10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended December 31, 2010

OR

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

For the transition period from ___________________ to ______________________

Commission File Number: 0-50820

First Clover Leaf Financial Corp.

(Exact Name of Registrant as Specified in its Charter)

Maryland	20-4797391
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

6814 Goshen Road, Edwardsville, Illinois	62025
(Address of Principal Executive Offices)	(Zip Code)

(618) 656-6122

(Issuer’s Telephone Number including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

	Name of Each Exchange
Title of Each Class	On Which Registered
Common Stock, par value $0.10 per share	The NASDAQ Stock Market, LLC

Securities Registered Pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES £ NO T.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

YES £ NO T.

Indicate by check mark 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 reports), and (2) has been subject to such requirements for the past 90 days.

(1) YES T NO £

(2) YES T NO £

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the Registrant was required to submit and post such files). YES £ NO £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. T

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	£	Accelerated filer	£
Non-accelerated filer	£	Smaller reporting company	T
(Do not check if smaller reporting company)

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

YES £ NO T

As of June 30, 2010 the aggregate market value of the voting and non-voting common stock held by non-affiliates of the Registrant, computed by reference to the closing price of the common stock as of June 30, 2010 ($6.51 per share) was $40.6 million.

As of March 28, 2011, there were approximately 7,882,500 shares issued and outstanding of the Registrant’s Common Stock, par value $0.10 per share.

DOCUMENTS INCORPORATED BY REFERENCE

1. Proxy Statement for the 2011 Annual Meeting of Stockholders (Parts II and III).

2. Annual Report to Stockholders for the year ended December 31, 2010 (Part II).

2

PART I

ITEM 1.             BUSINESS

Forward-Looking Statements

This Annual Report contains certain “forward-looking statements” which may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and local economic conditions, changes in interest rates, deposit flows, demand for mortgage, commercial and other loans, real estate values, competition, changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing products and services. These risks and uncertainties, as well as the Risk Factors set forth in Item 1A below, should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We do not undertake any obligation to update any forward-looking statement in the future, or to reflect circumstances and events that occur after the date on which the forward-looking statement was made.

General

First Clover Leaf Financial Corp. (“First Clover Leaf”) is a Maryland corporation that was incorporated in March 2006 and was formed by our predecessor company, First Federal Financial Services, Inc., in connection with the “second-step” conversion of First Federal Financial Services, MHC and the simultaneous acquisition of Clover Leaf Financial Corp. and its wholly owned savings bank subsidiary, Clover Leaf Bank, a former Illinois bank headquartered in Edwardsville, Illinois. The second-step conversion and stock offering and the simultaneous acquisition of Clover Leaf Financial Corp. were consummated in July 2006. As a result of these transactions, Clover Leaf Financial Corp. was merged with and into First Clover Leaf and Clover Leaf Bank was merged with and into our wholly owned subsidiary, First Federal Savings and Loan Association of Edwardsville, which was renamed First Clover Leaf Bank.

In October 2008 we completed our acquisition of Partners Financial Holdings Inc. (“Partners”), the holding company of Partners Bank (“Partners Bank”), an Illinois state bank located in Glen Carbon, Illinois. In the acquisition, Partners was merged with and into First Clover Leaf with First Clover Leaf being the surviving corporation in the merger, and Partners Bank was merged with and into First Clover Leaf Bank, with First Clover Leaf Bank as the surviving institution.

Our principal asset is our ownership of 100% of the outstanding common stock of First Clover Leaf Bank, a federal savings bank.

At December 31, 2010, we had total consolidated assets of $575.0 million, net loans of $387.6 million, total deposits of $447.5 million and stockholders’ equity of $77.3 million. We had net income of $3.8 million for the year ended December 31, 2010.

Our headquarters are located at 6814 Goshen Road, Edwardsville, Illinois 62025, and our telephone number is (618) 656-6122.

Our website address is www.firstcloverleafbank.com. Information on our website is not and should not be considered a part of this Annual Report on Form 10-K. Our website contains a direct link to

3

our filings with the Securities and Exchange Commission, including copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these filings, if any. Copies may also be obtained, without charge, by written request to Secretary, 6814 Goshen Road, Edwardsville, Illinois 62025.

