Company Quick10K Filing
Quick10K
Hills Bancorporation
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-15 Earnings, Regulation FD, Exhibits
8-K 2019-04-15 Shareholder Vote
8-K 2019-03-20 Amend Bylaw, Exhibits
8-K 2018-04-19 Shareholder Vote
8-K 2018-04-16 Earnings, Regulation FD, Exhibits
8-K 2018-01-12 Other Events
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HBIA 2019-03-31
Part I
Note 1. Summary of Significant Accounting Policies
Note 2. Earnings per Share
Note 3. Other Comprehensive Income (Loss)
Note 4. Securities
Note 5. Loans
Note 6. Leases
Note 7. Fair Value Measurements
Note 8. Stock Repurchase Program
Note 9. Commitments and Contingencies
Note 10. Income Taxes
Note 11. Derivative Financial Instruments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Item 6. Exhibits
EX-3.2 exhibit3_2.htm
EX-31 exhibit3133119.htm
EX-32 exhibit3233119.htm

Hills Bancorporation Earnings 2019-03-31

HBIA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 hbia201933110q.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

Commission file number:  0-12668
Hills Bancorporation

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

131 MAIN STREET, HILLS, IOWA 52235

Telephone number: (319) 679-2291

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes  o No

Indicate by checkmark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

þ Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  o
Accelerated Filer                     þ   
Non-accelerated filer    o
Small Reporting Company     o
Emerging Growth Company    o
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes  þ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
 
 
 



APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date.
 
SHARES OUTSTANDING
CLASS
April 30, 2019
 
 
Common Stock, no par value
9,351,299
 
 
 
 



HILLS BANCORPORATION
Index to Form 10-Q

Part I
FINANCIAL INFORMATION
 
 
 
Page
 
 
Number
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Part II
 
 
OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 
 
 
 

Page 3




HILLS BANCORPORATION CONSOLIDATED BALANCE SHEETS (Amounts In Thousands, Except Share Amounts) 
 
March 31, 2019
 
December 31, 2018
ASSETS
(Unaudited)
 
Cash and cash equivalents
$
200,476

 
$
43,305

Investment securities available for sale at fair value (amortized cost March 31, 2019 $323,358 December 31, 2018 $321,660)
323,917

 
318,926

Stock of Federal Home Loan Bank
12,266

 
12,172

Loans held for sale
5,267

 
1,984

Loans, net of allowance for loan losses (March 31, 2019 $36,520; December 31, 2018 $37,810)
2,607,488

 
2,591,085

Property and equipment, net
36,631

 
37,051

Tax credit real estate investment
8,931

 
9,193

Accrued interest receivable
13,970

 
11,784

Deferred income taxes, net
9,669

 
10,869

Goodwill
2,500

 
2,500

Other assets
6,750

 
3,595

Total Assets
$
3,227,865

 
$
3,042,464

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

 
 
 
 
Liabilities
 

 
 

Noninterest-bearing deposits
$
363,142

 
$
372,152

Interest-bearing deposits
2,233,750

 
2,048,972

Total deposits
$
2,596,892

 
$
2,421,124

Federal Home Loan Bank borrowings
215,000

 
215,000

Accrued interest payable
2,051

 
1,812

Other liabilities
23,291

 
20,776

Total Liabilities
$
2,837,234

 
$
2,658,712

 
 
 
 
Redeemable Common Stock Held by Employee Stock Ownership Plan (ESOP)
$
49,851

 
$
48,870

 
 
 
 
STOCKHOLDERS' EQUITY
 

 
 

Common stock, no par value; authorized 20,000,000 shares; issued March 31, 2019 10,326,417 shares; December 31, 2018 10,325,191 shares
$

 
$

Paid in capital
55,295

 
52,122

Retained earnings
375,394

 
371,848

Accumulated other comprehensive loss
(1,001
)
 
(3,250
)
Treasury stock at cost (March 31, 2019 974,357 shares; December 31, 2018 988,750 shares)
(39,057
)
 
(36,968
)
Total Stockholders' Equity
$
390,631

 
$
383,752

Less maximum cash obligation related to ESOP shares
49,851

 
48,870

Total Stockholders' Equity Less Maximum Cash Obligation Related to ESOP Shares
$
340,780

 
$
334,882

Total Liabilities & Stockholders' Equity
$
3,227,865

 
$
3,042,464


See Notes to Consolidated Financial Statements.

Page 4


HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Amounts In Thousands, Except Per Share Amounts)
 
Three Months Ended March 31,
 
2019
 
2018
Interest income:
 
 
 
Loans, including fees
$
29,573

 
$
26,028

Investment securities:
 

 
 

Taxable
758

 
563

Nontaxable
1,025

 
889

Federal funds sold
491

 
551

Total interest income
$
31,847

 
$
28,031

Interest expense:
 

 
 

Deposits
$
6,499

 
$
3,864

FHLB borrowings
1,575

 
1,874

Total interest expense
$
8,074

 
$
5,738

Net interest income
$
23,773

 
$
22,293

Provision for loan losses
(1,246
)
 
(765
)
Net interest income after provision for loan losses
$
25,019

 
$
23,058

Noninterest income:
 

 
 

Net gain on sale of loans
$
286

 
$
331

Trust fees
2,252

 
2,641

Service charges and fees
2,275

 
2,228

Other noninterest income
437

 
428

 
$
5,250

 
$
5,628

 
 
 
 
Noninterest expenses:
 

 
 

Salaries and employee benefits
$
8,722

 
$
8,284

Occupancy
1,186

 
1,101

Furniture and equipment
1,673

 
1,474

Office supplies and postage
459

 
434

Advertising and business development
638

 
630

Outside services
2,572

 
2,578

FDIC insurance assessment
209

 
218

Other noninterest expense
590

 
537

 
$
16,049

 
$
15,256

Income before income taxes
$
14,220

 
$
13,430

Income taxes
3,017

 
2,572

Net income
$
11,203

 
$
10,858

 
 
 
 
Earnings per share:
 

 
 

Basic
$
1.20

 
$
1.16

Diluted
$
1.20

 
$
1.16

 
See Notes to Consolidated Financial Statements.

Page 5


HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) (Amounts In Thousands)

 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
11,203

 
$
10,858

 
 
 
 
Other comprehensive income (loss)
 

 
 

Securities:
 

 
 

Net change in unrealized income (loss) on securities available for sale
$
3,293

 
$
(2,257
)
Reclassification adjustment for net gains realized in net income

 

Income taxes
(821
)
 
563

Other comprehensive income (loss) on securities available for sale
$
2,472

 
$
(1,694
)
Derivatives used in cash flow hedging relationships:
 

 
 

Net change in unrealized (loss) income on derivatives
$
(298
)
 
$
1,054

Income taxes
75

 
(263
)
Other comprehensive (loss) income on cash flow hedges
$
(223
)
 
$
791

 
 
 
 
Other comprehensive income (loss), net of tax
$
2,249

 
$
(903
)
 
 
 
 
Comprehensive income
$
13,452

 
$
9,955

 
See Notes to Consolidated Financial Statements.

Page 6


HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Amounts In Thousands, Except Share Amounts)
 
Paid In Capital
 
Retained Earnings
 
Accumulated Other
Comprehensive
Income (Loss)
 
Treasury Stock
 
Maximum Cash
Obligation Related
To ESOP Shares
 
Total
Balance, December 31, 2017
$
48,930

 
$
341,558

 
$
(2,446
)
 
$
(33,018
)
 
$
(43,308
)
 
$
311,716

Issuance of 88,943 shares of common stock
2,580

 

 

 
2,224

 

 
4,804

Issuance of 1,957 shares of common stock under the employee stock purchase plan
100

 

 

 

 

 
100

Unearned restricted stock compensation
118

 

 

 

 

 
118

Forfeiture of 208 shares of common stock
(8
)
 
 
 
 
 
 
 
 
 
(8
)
Change related to ESOP shares

 

 

 

 
(2,471
)
 
(2,471
)
Net income

 
10,858

 

 

 

 
10,858

Cash dividends ($0.75 per share)

 
(7,002
)
 

 

 

 
(7,002
)
Reclassification of stranded tax effects due to the Tax Cuts and Jobs Act
 
 
526

 
(526
)
 
 
 
 
 

Purchase of 47,432 shares of common stock

 

 

 
(2,694
)
 

 
(2,694
)
Other comprehensive loss

 

 
(903
)
 

 

 
(903
)
Balance, March 31, 2018
$
51,720

 
$
345,940

 
$
(3,875
)
 
$
(33,488
)
 
$
(45,779
)
 
$
314,518

 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
$
52,122

 
$
371,848

 
$
(3,250
)
 
$
(36,968
)
 
$
(48,870
)
 
$
334,882

Issuance of 84,164 shares of common stock
2,932

 

 

 
2,202

 

 
5,134

Issuance of 1,929 shares of common stock under the employee stock purchase plan
105

 

 

 

 

 
105

Unearned restricted stock compensation
170

 

 

 

 

 
170

Forfeiture of 703 shares of common stock
(34
)
 

 

 

 

 
(34
)
Change related to ESOP shares

 

 

 

 
(981
)
 
(981
)
Net income

 
11,203

 

 

 

 
11,203

Cash dividends ($0.82 per share)

 
(7,657
)
 

 

 

 
(7,657
)
Purchase of 69,771 shares of common stock

 

 

 
(4,291
)
 

 
(4,291
)
Other comprehensive income

 

 
2,249

 

 

 
2,249

Balance, March 31, 2019
$
55,295

 
$
375,394

 
$
(1,001
)
 
$
(39,057
)
 
$
(49,851
)
 
$
340,780

 
See Notes to Consolidated Financial Statements.

Page 7


HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts In Thousands)

 
Three Months Ended 
 March 31,
 
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net income
$
11,203

 
$
10,858

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
 

 
 

Depreciation
847

 
821

Provision for loan losses
(1,246
)
 
(765
)
Forfeiture of common stock
(34
)
 
(8
)
Compensation expensed through issuance of common stock
108

 
91

Provision for deferred income taxes
454

 
303

Net gain on sale of other real estate owned and other repossessed assets
(11
)
 
(2
)
Increase in accrued interest receivable
(2,186
)
 
(593
)
Amortization of premium on investment securities, net
100

 
134

Decrease (increase) in other assets
426

 
(86
)
Decrease in accrued interest payable and other liabilities
(955
)
 
(1,465
)
Loans originated for sale
(29,847
)
 
(31,571
)
Proceeds on sales of loans
26,850

 
31,480

Net gain on sales of loans
(286
)
 
(331
)
Net cash and cash equivalents provided by operating activities
$
5,423

 
$
8,866

 
 
 
 
Cash Flows from Investing Activities
 

 
 

Proceeds from maturities of investment securities available for sale
$
10,251

 
$
10,711

Purchases of investment securities available for sale
(12,143
)
 
(25,856
)
Loans made to customers, net of collections
(15,208
)
 
7,953

Proceeds on sale of other real estate owned and other repossessed assets
62

 
2

Purchases of property and equipment
(427
)
 
(651
)
Income from tax credit real estate, net
262

 
390

Net cash and cash equivalents used in investing activities
$
(17,203
)
 
$
(7,451
)
 
 
 
 
Cash Flows from Financing Activities
 

 
 

Net increase in deposits
$
175,768

 
$
153,212

Net decrease in FHLB borrowings

 
(60,000
)
Issuance of common stock, net of costs
5,026

 
4,713

Purchase of treasury stock
(4,291
)
 
(2,694
)
Proceeds from the issuance of common stock through the employee stock purchase plan
105

 
100

Dividends paid
(7,657
)
 
(7,002
)
Net cash and cash equivalents provided by financing activities
$
168,951

 
$
88,329

 
(Continued)


Page 8


HILLS BANCORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued) (Amounts In Thousands)
 
Three Months Ended 
 March 31,
 
2019
 
2018
Increase in cash and cash equivalents
$
157,171

 
$
89,744

Cash and cash equivalents:
 

 
 

Beginning of period
43,305

 
154,353

End of period
$
200,476

 
$
244,097

 
 
 
 
Supplemental Disclosures
 

 
 

Cash payments for:
 

 
 

Interest paid to depositors
$
6,260

 
$
3,844

Interest paid on other obligations
1,575

 
1,874

Income taxes paid

 

 
 
 
 
Noncash activities:
 

 
 

Increase in maximum cash obligation related to ESOP shares
$
981

 
$
2,471

Transfers to other real estate owned
51

 
62

Right-of-use assets obtained in exchange for operating lease obligations
3,581

 

 
See Notes to Consolidated Financial Statements.



Page 9


HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1.
Summary of Significant Accounting Policies

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with instructions for Form 10-Q and Regulation S-X.  These financial statements include all adjustments (consisting of normal recurring accruals) which in the opinion of management are considered necessary for the fair presentation of the financial position and results of operations for the periods shown.  Certain prior year amounts have been reclassified to conform to the current year presentation.  The Company considers that it operates as one business segment, a commercial bank.

Operating results for the three month period ended March 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Form 10-K Annual Report of Hills Bancorporation and subsidiary (the “Company”) for the year ended December 31, 2018 filed with the Securities Exchange Commission on March 5, 2019.  The consolidated balance sheet as of December 31, 2018, has been derived from the audited consolidated financial statements for that period.

The Company evaluated subsequent events through the filing date of its quarterly report on Form 10-Q with the SEC.

Revenue Recognition

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the Company’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit and investment securities as these activities are not subject to the requirements of ASC 606. Interest income on loans and investment securities is recognized on the accrual method in accordance with written contracts.

Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606 are the following: Service charges and fees on deposit accounts represent general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue which includes interchange income, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied. Trust income represents monthly fees due from wealth management customers as consideration for managing the customers' assets. Wealth management and trust services include custody of assets, investment management, fees for trust services and similar fiduciary activities. Revenue is recognized when our performance obligation is completed each month, which is generally the time that payment is received.

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. As of March 31, 2019, the Company did not have any significant contract balances.

An entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. The Company has not incurred or capitalized any contract acquisition costs as of March 31, 2019.


Page 10

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)


Effect of New Financial Accounting Standards:

In May 2014, The FASB and International Accounting Standards Board (IASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised good or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The adoption of ASU 2014-09 by the Company did not have a material impact on the recognition of revenue though did require additional disclosures on our material noninterest income streams discussed in revenue recognition above.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 created Subtopic 321-10, Investments-Equity Securities which is applicable to all entities except those in industries that account for substantially all investments at fair value through earnings or the change in net assets. Under this new subtopic, equity securities are generally required to be measured at fair value with unrealized holding gains and losses reflected in net income. ASU 2016-01 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company adopted ASU 2016-01 for the period ending March 31, 2018. There was no material impact on the financial statements however it required a change in disclosure and related methodology located in Note 6 Fair Value Measurements.

In February 2016, the FASB issued ASU No. 2016-02 (Topic 842), Leases. The ASU provides guidance requiring lessees to recognize right-of-use (ROU) assets and lease liabilities for all leases other than those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the lease term on a straight-line basis. Under this new ASU, lessees will recognize right-of use assets and lease liabilities for most leases currently accounted for as operating leases under generally accepted accounting principles. For public companies, ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted the ASU on January 1, 2019 and used the alternative transition approach which permits the effects of adoption to be applied at the effective date. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. We elected the 'package of practical expedients', which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We also elected the short-term lease exemption and combining the lease and nonlease components practical expedients. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. The most significant impact upon adoption relates to the recognition of new ROU assets and lease liabilities on our balance sheet for our equipment and real estate operating leases. Upon adoption, we recognized additional operating liabilities of $3.58 million, with corresponding ROU assets of the same amount based on the present value of the remaining rental payments, including options to extend that are expected to be exercised, under current leasing standards for existing operating leases. There was no cumulative effect of adopting the standard.

In March 2016, the FASB issued ASU No. 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20), Recognition of Breakage for Certain Prepaid Stored-Value Products. ASU 2016-04 applies to all entities that offer certain prepaid stored - value products. The ASU provides guidance for the derecognition of financial liabilities related to the issuance of these products and aligns the recognition of breakage to current authoritative guidance. For public companies, ASU 2016-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company adopted ASU 2016-04 for the period ending March 31, 2018. There was no material impact on the financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (CECL). The ASU changes the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model required under current GAAP, which delays recognition until it is probable a loss has been incurred. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to significantly increase

Page 11

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

our allowance. For public companies, ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, early adoption is permitted for the fiscal year beginning after December 15, 2018. The Company has implemented a software solution provided by a third party vendor to assist in the analysis of historical loan data to determine the CECL model that will be implemented. The Company anticipates running parallel calculations of the "incurred loss" and CECL models for the quarter ending June 30, 2019. We expect to recognize a one-time cumulative-effect adjustment to our allowance for loan losses as of the beginning of the first reporting period in which the new standard is adopted. The amount of the one-time cumulative-effect adjustment has not yet been determined.

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323), Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. This ASU adds an SEC paragraph and amends other Topics pursuant to an SEC staff Announcement made at the September 22, 2016 Emerging Issues Task Force (EITF) meeting. The SEC paragraph applies to ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606); ASU No. 2016-02, Leases (Topic 842); and ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU provides that a company should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. If the company does not know or cannot reasonably estimate the impact that adoption of the ASUs referenced in this announcement is expected to have on the financial statements, then in addition to making a statement to that effect, the company should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the company when adopted. Additional qualitative disclosures should include a description of the effect of the accounting policies that the company expects to apply and a comparison to the company's current accounting policies. Also, the company should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 250), Simplifying the Test for Goodwill Impairment. The ASU simplifies the goodwill impairment test by requiring a company to perform its annual or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized when the carrying amount exceeds fair value. For public companies, ASU 2017-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of ASU No. 2017-04 by the Company is not expected to have a material impact.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. This ASU requires companies to change the recognition and presentation of the effects of hedge accounting by eliminating the requirement to separately measure and report hedge ineffectiveness and requiring companies to present all of the elements of hedge accounting that affect earnings in the same income statement line as the hedged item. Furthermore, the standard eases the requirements for effectiveness testing, hedge documentation and applying the critical terms match method and introduces new alternatives that will permit companies to reduce the risk of material error corrections if they misapply the shortcut method. For public companies, ASU 2017-12 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2018. The Company adopted ASU No. 2017-12 for the period ending March 31, 2019. There was no material impact on the financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted ASU 2018-02 for the period ending March 31, 2018 and elected the specific identification method accounting policy. There was a $0.53 million reclassification recorded in stockholders' equity for the period ending March 31, 2018.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted ASU No. 2018-07 for the period ending March 31, 2019. There was no material impact on the financial statements.


Page 12

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including removal of the requirement to disclose the valuation processes for Level 3 fair value measurements and the additional requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The adoption of ASU 2018-13 by the Company is not expected to have a material impact.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangements That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU 2018-15 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is in the process of evaluating the impact of this ASU on the financial statements.

In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815), Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this ASU permit use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (LIBOR) swap rate, the Overnight Index Swap (OIS) Rate based on the Fed Funds Effective Rate and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate. The amendments in this ASU are required to be adopted concurrently with the amendments in ASU 2017-12. For public companies, this would be for fiscal years, and interim periods within those fiscal years beginning after December 15, 2018. The Company adopted ASU No. 2018-16 for the period ending March 31, 2019 concurrently with ASU 2017-12. There was no material impact on the financial statements.



Note 2.
Earnings Per Share

Basic earnings per share is computed using the weighted average number of actual common shares outstanding during the period.  Diluted earnings per share reflects the potential dilution that would occur from the exercise of common stock options outstanding.  ESOP shares are considered outstanding for this calculation unless unearned.


Page 13

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The computation of basic and diluted earnings per share for the periods presented is as follows:

 
Three Months Ended March 31,
 
2019
 
2018
Common shares outstanding at the beginning of the period
9,336,441

 
9,335,154

Weighted average number of net shares issued
30,816

 
48,969

Weighted average shares outstanding (basic)
9,367,257

 
9,384,123

Weighted average of potential dilutive shares attributable to stock options granted, computed under the treasury stock method
4,008

 
3,890

Weighted average number of shares (diluted)
9,371,265

 
9,388,013

Net income (In thousands)
$
11,203

 
$
10,858

Earnings per share:
 

 
 

Basic
$
1.20

 
$
1.16

Diluted
$
1.20

 
$
1.16



Page 14

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 3.
Other Comprehensive Income (Loss)

The following table summarizes the balances of each component of accumulated other comprehensive income (AOCI), included in stockholders’ equity, at March 31, 2019 and December 31, 2018:

 
March 31,
2019

December 31, 2018
 
(amounts in thousands)
Net unrealized income (loss) on available-for-sale securities
$
559

 
$
(2,734
)
Net unrealized loss on derivatives used for cash flow hedges
(1,894
)
 
(1,596
)
Tax effect
$
334

 
$
1,080

Net-of-tax amount
$
(1,001
)
 
$
(3,250
)
 
Note 4.
Securities

The carrying values of investment securities at March 31, 2019 and December 31, 2018 are summarized in the following table (dollars in thousands):

 
March 31, 2019
 
December 31, 2018
 
Amount
 
Percent
 
Amount
 
Percent
Securities available for sale
 
 
 
 
 
 
 
U.S. Treasury
$
91,573

 
28.27
%
 
$
83,155

 
26.07
%
Other securities (FHLB, FHLMC and FNMA)
27,531

 
8.50

 
34,871

 
10.93

State and political subdivisions
204,813

 
63.23

 
200,900

 
63.00

Total securities available for sale
$
323,917

 
100.00
%
 
$
318,926

 
100.00
%

Investment securities have been classified in the consolidated balance sheets according to management’s intent.  Available-for-sale securities consist of debt securities not classified as trading or held to maturity.  Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity.  There were no trading or held to maturity securities as of March 31, 2019 or December 31, 2018. The carrying amount of available-for-sale securities and their approximate fair values were as follows as of March 31, 2019 and December 31, 2018 (in thousands):

 
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Estimated Fair
Value
March 31, 2019:
 
 
 
 
 
 
 
U.S. Treasury
$
91,181

 
$
726

 
$
(334
)
 
$
91,573

Other securities (FHLB, FHLMC and FNMA)
27,846

 

 
(315
)
 
27,531

State and political subdivisions
204,331

 
1,189

 
(707
)
 
204,813

Total
$
323,358

 
$
1,915

 
$
(1,356
)
 
$
323,917

December 31, 2018:
 

 
 

 
 

 
 

U.S. Treasury
$
83,839

 
$
124

 
$
(808
)
 
$
83,155

Other securities (FHLB, FHLMC and FNMA)
35,371

 

 
(500
)
 
34,871

State and political subdivisions
202,450

 
278

 
(1,828
)
 
200,900

Total
$
321,660

 
$
402

 
$
(3,136
)
 
$
318,926





Page 15

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The amortized cost and estimated fair value of available-for-sale securities classified according to their contractual maturities at March 31, 2019, were as follows (in thousands):
 
 
Amortized
Cost
 
Fair Value
Due in one year or less
$
57,358

 
$
57,169

Due after one year through five years
186,161

 
186,388

Due after five years through ten years
79,278

 
79,787

Due over ten years
561

 
573

Total
$
323,358

 
$
323,917


As of March 31, 2019 investment securities with a carrying value of $11.72 million were pledged to collateralize derivative financial instruments and other borrowings.

The following table shows the fair value, gross unrealized losses and the percentage of fair value represented by gross unrealized losses of applicable investment securities owned by the Company, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018 (in thousands):

 
Less than 12 months
 
12 months or more
 
Total
March 31, 2019
Description of Securities
#
 
Fair Value
 
Unrealized
Loss
 
%
 
#
 
Fair Value
 
Unrealized
Loss
 
%
 
#
 
Fair Value
 
Unrealized
Loss
 
%
U.S. Treasury

 
$

 
$

 
%
 
19

 
$
46,923

 
$
(334
)
 
0.71
%
 
19

 
$
46,923

 
$
(334
)
 
0.71
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other securities (FHLB, FHLMC and FNMA)

 

 

 

 
11

 
27,531

 
(315
)
 
1.14

 
11

 
27,531

 
(315
)
 
1.14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
59

 
30,332

 
(148
)
 
0.49

 
262

 
62,104

 
(559
)
 
0.90

 
321

 
92,436

 
(707
)
 
0.76

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
59

 
$
30,332

 
$
(148
)
 
0.49
%
 
292

 
$
136,558

 
$
(1,208
)
 
0.88
%
 
351

 
$
166,890

 
$
(1,356
)
 
0.81
%

 
Less than 12 months
 
12 months or more
 
Total
December 31, 2018
Description of Securities
#
 
Fair Value
 
Unrealized
Loss
 
%
 
#
 
Fair Value
 
Unrealized
Loss
 
%
 
#
 
Fair Value
 
Unrealized
Loss
 
%
U.S. Treasury
6

 
$
14,644

 
$
(49
)
 
0.33
%
 
19

 
$
46,443

 
$
(759
)
 
1.63
%
 
25

 
$
61,087

 
$
(808
)
 
1.32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other securities (FHLB, FHLMC and FNMA)

 

 

 

 
14

 
34,871

 
(500
)
 
1.43

 
14

 
34,871

 
(500
)
 
1.43

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and political subdivisions
113

 
31,022

 
(162
)
 
0.52

 
325

 
77,921

 
(1,666
)
 
2.14

 
438

 
108,943

 
(1,828
)
 
1.68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total temporarily impaired securities
119

 
$
45,666

 
$
(211
)
 
0.46
%
 
358

 
$
159,235

 
$
(2,925
)
 
1.84
%
 
477

 
$
204,901

 
$
(3,136
)
 
1.53
%

The Company considered the following information in reaching the conclusion that the impairments disclosed in the table above are temporary and not other-than-temporary impairments.  None of the unrealized losses in the above table was due to the deterioration in the credit quality of any of the issues that might result in the non-collection of contractual principal and interest. 

