HILLS BANCORPORATION (HBIA) stock intrinsic value fair value estimate & owner earnings analysis

Hills Bancorporation is the holding company for Hills Bank and Trust, a full-service community bank operating entirely within eastern Iowa - Hills, Iowa City, Coralville, North Liberty, Cedar Rapids, Marion and surrounding towns. It gathers local deposits and lends them out, with about 86% of its $3.6 billion loan book secured by real estate, alongside trust, farm-management and investment-advisory fee businesses. Adjusted for the two-for-one split completed in mid-2026, earnings per share rose from roughly $1.52 in 2015 to $3.41 in 2025, about 8% a year, with one clear setback in 2023 when rising deposit costs squeezed the lending margin. Profitability has since rebounded sharply: the margin widened from 2.78% to 3.45% in 2025 and improved again in the first half of 2026, when the bank earned $2.74 per share in six months - helped partly by a one-off release of loan-loss reserves that will not repeat. The downside case assumes that margin gain largely reverses and a commercial-real-estate and apartment lending cycle lifts loan losses, leaving earnings near $3.00 and barely growing, worth about $29 a share. The base case normalizes earnings near $3.90 with roughly 4% annual growth, worth about $56. The upside case assumes today's wider margin mostly holds with growth near 6.5%, worth about $101. Capital is unusually strong at 12.9%, operating costs are tightly controlled, and the dividend has doubled over eleven years, which supports the downside case. But the shares are not listed on any exchange and trade rarely, and the recent earnings surge is only two quarters old, so a wide margin of safety is warranted: a margin-of-safety price of $31, roughly 45% below the base case and close to book value. All per-share figures are stated after the 2026 two-for-one stock split.