First Clover Leaf Bank

General

We conduct our business through our four branch offices located in Edwardsville and Wood River, Illinois. Our principal business consists of attracting retail deposits from the general public in the areas surrounding our office locations and investing those deposits, together with funds generated from operations, primarily in one- to four-family residential real estate loans, multi-family real estate loans, commercial real estate loans, construction and land loans, commercial business loans and consumer loans, and in investment securities. Our revenues are derived principally from interest on loans and securities. Our primary sources of funds are deposits and principal and interest payments on loans and securities.

Competition

We face intense competition within our market area both in making loans and attracting deposits. The City of Edwardsville and the surrounding area have a high concentration of financial institutions, including large commercial banks, community banks and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies. Some of our competitors offer products and services that we currently do not offer, such as trust services. Based on Federal Deposit Insurance Corporation data as of June 30, 2010 (the latest date for which information is available), our market share of deposits was 10.1% of all deposits in Madison County making us the fourth largest institution out of 26 institutions located in Madison County as of that date. Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our role as a community bank.

Market Area

We operate in a primarily suburbanmarket area that has a stable population and household base. The 2010 U.S. Census Report indicates that the population of Madison County increased 0.4% to 269,282, from 2005 until 2010 while the population of the City of Edwardsville increased 7.6% to 24,293. During the same period, the number of households in Madison County and in the City of Edwardsville increased 1.0% and 7.7%, respectively. The latest information available for 2009 indicates that the median household income for Madison County was $50,628. This compares to a median household income of $53,974 and $50,221 for the state of Illinois and the United States, respectively.

Our primary lending area is concentrated in Madison County and the southern portion of Macoupin County, Illinois. The City of Edwardsville is the County Seat of Madison County and is considered a “bedroom community” for St. Louis, Missouri, which is approximately 20 miles southwest of Edwardsville. The economy of our market area is characterized by a large number of small retail establishments and small industry. Additionally, major employers in our immediate market area include Southern Illinois University-Edwardsville, ConocoPhillips, the local school district and the Madison County government. Our customer base is comprised primarily of middle-income families. We believe that our local market has not experienced as severe of a downturn as certain other areas of the country, such as coastal states. While, in general, property values in our market area have fallen, homes continue to sell, but, in many cases, at a slower pace. As indicated above, the local area is not heavily reliant on any one industry.

4

Lending Activities

Our principal lending activity includes the origination of first mortgage loans for the purchase or refinancing of one- to four-family residential property, the origination of multi-family and commercial real estate loans, construction and land loans, commercial business loans, as well as home equity loans.

One- to four-family residential real estate mortgage loans represented $99.2 million, or 24.6%, of our loan portfolio at December 31, 2010, and multi-family loans represented $26.5 million, or 6.6% of our loan portfolio at December 31, 2010. Commercial real estate loans represented $160.8 million, or 39.9% of our loan portfolio at December 31, 2010. We also offer construction and land loans secured by single-family properties and residential subdivisions. Construction and land loans represented $53.6 million, or 13.3%, of our loan portfolio at December 31, 2010. We offer commercial business loans, and these loans represented $51.7 million, or 12.8% of our loan portfolio, at December 31, 2010. We originate consumer loans, including home equity loans and automobile loans, which totaled $10.9 million, or 2.8% of our loan portfolio at December 31, 2010.

In an effort to reduce the risk to our net income from changes in market interest rates, in recent years we have emphasized the origination of commercial real estate and commercial business loans. Compared to our residential mortgage loans, commercial real estate and commercial business loans generally have higher interest rates and are more sensitive to changes in market interest rates because they often have shorter terms to maturity, and therefore, the interest rates adjust more frequently. Our acquisition of Partners Bank further increased our commercial real estate and commercial business loans, as those types of loans represented the primary lending focus of Partners Bank.

5

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

	At December 31,
	2010						2009						2008						2007						2006
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real Estate Loans:
One- to four-family residential loans(1)	$	99,187			24.6	%	$	98,080			23.4	%	$	110,925			25.3	%	$	112,764			39.2	%	$	120,355			48.5	%
Multi-family		26,543			6.6			20,947			5.0			18,150			4.2			13,931			4.8			8,895			3.6
Commercial		160,799			39.9			179,923			42.8			168,432			38.4			97,810			34.0			68,577			27.7
Construction and land		53,647			13.3			45,448			10.8			52,338			11.9			20,776			7.2			17,181			6.9
Total real estate loans		340,176			84.4			344,398			82.0			349,845			79.8			245,281			85.2			215,008			86.7
Commercial business		51,738			12.8			63,135			15.0			78,160			17.8			34,783			12.1			25,907			10.4
Consumer Loans:
Automobile		1,079			0.3			1,383			0.3			1,318			0.3			1,355			0.5			2,028			0.8
Home equity		9,170			2.3			9,871			2.4			7,145			1.7			5,119			1.8			3,364			1.4
Other		666			0.2			1,223			0.3			1,807			0.4			1,296			0.5			1,733			0.7
Total consumer loans		10,915			2.8			12,477			3.0			10,270			2.4			7,770			2.7			7,125			2.9
Total loans		402,829			100.0	%		420,010			100.0	%		438,275			100.0	%		287,834			100.0	%		248,040			100.0	%
Less undisbursed portion of construction loans		(9,590	)					(1,773	)					(3,402	)					(860	)					(1,257	)
Less deferred loan origination costs (fees), net		57						(21	)					(59	)					(157	)					(48	)
Less allowance for loan losses		(5,728	)					(6,317	)					(3,895	)					(1,898	)					(1,710	)
Total loans, net	$	387,568					$	411,899					$	430,919					$	284,919					$	245,025

___________________

(1) At December 31, 2009, 2008, and 2006 there were $1.8 million, $240,000, and $1.0 million respectively, in loans held for sale. At December 31, 2010 and 2007 there were no loans held for sale.

6

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2010.

	One- to Four-Family					Multi-Family					Commercial Real Estate					Construction and Land(2)
	Amount		Weighted Average Yield			Amount		Weighted Average Yield			Amount		Weighted Average Yield			Amount		Weighted Average Yield
	(Dollars in thousands)
Due During the Years Ending December 31,
2011 (1)	$	4,462		5.54	%	$	6,320		6.22	%	$	33,880		6.03	%	$	14,353		5.52	%
2012 to 2015		24,441		4.92			16,945		5.73			113,729		6.02			38,923		4.18
2016 and beyond		70,284		4.96			3,278		5.26			13,190		5.79			371		6.02
Total	$	99,187		4.99	%	$	26,543		5.79	%	$	160,799		6.00	%	$	53,647		4.55	%

	Commercial Business					Consumer Loans					Total
	Amount		Weighted Average Yield			Amount		Weighted Average Yield			Amount		Weighted Average Yield
	(Dollars in thousands)
Due During the Years Ending December 31,
2011 (1)	$	26,291		5.37	%	$	3,913		5.47	%	$	89,219		5.72	%
2012 to 2015		20,815		6.23			4,826		5.92			219,679		5.57
2016 and beyond		4,632		5.10			2,176		6.64			93,931		5.14
Total	$	51,738		5.69	%	$	10,915		5.90	%	$	402,829		5.50	%

___________________

(1) Includes demand loans, loans having no stated repayment schedule or maturity, overdraft loans and loans in process of renewal.

(2) Includes land acquisition loans.

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at December 31, 2010 that are contractually due after December 31, 2011.

	Due After December 31, 2011
	Fixed		Adjustable		Total
	(In thousands)
One- to four-family residential loans	$	81,962	$	12,763	$	94,725
Multi-family		17,048		3,175		20,223
Commercial real estate		113,114		13,805		126,919
Construction and land		36,151		3,143		39,294
Total real estate loans		248,275		32,886		281,161
Commercial business		21,585		3,862		25,447
Consumer loans		6,735		267		7,002
Total loans	$	276,595	$	37,015	$	313,610

7

One- to Four-Family Residential Real Estate Loans. As of December 31, 2010, one- to four-family residential loans totaled $99.2 million, or 24.6% of our total loan portfolio. These loans are predominately collateralized by properties located in our market area. Virtually all of our residential real estate loans have fixed rates of interest primarily because our customers prefer fixed-rate mortgage loans in the relatively low interest rate environment that currently exists. We generally sell most of the conforming, fixed-rate loans that we originate, but we generally retain the servicing rights on these loans. At December 31, 2010, we were servicing $68.3 million in loans for others. In 2010, we originated $20.3 million and sold $22.6 million in single family residential mortgage loans to Fannie Mae.

We currently offer one- to four-family residential mortgage loans with terms of five, seven, 10, 15, 20, 30 and 40 years. Our five and seven-year loans provide for principal and interest amortization of up to 30 years with a balloon payment at the end of the five or seven-year term. All of our loans with terms of 10 years or greater amortize over the term of the loan.

For one- to four-family residential real estate loans, we may lend up to 80% of the property’s appraised value, or up to 100% of the property’s appraised value if the borrower obtains private mortgage insurance. We require title insurance on all of our one- to four-family mortgage loans, and we also require that fire and extended coverage casualty insurance (and, if appropriate, flood insurance) be maintained in an amount equal to at least the lesser of the loan balance or the replacement cost of the improvements on the property. We require a property appraisal for all mortgage loans that are underwritten to comply with secondary market standards.Appraisals are conducted by independent appraisers from a list approved by our board of directors. Our residential real estate loans include “due-on-sale” clauses.

As a result of our conservative underwriting standards, we do not originate, sell, or place any loans in our loan portfolio that are considered sub-prime or Alt-A.

Multi-Family Real Estate Loans. Loans secured by multi-family real estate totaled $26.5 million, or 6.6%, of our total loan portfolio at December 31, 2010. Multi-family real estate loans generally are secured by apartment buildings and rental properties. All of our multi-family real estate loans are secured by properties located within our lending area. At December 31, 2010, our largest multi-family real estate loan had a principal balance of $2.8 million and was secured by apartment buildings. At December 31, 2010 the loan was performing in accordance with its repayment terms. Multi-family real estate loans generally are offered with interest rates that adjust after one, three or five years. The interest rate adjustments are tied to either a Treasury Bill Index tied to the adjustment period, or to a Cost of Funds Index.

We consider a number of factors in originating multi-family real estate loans. We evaluate the qualifications and financial condition of the borrower (including credit history), profitability and expertise, as well as the value and condition of the mortgaged property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to debt service), and the ratio of the loan amount to the appraised value of the mortgaged property. Multi-family real estate loans are originated in amounts up to 80% of the lower of the sale price or the appraised value of the mortgaged property securing the loan. All multi-family real estate loans over $250,000 are appraised by outside independent appraisers approved by the board of directors. All multi-family real estate loans below $250,000 must either have an independent appraisal or an opinion of value, which, generally, is the property’s tax bill. Borrowers are required to sign multi-family notes in their individual (not corporate) capacity.

8

Loans secured by multi-family real estate generally involve a greater degree of credit risk than one- to four-family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family real estate typically depends upon the successful operation of the real estate property securing the loan. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Commercial Real Estate Loans. Loans secured by commercial real estate totaled $160.8 million, or 39.9% of our total loan portfolio as of December 31, 2010. Our commercial real estate loans are secured predominately by office buildings, and to a lesser extent warehouse properties, and more specialized properties such as churches. We originate commercial real estate loans with a typical term of five years with balloon payments. These loans generally amortize over 15 to 20 years. We offer both adjustable and fixed rates of interest on commercial real estate loans, with the interest rate for adjustable rate loans tied to the prime interest rate. Our largest commercial real estate loan at December 31, 2010 had a principal balance of $4.6 million and was collateralized primarily by the land and building of a car dealership. This loan was performing in accordance with its repayment terms as of December 31, 2010.

Commercial real estate loans generally have higher interest rates than the interest rates on residential mortgage loans, and are more sensitive to changes in market interest rates because they often have shorter terms to maturity, and therefore, the interest rates adjust more frequently. Commercial real estate loans often have significant additional risk compared to one- to four-family residential mortgage loans, as they typically involve large loan balances concentrated with single borrowers or groups of related borrowers. In addition, the repayment of commercial real estate loans typically depends on the successful operation of the related real estate project, and thus may be subject to a greater extent than residential mortgage loans to adverse conditions in the real estate market or in the economy generally.

In our underwriting of commercial real estate loans, we may lend up to 80% of the property’s appraised value in the case of loans secured by multi-family real estate, and up to 75% of the property’s appraised value on loans secured by other commercial properties. We require independent appraisals for all commercial real estate loans in excess of $250,000. For loans that do not exceed this amount, we require that one of our officers prepare a memorandum of value detailing comparable values based upon tax bills, prior appraisals, and income information on revenue-producing property. Decisions to lend are based on the economic viability of the property and the creditworthiness of the borrower. Creditworthiness is determined by considering the character, experience, management and financial strength of the borrower, and the ability of the property to generate adequate funds to cover both operating expenses and debt service. In evaluating whether to make a commercial real estate loan, we place primary emphasis on the ratio of net cash flow to debt service on the property, and we generally require a ratio of cash flow to debt service of at least 120%, computed after deduction for a vacancy factor and property expenses we deem appropriate.

We require title insurance on all of our commercial real estate loans, and we also require that fire and extended coverage casualty insurance (and, if appropriate, flood insurance) be maintained. In addition, we generally require that the borrower personally guarantee the repayment of the loan.

Construction and Land Loans. As of December 31, 2010, construction and land loans totaled $53.6 million, or 13.3%, of our total loan portfolio. This portfolio consists of construction/speculative loans and construction/permanent loans.

Construction/speculative loans are made to area homebuilders who do not have, at the time the loan is originated, a signed contract with a homebuyer who has a commitment for permanent financing with either First Clover Leaf Bank or another lender. The homebuyer may enter into a purchase contract

9

either during or after the construction period. These loans have the risk that the builder will have to make interest and principal payments on the loan, and finance real estate taxes and other holding costs of the completed home for a significant time after the completion of construction. Funds are disbursed in phases as construction is completed. All construction/speculative loans require that the builder-borrower personally guarantee the full repayment of the principal and interest on the loan and make interest payments during the construction phase. These loans are generally originated for a term of 12 months, with interest rates that are tied to the prime lending rate. First Clover Leaf Bank recognizes the relative increased risk element for these types of loans, particularly in the current real estate market, and therefore generally observes a loan-to-value ratio of no more than 75% of the lower of cost or the estimated value of the completed property. In addition, we generally limit our construction/speculative loans to one property per borrower at any given time, and the largest number of construction/speculative loans we have originated to a single borrower at any given time was for fourproperties. At December 31, 2010, the largest outstanding concentration of credit to one builder consisted of a mixed use development loan with an aggregate balance of $6.6 million, which was performing in accordance with its repayment terms at that date.

Construction/permanent loans are made to either a homebuilder or a homeowner who, at the time of construction, has a signed contract together with a commitment for permanent financing from First Clover Leaf Bank or another lender for the finished home. The construction phase of a loan generally lasts up to six months, and the interest rate charged generally corresponds to the rate of the committed permanent loan, with loan-to-value ratios of up to 80% (or up to 100% if the borrower obtains private mortgage insurance) of the appraised estimated value of the completed property or cost, whichever is less. Following the initial six-month period, construction/permanent loans convert to permanent loans, regardless of whether the construction phase has been completed. At December 31, 2010 the largest single outstanding construction loan of this type had an outstanding balance of approximately $450,000. At December 31, 2010, the loan was performing in accordance with its repayment terms.

Construction lending generally involves a greater degree of risk than our other one- to four-family mortgage lending. The repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of the home construction. Construction delays or the financial impairment of the builder may further impair the borrower’s ability to repay the loan.

Our procedures for underwriting construction/speculative loans include an assessment of the borrower’s credit history and the borrower’s ability to meet other existing debt obligations, as well as payment of principal and interest on the proposed loan. We use the same underwriting standards and procedures for construction/permanent lending as we do for one- to four-family residential real estate lending.

We also originate land development loans to area homebuilders that are secured by individual unimproved or improved residential building lots. Land loans are generally offered with variable prime-based interest rates with terms of up to two years. The general loan-to-value ratio is 75% of the lower of cost or appraised value of the property.

Commercial Business Loans. We offer commercial business loans to existing and new customers in our market area. Some of these loans are secured in part by additional real estate collateral. We make various types of secured and unsecured commercial business loans for the purpose of financing equipment acquisition, expansion, working capital and other general business purposes. The terms of these loans are generally for less than five years. Equipment loans usually involve a one-time disbursement of funds, with repayment over the term of the loan, while operating lines of credit involve multiple disbursements and revolving notes that can be renewed annually. The loans are either negotiated on a fixed-rate basis or carry variable interest rates indexed to the prime rate. At December 31, 2010, we had commercial business loans outstanding with an aggregate balance of $51.7 million, or 12.8%, of the total loan portfolio. As of December 31, 2010, our largest commercial business loan relationship consisted of a $8.5 million line of credit with no outstanding balance, and a term loan of $4.2 million,

10

both of which were secured primarily by accounts receivable and corporate assets, and were performing in accordance with their terms. An additional $5.1 million of this relationship was participated to another financial institution.

We have continued our emphasis on commercial business lending. These loans tend to have higher rates of interest than residential mortgage loans, and are more sensitive to changes in market interest rates because they often have shorter terms to maturity, and therefore, the interest rates adjust more frequently. In addition, commercial business lending gives us greater access to commercial borrowers that may open transactional checking accounts with First Clover Leaf Bank.

Commercial credit decisions are based upon a complete credit review of the borrower. A determination is made as to the borrower’s ability to repay in accordance with the proposed terms as well as an overall assessment of the credit risks involved. Personal guarantees of borrowers are generally required. In evaluating a commercial business loan, we consider debt service capabilities, actual and projected cash flows and the borrower’s inherent industry risks. Credit agency reports of the borrower’s credit history as well as bank checks and trade investigations supplement the analysis of the borrower’s creditworthiness. Collateral supporting a secured transaction is also analyzed to determine its marketability and liquidity. Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business.

Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. Our commercial business loans are originated primarily based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Most often, this collateral consists of accounts receivable, inventory, equipment or real estate. Credit support provided by the borrower for most of these loans and the probability of repayment is based on the projected cash flow of the company or liquidation of the pledged collateral and enforcement of a personal guarantee, if any. As a result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing other loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

Consumer Loans. Our consumer loans consist primarily of home equity lines of credit, automobile loans and overdraft loans, loans secured by deposits and securities, and unsecured personal loans. As of December 31, 2010, consumer loans totaled $10.9 million, or 2.8%, of our total loan portfolio.

At December 31, 2010, home equity lines of credit totaled $9.2 million, or 2.3%, of total loans. Home equity lines of credit are generally made for owner-occupied homes, and are secured by first or second mortgages on residential properties. We generally offer home equity lines of credit with a maximum loan to appraised value ratio of 90% (including senior liens on the subject property). We currently offer these loans for terms of up to five years and with adjustablerates that are tied to the prime lending rate. Clover Leaf Bank previously offered these products with a maximum loan to appraised value of 85% with terms of up to 10 years, and we still retain some of these longer-term loans. To date, we are seeing minimal stress in our home equity portfolio or signs of material default risks. We do review reports periodically of the higher advanced credit lines and look at payment patterns and advance patterns in an effort to detect potential problems.

Automobile loans are generally offered with maturities of up to 60 months for new automobiles, while loans secured by used automobiles have maximum terms that vary depending on the age of the automobile. We require all borrowers to maintain collision insurance on automobiles securing loans in excess of $1,000, with First Clover Leaf Bank listed as loss payee. In those instances where the borrower fails to maintain adequate insurance coverage, we are further protected against loss through a third-party

11

policy insurance coverage. Our automobile loan portfolio totaled $1.1 million, or 0.3%, of total loans at December 31, 2010.

Consumer loans generally entail greater credit risk than residential mortgage loans, particularly in the case of loans that are unsecured or are secured by assets that tend to depreciate in value, such as automobiles. In these cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining value often does not warrant further substantial collection efforts against the borrower. Further, consumer loan collections depend on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Our procedures for underwriting consumer loans include an assessment of the borrower’s credit history and ability to meet other existing debt obligations, as well as payments of principal and interest on the proposed loans. The stability of the borrower’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. Although the borrower’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral security, if any, to the proposed loan amount. We require independent appraisals for all consumer loans in excess of $50,000 if secured by real estate. For loans that do not exceed this amount, we require that an officer prepare a memorandum of value detailing comparable values based upon tax bills for real estate loans and National Automobile Dealers Association values for automobile loans.

