of certain provisions originally enacted under the Tax Cuts and Jobs Act, as well as changes related to depreciation, research and development expenditures, interest deductibility limitations and the phaseout or termination of certain tax credits.

In accordance with ASC 740, Income Taxes, the Company evaluated the effects of the Act in the period that included the enactment date.

The Company assessed the impact of the Act on its current tax expense, deferred tax assets and liabilities, valuation allowances, and effective tax rate, based on its specific facts and circumstances.

The Company determined that the enactment of the Act did not have a material impact on its consolidated financial statements, including its income tax provision, deferred tax balances, or effective tax rate for the year ended December 31, 2025.

Accordingly, no material adjustments related to the Act were recorded in the accompanying consolidated financial statements.

The Company will continue to monitor future interpretive guidance and administrative developments related to the Act;

however, such guidance is not expected to materially affect the Company’s income tax provision.

Regulatory Capital Requirements, Restrictions on Subsidiary Dividends and Cash Restrictions

25 unchanged sentences

To maintain a ratio of capital to assets of 9.00 %, retained earnings of $ 183.23 million as of December 31, 2025 are available for the payment of dividends to the Company.

The Bank is required to maintain reserve balances in cash or with the Federal Reserve Bank.

Reserve balances totaled none as of December 31, 2024 and 2023.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

1 unchanged sentence

Such indebtedness has been incurred on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons.

The following is an analysis of the changes in the loans to related parties during the years ended December 31, 2024 and 2023:

The following is an analysis of the changes in the loans to those the Company has determined to be related parties during the years ended December 31, 2025 and 2024:

Year Ended December 31,

5 unchanged sentences

Balance, ending $ 86,428 $ 74,248

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Included in the loans to related parties was one loan on nonaccrual and past due with a balance of $ 0.05 million and $ 0.6 million as of December 31, 2025 and 2024.

Deposits from these related parties totaled $ 28.69 million and $ 13.51 million as of December 31, 2025 and 2024, respectively.

1 unchanged sentence

Letters of credit with these related parties totaled $ 0.07 million and $ 1.00 million as of December 31, 2025 and 2024, respectively, and were done under the same terms as those with nonrelated parties.

There were no amounts drawn related to these letters of credit as of December 31, 2025 and 2024.

Credit cards with these related parties had an outstanding balance of $ 0.05 million and $ 0.06 million as of December 31, 2025 and 2024 with a total credit limit of $ 0.56 million and $ 0.35 million as of December 31, 2025 and 2024.

These related party credit cards were done under the same terms as those with nonrelated parties.

HILLS BANCORPORATION

69 unchanged sentences

Interest-bearing deposits 2,765,090 2,767,730 — 2,767,730 —

Other borrowings 219,000 219,164 — 219,164 —

Other short-term borrowings 546,636 547,530 — 547,530 —

Federal Home Loan Bank borrowings 127,050 126,127 — 126,127 —

56 unchanged sentences

Fair values for outstanding letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.

The fair value of the outstanding letters of credit is not significant.

Unfunded loan commitments are not valued since the loans are generally priced at market at the time of funding (Level 2).

The fair value of the outstanding letters of credit and unfunded loan commitments are not significant.

Interest Rate Swap Agreements :

11 unchanged sentences

Mortgage-backed securities and collateralized mortgage obligations — 312,754 — 312,754

Other securities (FHLB, FHLMC and FNMA) — 14,848 — 14,848

Government Agency and GSE securities — 4,658 — 4,658

Total $ 255,527 $ 700,057 $ — $ 955,584

9 unchanged sentences

Mortgage-backed securities and collateralized mortgage obligations — 278,090 — 278,090

Other securities (FHLB, FHLMC and FNMA) — 33,049 — 33,049

Government Agency and GSE securities — 14,848 — 14,848

Total $ 288,462 $ 655,674 $ — $ 944,136

107 unchanged sentences

Forfeiture of common stock ( 794 ) ( 324 ) ( 564 )

(Increase) decrease in other assets ( 29 ) ( 52 ) 771

(Increase) in other assets ( 190 ) ( 29 ) ( 52 )

Increase (decrease) in other liabilities 571 96 ( 529 )

1 unchanged sentence

Cash flows from financing activities:

Issuance of common stock, net of costs — — 1,242

Stock options exercised 120 — —

4 unchanged sentences

Net cash and cash equivalents used by financing activities ( 25,596 ) ( 22,647 ) ( 17,000 )

Increase (decrease) in cash and cash equivalents 1,248 52 ( 1,576 )

Increase in cash and cash equivalents 1,057 1,248 52

Cash and cash equivalents:

7 unchanged sentences

The Bank’s loans, commitments to extend credit, unused lines of credit and outstanding letters of credit have been granted to customers within the Bank's market area.

Investments in securities issued by state and political subdivisions within the state of Iowa totaled approximately $ 149.47 million.

Investments in securities issued by state and political subdivisions within the state of Iowa had fair value of $ 162.38 million and $ 149.47 million for the years ended December 31, 2025 and 2024, respectively.

The concentrations of credit by type of loan are set forth in Note 3 to the Consolidated Financial Statements.

