Hills Bancorporation Amends 10-Q, Boosts Net Income Despite Credit Loss Surge

Ticker: HBIA · Form: 10-Q/A · Filed: Nov 14, 2025 · CIK: 732417

Sentiment: mixed

Topics: Regional Banking, 10-Q/A Amendment, Credit Loss Expense, Net Interest Income, Financial Performance, Internal Controls, Asset Quality

Related Tickers: HBIA

TL;DR

**HBIA's amended 10-Q shows solid net income growth, but the massive jump in credit loss expense is a red flag for asset quality that investors can't ignore.**

AI Summary

Hills Bancorporation (HBIA) filed an amended 10-Q/A for the period ended September 30, 2025, primarily to correct an inadvertent upload of a draft version of its original 10-Q and to update its internal control conclusions. The company reported a net income of $12.905 million for the three months ended September 30, 2025, an increase from $12.170 million in the same period of 2024. For the nine months ended September 30, 2025, net income rose to $45.990 million from $36.582 million year-over-year. Total assets increased to $4.653 billion as of September 30, 2025, from $4.588 billion at December 31, 2024. Net interest income significantly improved to $38.510 million for the quarter, up from $29.428 million, driven by higher interest income from loans and investment securities. However, credit loss expense surged to $5.975 million for the quarter, compared to $2.310 million in the prior year, and a substantial $10.982 million for the nine months, up from $2.622 million. The company also recorded a $4.294 million loss on the sale of investment securities for both the three and nine months ended September 30, 2025, which was not present in the prior year. Total liabilities increased to $4.069 billion from $4.047 billion, while total stockholders' equity grew to $584.376 million from $540.944 million.

Why It Matters

This amended filing provides the definitive financial picture for Hills Bancorporation, correcting an earlier error and offering clarity to investors. The significant increase in net interest income, up to $38.510 million for the quarter, suggests strong core banking performance, which is crucial for investor confidence in a competitive regional banking landscape. However, the sharp rise in credit loss expense to $5.975 million for the quarter warrants close attention, as it could signal deteriorating asset quality or a more conservative lending outlook, potentially impacting future profitability and competitive positioning against peers. The internal control weakness identified and subsequently addressed is also a key factor for regulators and investors assessing operational integrity.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant increase in credit loss expense, which jumped from $2.310 million in Q3 2024 to $5.975 million in Q3 2025, and from $2.622 million to $10.982 million for the nine-month period. This substantial rise suggests potential deterioration in loan portfolio quality or a more cautious economic outlook, directly impacting profitability. Additionally, the initial filing error and subsequent amendment highlight a weakness in internal controls over financial reporting, although the company states it has implemented new procedures.

Analyst Insight

Investors should scrutinize the drivers behind the increased credit loss expense, specifically looking for details on non-performing loans or changes in economic forecasts in the full report. While net income growth is positive, the internal control lapse, though addressed, warrants monitoring for future compliance. Consider holding HBIA shares if the credit loss increase is tied to proactive provisioning rather than actual asset deterioration, but be cautious if it signals broader portfolio weakness.

Financial Highlights

debt To Equity
6.96
revenue
$38.510M
total Assets
$4.653B
total Debt
$4.069B
net Income
$45.990M
eps
$5.17
revenue Growth
+30.9%

Revenue Breakdown

SegmentRevenueGrowth
Net Interest Income$38.510M+30.9%

Key Numbers

Key Players & Entities

FAQ

Why did Hills Bancorporation file an amended 10-Q/A?

Hills Bancorporation filed an amended 10-Q/A because it inadvertently uploaded an earlier draft version of its Quarterly Report on Form 10-Q for the period ended September 30, 2025, and its independent registered public accounting firm had not completed its review at the time of the original filing on November 10, 2025.

What was Hills Bancorporation's net income for the nine months ended September 30, 2025?

Hills Bancorporation reported a net income of $45.990 million for the nine months ended September 30, 2025, which is an increase from $36.582 million for the same period in 2024.

How did Hills Bancorporation's credit loss expense change in Q3 2025?

Hills Bancorporation's credit loss expense significantly increased to $5.975 million for the three months ended September 30, 2025, compared to $2.310 million for the same period in 2024.