Page 16

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The unrealized losses are due to changes in interest rates.  The Company has not recognized any unrealized loss in income because management does not have the intent to sell the securities included in the previous table.  Management has concluded that it is more likely than not that the Company will not be required to sell these securities prior to recovery of the amortized cost basis.

Note 5.
Loans

Classes of loans are as follows:

 
March 31,
2019
 
December 31,
2018
 
(Amounts In Thousands)
Agricultural
$
93,573

 
$
92,673

Commercial and financial
227,403

 
229,501

Real estate:
 
 
 
Construction, 1 to 4 family residential
73,868

 
72,279

Construction, land development and commercial
105,466

 
113,807

Mortgage, farmland
238,109

 
236,454

Mortgage, 1 to 4 family first liens
916,408

 
912,059

Mortgage, 1 to 4 family junior liens
152,183

 
152,625

Mortgage, multi-family
351,090

 
352,434

Mortgage, commercial
402,073

 
383,314

Loans to individuals
29,739

 
30,072

Obligations of state and political subdivisions
53,153

 
52,725

 
$
2,643,065

 
$
2,627,943

Net unamortized fees and costs
943

 
952

 
$
2,644,008

 
$
2,628,895

Less allowance for loan losses
36,520

 
37,810

 
$
2,607,488

 
$
2,591,085



Page 17

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Changes in the allowance for loan losses, the allowance for loan losses applicable to impaired loans and the related loan balance of impaired loans for the three months ended March 31, 2019 were as follows:



Three Months Ended March 31, 2019
 
Agricultural
 
Commercial and
Financial
 
Real Estate:
Construction and
land development
 
Real Estate:
Mortgage,
farmland
 
Real Estate:
Mortgage, 1 to 4
family
 
Real Estate:
Mortgage, multi-
family and
commercial
 
Other
 
Total
 
(Amounts In Thousands)
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
2,789

 
$
5,826

 
$
3,292

 
$
3,972

 
$
12,516

 
$
8,165

 
$
1,250

 
$
37,810

Charge-offs

 
(180
)
 
(8
)
 

 
(177
)
 
(4
)
 
(108
)
 
(477
)
Recoveries
10

 
184

 
2

 
5

 
110

 
85

 
37

 
433

Provision
(258
)
 
174

 
(358
)
 
(106
)
 
(819
)
 
(23
)
 
144

 
(1,246
)
 


 


 


 


 


 


 


 


Ending balance
$
2,541

 
$
6,004

 
$
2,928

 
$
3,871

 
$
11,630

 
$
8,223

 
$
1,323

 
$
36,520

 

 

 

 

 

 

 

 

Ending balance, individually evaluated for impairment
$
258

 
$
1,375

 
$

 
$

 
$
74

 
$
483

 
$
59

 
$
2,249

 

 

 

 

 

 

 

 

Ending balance, collectively evaluated for impairment
$
2,283

 
$
4,629

 
$
2,928

 
$
3,871

 
$
11,556

 
$
7,740

 
$
1,264

 
$
34,271

 


 


 


 


 


 


 


 


Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
93,573

 
$
227,403

 
$
179,334

 
$
238,109

 
$
1,068,591

 
$
753,163

 
$
82,892

 
$
2,643,065

 


 


 


 


 


 


 


 


Ending balance, individually evaluated for impairment
$
2,740

 
$
4,039

 
$
832

 
$
4,189

 
$
6,879

 
$
4,333

 
$
59

 
$
23,071

 

 

 

 

 

 

 

 

Ending balance, collectively evaluated for impairment
$
90,833

 
$
223,364

 
$
178,502

 
$
233,920

 
$
1,061,712

 
$
748,830

 
$
82,833

 
$
2,619,994


Page 18

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Changes in the allowance for loan losses for the three months ended March 31, 2018 were as follows:


 
Three Months Ended March 31, 2018
 
Agricultural
 
Commercial and
Financial
 
Real Estate:
Construction and
land development
 
Real Estate:
Mortgage,
farmland
 
Real Estate:
Mortgage,
1 to 4 family
 
Real Estate:
Mortgage, multi-
family and
commercial
 
Other
 
Total
 
(Amounts In Thousands)
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
2,294

 
$
4,837

 
$
2,989

 
$
3,669

 
$
8,668

 
$
5,700

 
$
1,243

 
$
29,400

Charge-offs

 
(30
)
 

 

 
(121
)
 
(1
)
 
(115
)
 
(267
)
Recoveries
12

 
248

 
143

 

 
98

 
4

 
37

 
542

Provision
(53
)
 
(397
)
 
(352
)
 
40

 
10

 
91

 
(104
)
 
(765
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
2,253

 
$
4,658

 
$
2,780

 
$
3,709

 
$
8,655

 
$
5,794

 
$
1,061

 
$
28,910

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, individually evaluated for impairment
$
199

 
$
759

 
$
40

 
$

 
$
75

 
$
493

 
$
63

 
$
1,629

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, collectively evaluated for impairment
$
2,054

 
$
3,899

 
$
2,740

 
$
3,709

 
$
8,580

 
$
5,301

 
$
998

 
$
27,281

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
83,940

 
$
214,004

 
$
166,761

 
$
218,462

 
$
980,150

 
$
705,576

 
$
83,032

 
$
2,451,925

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, individually evaluated for impairment
$
2,823

 
$
2,550

 
$
946

 
$
3,615

 
$
6,564

 
$
8,025

 
$
63

 
$
24,586

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance, collectively evaluated for impairment
$
81,117

 
$
211,454

 
$
165,815

 
$
214,847

 
$
973,586

 
$
697,551

 
$
82,969

 
$
2,427,339




Page 19

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The following table presents the credit quality indicators by type of loans in each category as of March 31, 2019 and December 31, 2018, respectively (amounts in thousands):

 
Agricultural
 
Commercial and
Financial
 
Real Estate:
Construction, 1 to 4
family residential
 
Real Estate:
Construction, land
development and
commercial
March 31, 2019
 
 
 
 
 
 
 
Grade:
 
 
 
 
 
 
 
Excellent
$
4,091

 
$
2,718

 
$

 
$
203

Good
15,703

 
47,718

 
12,376

 
17,416

Satisfactory
39,421

 
123,709

 
44,934

 
57,452

Monitor
27,703

 
38,547

 
14,185

 
21,312

Special Mention
836

 
8,566

 
1,978

 
7,576

Substandard
5,819

 
6,145

 
395

 
1,507

Total
$
93,573

 
$
227,403

 
$
73,868

 
$
105,466


 
Real Estate:
Mortgage,
farmland
 
Real Estate:
Mortgage, 1 to 4
family first liens
 
Real Estate: Mortgage,
1 to 4 family junior
liens
 
Real Estate:
Mortgage, multi-
family
March 31, 2019
 
 
 
 
 
 
 
Grade:
 
 
 
 
 
 
 
Excellent
$
5,469

 
$
2,307

 
$
526

 
$
22,051

Good
50,050

 
31,571

 
4,071

 
59,203

Satisfactory
126,988

 
756,430

 
138,533

 
189,192

Monitor
45,440

 
97,980

 
6,241

 
58,506

Special Mention
1,117

 
9,414

 
1,141

 
15,947

Substandard
9,045

 
18,706

 
1,671

 
6,191

Total
$
238,109

 
$
916,408

 
$
152,183

 
$
351,090


 
Real Estate:
Mortgage,
commercial
 
Loans to
individuals
 
Obligations of state and
political subdivisions
 
Total
March 31, 2019
 
 
 
 
 
 
 
Grade:
 
 
 
 
 
 
 
Excellent
$
35,391

 
$

 
$
7,985

 
$
80,741

Good
86,117

 
193

 
15,414

 
339,832

Satisfactory
195,035

 
28,663

 
21,563

 
1,721,920

Monitor
74,094

 
588

 
8,191

 
392,787

Special Mention
2,901

 
229

 

 
49,705

Substandard
8,535

 
66

 

 
58,080

Total
$
402,073

 
$
29,739

 
$
53,153

 
$
2,643,065

 

Page 20

HILLS BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

 
Agricultural
 
Commercial and
Financial
 
Real Estate:
Construction, 1 to 4
family residential
 
Real Estate:
Construction, land
development and
commercial
December 31, 2018
 
 
 
 
 
 
 
Grade:
 
 
 
 
 
 
 
Excellent
$
3,667

 
$
3,322

 
$

 
$
209

Good
15,342

 
51,562

 
13,029

 
16,667

Satisfactory
39,897

 
121,759