4 unchanged sentences

While the ultimate outcome of such legal proceedings cannot be predicted with certainty, after reviewing pending and threatened litigation with counsel, management believes at this time that the outcome of such litigation will not have a material adverse effect on the Company’s business, financial conditions, or results of operations.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial instruments with off-balance sheet risk :

2 unchanged sentences

These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

HILLS BANCORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, credit card participations and standby letters of credit is represented by the contractual amount of those instruments.

8 unchanged sentences

Outstanding letters of credit 11,152 13,867

Total commitments $ 686,436 $ 600,642

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

33 unchanged sentences

Collateral must be posted when the market value exceeds certain threshold limits which are determined by credit ratings of each counterparty.

The Bank entered into one interest rate swap agreement in November 2023 and was required to pledge a US Treasury in the amount of approximately $ 250 thousand and $ 500 thousand of collateral as of December 31, 2024 and 2023, respectively.

The Bank entered into one interest rate swap agreement in November 2023 and was required to pledge a US Treasury security in the amount of approximately $ 0.00 and $ 250,000 of collateral as of December 31, 2025 and 2024, respectively, due to the agreement expiring on May 15, 2025.

Cash Flow Hedges:

2 unchanged sentences

For accounting purposes, this swap transaction was designated as a cash flow hedge of the changes in cash flows attributable to changes in the effective federal funds rate, the benchmark interest rate being hedged, associated with the interest payments made on an amount of the Bank’s debt principal equal to the then-outstanding swap notional amount.

The underlying principal balance will be matched to future planned advances related to a large customer construction project, however, the FHLB advances will remain equal to the notional amount of the swap making it probable that sufficient effective federal funds rate based interest payments would exist through the maturity date of the swap.

The underlying principal balance was matched to future advances related to a large customer construction project, however, the FHLB advances remained equal to the notional amount of the swap making it probable that sufficient effective federal funds rate based interest payments would exist through the maturity date of the swap.

The table below identifies the balance sheet category and fair value of the Bank’s derivative instrument designated as a cash flow hedge as of December 31, 2025 and 2024:

Value Balance

Category Maturity

Value Balance Sheet Category Maturity

(Amounts in Thousands)

December 31, 2025

Interest rate swap $ 42,150 $ ( 93 ) Other Liabilities 5/15/2025

Interest rate swap $ — $ — N/A

December 31, 2024

Interest rate swap $ 42,150 $ ( 93 ) Other Liabilities 5/15/2025

The table below identifies the losses recognized on the Bank’s derivative instrument designated as cash flow hedges for the year ended December 31, 2024 and 2023:

The table below identifies the losses recognized on the Bank’s derivative instrument designated as cash flow hedges for the years ended December 31, 2025, 2024, and 2023:

Recognized in Other Comprehensive Loss Reclassified from AOCI into Income Recognized in Income on Derivatives

5 unchanged sentences

Interest rate swap $ 106 Interest Expense $ — Other Income $ —

December 31, 2023

Interest rate swap $ ( 177 ) Interest Expense $ — Other Income $ —

HILLS BANCORPORATION

2 unchanged sentences

The Company conducts operations through one reportable segment which is determined by the Senior Executive Committee, which is designated the chief operating decision maker, based upon information provided about the Company's products and services offered, primarily banking operations.

The Executive Committee consists of the Chief Executive Officer, Chief Financial Officer and President/Chief Operating Officer.

The Executive Committee consists of the Chief Executive Officer and Chief Financial Officer.

The segment is also distinguished by the level of information provided to the Executive Committee, who uses such information to review performance of various components of the business (such as branches), which are then aggregated if operating performance, products/services, and customers are similar.

16 unchanged sentences

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

On January 5, 2026, the Audit Committee approved the dismissal of Forvis Mazars, LLP as the Company’s independent registered public accounting firm following completion of the audit for the fiscal year ended December 31, 2025, and approved the engagement of Crowe LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2026.

The reports of Forvis Mazars, LLP on the Company’s consolidated financial statements for the fiscal years ended December 31, 2025 and December 31, 2024 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

During the Company’s two most recent fiscal years and the subsequent interim period through March 18, 2026, there were no disagreements with Forvis Mazars, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure that, if not resolved to the satisfaction of Forvis Mazars, LLP, would have caused reference in its reports.

During the same periods, there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K, except for previously disclosed material weaknesses in internal control over financial reporting relating to (i) management review and activity-level controls over the period-end financial reporting process and controls to ensure that period-end financial statements to be filed are correct, and our independent auditor has completed its procedures prior to the filing of period-end financial statements;

(ii) the review, posting, and approval of manual journal entries;

(iii) the identification and disclosure of related party transactions;

(iv) related to the allowance for credit losses on loans (“ACL”), the design of controls over the framework used to determine the qualitative component of the ACL and the review process to ensure qualitative adjustments are accurately determined and applied;

(v) related to property and equipment, the design of controls over the determination of estimated useful lives and the timely identification and recording of dispositions of property and equipment;

and (vi) management lacks sufficient depth and structure in the oversight of the financial reporting function and insufficient staffing levels with specialized technical accounting and internal control expertise to effectively design controls and perform an adequate level of review over the period-end financial reporting process.

The Company did not consult with Crowe LLP during the two most recent fiscal years or the subsequent interim period regarding either (i) the application of accounting principles to a specific completed or contemplated transaction or the type of audit opinion that might be rendered, or (ii) any matter that was the subject of a disagreement or reportable event under Item 304(a)(1)(iv) or Item 304(a)(1)(v) of Regulation S-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk