John Phelan

About John W. Phelan

John W. Phelan, age 70, has served as a Director of Hills Bancorporation and Hills Bank & Trust Company since 2007. He owns Phelan Distributing LLC, a wholesale wine distributor in Cedar Rapids, IA, and is a past president and long‑term board member of the State of Iowa Broadcasters Association; the company highlights his deep Cedar Rapids network as valuable to market expansion. Independence: the board classifies all non‑employee directors as independent under NASDAQ rules except two named individuals (Hodge) and management (Seegmiller, Shileny), which implies Phelan is independent. Attendance: in 2024 all directors attended at least 75% of board and committee meetings and attended the annual meeting.

Past Roles

External Roles

Board Governance

• Current committees: Loan Committee; Compensation and Incentive Stock Committee. The Governance & Nominating Committee consists of all twelve non‑employee directors (i.e., all except Seegmiller and Shileny), so Phelan serves there by virtue of being a non‑employee director. Not on Audit (Peck, Schmitt, Wever) or Risk (Donovan, Frey, Sparks).
• Independence: Independent under NASDAQ Rule 5605(a)(2) (all non‑employee directors independent except Hodge; management not independent).
• Engagement/attendance: 2024—Company board held 1 annual, 1 special, 12 regular meetings; all directors attended ≥75% of board and committee meetings; all directors attended the 2024 annual shareholders’ meeting. Bank board met monthly with similar attendance ≥75% at board and appointed committees.
• Board leadership: No designated lead independent director at the holding company; the bank’s board chair is a non‑employee director; the Company’s CEO (Shileny) acts as de facto chair for company board meetings.

Fixed Compensation

Director cash fees are paid by the Bank (non‑employee directors). Context and Phelan’s 2024 actual:

Fee schedule reference (Bank pays director fees; Company pays none):

Director deferral plan: non‑employee directors may defer up to 50% of cash fees into stock‑value “units” (book‑entry, unsecured), adjusted for dividends and share price; paid in five installments at separation/age 72/change in control.

Performance Compensation

Directors generally do not receive annual equity retainers; Phelan had no 2024 stock or option grants. Two new directors received options in 2024; Phelan is not listed among option holders.

Other Directorships & Interlocks

Expertise & Qualifications

• Community market connectivity in Cedar Rapids/Marion; cited as “invaluable” to market expansion.
• Private company owner/operator experience (wholesale distribution).
• Prior industry association leadership and board service (State of Iowa Broadcasters Association).
• Governance roles across Loan and Compensation & Incentive Stock Committees; participates in Governance & Nominating as a non‑employee director.

Equity Ownership

Governance Assessment

• Positives

  • Independent director; serves on key oversight committees (Loan; Compensation & Incentive Stock), supporting credit and pay governance.
  • Attendance/engagement: all directors met ≥75% attendance in 2024; attended annual meeting.
  • No other public company boards (lower overboarding/interlock risk).
  • No Phelan‑specific related‑party transactions disclosed; insider lending subject to Regulation O on market terms and board approval thresholds.
  • Shareholder support: Say‑on‑Pay passed with 98% approval in 2024, indicating broad investor confidence in compensation governance.

• Watch‑items / potential red flags

  • Alignment: Phelan’s 2024 director pay was all cash with no equity grant; the company has no director ownership/retention policy—reduced structural alignment versus best practices.
  • Hedging: the company has not adopted hedging policies for directors/employees (some investors view absence of anti‑hedging as misaligned).
  • Board leadership at holding company lacks a designated lead independent director; CEO acts as de facto chair (mitigated by non‑employee chair at the bank).

• Context on Compensation Committee governance

  • Compensation & Incentive Stock Committee is comprised of all non‑employee directors (excluding management); the board has not used outside pay consultants historically, though the option exists.

• Related‑party context (not Phelan): A fellow director (Hodge) is not independent due to disclosed real‑estate relationships (lease and construction), reinforcing the importance of independent voices like Phelan on comp/loan governance.

Appendices

Director Compensation (Phelan) – 2024 Detail

Committee Memberships and Roles (as disclosed)