What was the impact of investment securities sales on Hills Bancorporation's income?

Hills Bancorporation recorded a loss on the sale of investment securities of $4.294 million for both the three and nine months ended September 30, 2025. There was no such loss reported in the prior year periods.

What is Hills Bancorporation's total assets as of September 30, 2025?

As of September 30, 2025, Hills Bancorporation's total assets were $4.653 billion, an increase from $4.588 billion at December 31, 2024.

What changes did Hills Bancorporation make to its internal controls?

Following the filing error, Hills Bancorporation implemented a new internal control procedure to verify that its independent registered public accounting firm has completed its review prior to filing a Quarterly Report on Form 10-Q. They also amended Part I, Item 4 (Controls and Procedures) to update conclusions regarding the ineffectiveness of disclosure controls and internal control over financial reporting as of September 30, 2025.

How many shares of common stock did Hills Bancorporation have outstanding?

As of October 31, 2025, Hills Bancorporation had 8,795,437 shares of common stock outstanding.

Did Hills Bancorporation's net interest income improve in Q3 2025?

Yes, Hills Bancorporation's net interest income improved to $38.510 million for the three months ended September 30, 2025, up from $29.428 million in the same period of 2024.

What was the basic earnings per share for Hills Bancorporation for the nine months ended September 30, 2025?

The basic earnings per share for Hills Bancorporation was $5.17 for the nine months ended September 30, 2025, an increase from $4.03 for the same period in 2024.

What is the primary business segment of Hills Bancorporation?

Hills Bancorporation operates as one business segment, a commercial bank. While its loan activity is diversified, its credit is concentrated in real estate loans.

Risk Factors

Industry Context

Hills Bancorporation operates as a commercial bank within a competitive financial services landscape. The industry is characterized by evolving interest rate environments, increasing regulatory scrutiny, and a growing emphasis on digital services. Banks are navigating challenges related to credit risk management, particularly in sectors like commercial real estate, while seeking to optimize net interest margins through effective balance sheet management.

Regulatory Implications

The amended filing highlights the importance of accurate and timely financial reporting. Companies must maintain robust internal controls to prevent errors and ensure compliance with SEC regulations. Any misstatements or control deficiencies can lead to increased regulatory scrutiny and potential penalties.

What Investors Should Do

  1. Monitor credit loss trends closely.
  2. Analyze the impact of investment security sales.
  3. Evaluate the sustainability of net interest income growth.
  4. Assess the company's risk management practices.

Key Dates

Glossary

Available-for-sale (AFS) securities
Debt securities that are not classified as trading or held to maturity. They are reported at fair value, with unrealized gains and losses included in a separate component of stockholders' equity. (The company had no trading or held-to-maturity securities, and a loss on the sale of AFS securities impacted recent results.)
Allowance for credit losses
An estimate of the amount of uncollectible loans and other credit exposures within a company's portfolio. (This account saw a significant increase in the period, indicating management's expectation of higher loan defaults.)
Contract asset/liability
Balances arising from the timing difference between performance obligations and customer payments under revenue recognition standards. (The company reported no significant contract balances, simplifying revenue recognition analysis.)
Tax credit real estate
Investments in affordable housing projects that provide tax credits to the investor. (Represents a specific type of investment held by the company, with ongoing evaluation for impairment.)

Year-Over-Year Comparison

Compared to the prior year, Hills Bancorporation has demonstrated strong revenue growth, with net interest income for the quarter increasing by 30.9% to $38.510 million. Net income also saw a healthy rise. However, this period is marked by a significant increase in credit loss expense, which surged to $10.982 million for the nine months, up from $2.622 million. Additionally, a new $4.294 million loss on the sale of investment securities was recorded, impacting non-interest income, which was not a factor in the prior year.

Filing Stats: 4,776 words · 19 min read · ~16 pages · Grade level 20 · Accepted 2025-11-14 17:03:09

Filing Documents

Financial Statements

Item 1. Financial Statements Consolidated balance sheets, September 30, 2025 (unaudited) and December 31, 2024 4 Consolidated statements of income (unaudited) for three and nine months ended September 30, 2025 and 2024 5 Consolidated statements of comprehensive income (unaudited) for three and nine months ended September 30, 2025 and 2024 6 Consolidated statements of stockholders' equity (unaudited) for three and nine months ended September 30, 2025 and 2024 8 Consolidated statements of cash flows (unaudited) for nine months ended September 30, 2025 and 2024 9

Notes to consolidated financial statements (condensed)

Notes to consolidated financial statements (condensed) 11

Management Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 52

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 67

Controls and Procedures

Item 4. Controls and Procedures 68 Part II OTHER INFORMATION

Legal proceedings

Item 1. Legal proceedings 68

Risk factors

Item 1A. Risk factors 68

Unregistered sales of equity securities and use of proceeds

Item 2. Unregistered sales of equity securities and use of proceeds 70

Defaults upon senior securities

Item 3. Defaults upon senior securities 71

Mine safety disclosures

Item 4. Mine safety disclosures 71

Other information

Item 5. Other information 71

Exhibits

Item 6. Exhibits 72

Signatures

Signatures 73 Page 3 Index HILLS BANCORPORATION CONSOLIDATED BALANCE SHEETS (Amounts In Thousands, Except Share Amounts) September 30, 2025 December 31, 2024 ASSETS (Unaudited) Cash and cash equivalents $ 47,197 $ 123,399 Investment securities available for sale at fair value (amortized cost September 30, 2025 $ 974,824 ; December 31, 2024 $ 979,855 ) 962,763 944,136 Stock of Federal Home Loan Bank 32,698 28,024 Loans held for sale 3,618 3,971 Loans, net of allowance for credit losses September 30, 2025 $ 59,097 ; December 31, 2024 $ 50,940 3,497,209 3,387,521 Property and equipment, net 35,942 35,868 Tax credit real estate investments 9,704 8,854 Accrued interest receivable 25,258 21,403 Deferred income taxes, net 24,998 21,132 Goodwill 2,500 2,500 Other assets 11,581 11,434 Total Assets $ 4,653,468 $ 4,588,242 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Noninterest-bearing deposits $ 578,133 $ 581,043 Interest-bearing deposits 2,800,134 2,765,090 Total deposits $ 3,378,267 $ 3,346,133 Other short-term borrowings, including Bank Term Funding Program and federal funds purchased 588,740 546,636 Federal Home Loan Bank borrowings 76,583 127,050 Accrued interest payable 3,658 9,912 Allowance for credit losses on off-balance sheet credit exposures 3,849 2,900 Other liabilities 17,995 14,667 Total Liabilities $ 4,069,092 $ 4,047,298 Redeemable Common Stock Held by Employee Stock Ownership Plan (ESOP) $ 53,147 $ 48,257 STOCKHOLDERS' EQUITY Common stock, no par value; authorized 20,000,000 shares; issued September 30, 2025 10,340,961 shares; December 31, 2024 10,346,920 shares $ — $ — Paid in capital 65,114 64,644 Retained earnings 614,556 578,882 Accumulated other comprehensive loss ( 9,195 ) ( 27,300 ) Treasury stock at cost (September 30, 2025 1,513,262 shares; December 31, 2024 1,377,498 shares) ( 86,099 ) ( 75,282 ) Total Stockholders' Equity $ 584,376 $ 540,944 Less maximum cash obligation related to ESOP shares 5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. While the chief operating decision-makers monitor the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis. Although the loan activity of the Bank is diversified with commercial and agricultural loans, real estate loans, automobile, installment and other consumer loans, the Bank's credit is concentrated in real estate loans. Accordingly, the management of the Company considers that it operates as one business segment, a commercial bank. Operating results for the nine month period ended September 30, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025. 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, 2024 filed with the Securities Exchange Commission on March 14, 2025. The consolidated balance sheet as of December 31, 2024, 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. Accounting Estimates: The preparation of consolidated financial statements in confor

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) 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 September 30, 2025 and December 31, 2024, 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 o

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited) Available-for-sale debt securities and the allowance for credit losses on available-for-sale debt securities : Available-for-sale ("AFS") 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 September 30, 2025 or 2024. Fair value measurement is based upon quoted mark

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