Loan Originations, Purchases, Sales and Servicing. Although we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon borrower demand, market interest rates, borrower preference for fixed- versus adjustable-rate loans, and the interest rates offered on each type of loan by competing lenders in our market area. This includes banks, savings institutions, credit unions, mortgage banking companies, and life insurance companies. Loan originations are derived from a number of sources, including existing or prior customers and walk-in customers.

Loan originations are adversely affected by rising interest rates, which typically result in decreased loan demand. Accordingly, the volume of our loan originations and the interest rates we can charge on loans vary from period to period. One- to four-family residential mortgage loans are generally underwritten to conform to Fannie Mae and Freddie Mac seller/servicer guidelines, and are currently originated on a fixed interest rate basis only. We generally sell most of our conforming, fixed-rate, one- to four-family loans but retain the servicing rights on loans that we originate, which means that we will continue to collect payments on the loans and supervise foreclosure proceedings, if necessary. We retain a portion of the interest paid by the borrower on the loans, generally 25 basis points, as consideration for our services. We currently service $68.3 million of loans for others. In 2010, we originated $20.3 million in single family residential mortgage loans held for sale and sold $22.6 million of such loans to Fannie Mae.

Loan Approval Procedures and Authority. Our lending activities are subject to written underwriting standards and loan origination procedures adopted by management and the board of directors. For single family, owner-occupied real estate loans, the President of First Clover Leaf Bank and the Senior Vice President – Chief Lending Officer are authorized to approve loans up to $500,000. For secured commercial real estate loans and construction and land loans, these officers are authorized to approve loans up to $750,000; for secured consumer loans, these officers may approve loans up to $250,000; and for overdrafts and unsecured credits, these officers may approve loans up to $100,000. They may approve renewals of commercial business and commercial real estate loans by a total of their combined lending limits where there has been no deterioration in either the payment pattern or financial strength of the borrower. However, the entire board of directors must approve all loans in excess of $4.0 million. In addition, a list of all preauthorized loans is presented to the board of directors’ loan committee on a monthly basis.

12

Loans to One Borrower. At December 31, 2010, the maximum amount that First Clover Leaf Bank could have loaned to any one borrower under the 15% limit of risk-based capital was approximately $9.6 million. At that date, the largest lending relationship with First Clover Leaf Bank totaled $21.5 million and consisted of two loans secured primarily by accounts receivable, real estate and corporate assets. First Clover Leaf Bank also has an agreement in place with another financial institution to participate in this loan and had participated $12.5 million to this financial institution at year end. First Clover Leaf Bank’s remaining outstanding balance on this loan at year end was $4.2 million.

Appraisal Policies. We obtain appraisals on property for all new loan originations secured by real estate. Appraisals are completed prior to the closing of the new loan. We will also request a new appraisal on a renewing loan if the credit appears to be distressed and we do not feel that we can properly assess the value from our own resources. The bank also subscribes to a service that provides access to current property listings and sales on single family residences which allows access to comparative sales prices. We will obtain a new appraisal on a commercial property when a borrower is experiencing cash flow difficulties which appear to be more than temporarily impaired and we do not feel that we have the resources necessary to properly assess the situation. In addition, if we have determined that it is necessary to foreclose on a property, we will obtain a new appraisal.

Asset Quality

Loan Delinquencies and Collection Procedures. When a borrower fails to make required payments on a loan, we take a number of steps to induce the borrower to correct the delinquency and restore the loan to a current status. We will send a borrower a reminder notice 15 days after an account becomes delinquent, and our employees are authorized to use their discretion whether direct telephone contact is required at that time. If the borrower does not remit the entire payment due by the end of the month, we try to make direct contact with the borrower to arrange a payment plan. If a satisfactory payment plan is not established within 50 days of a delinquency, we will send a demand letter to the borrower. If a satisfactory payment plan has not been arranged within 60 days following a delinquency, we may instruct our attorneys to institute foreclosure proceedings depending on the loan-to-value ratio or our relationship with the borrower. Foreclosed property is held as other real estate owned.

Our policies require that management continuously monitor the status of the loan portfolio and report to the board of directors on a monthly basis. These reports include information on delinquent loans and foreclosed real estate and our actions and plans to cure the delinquent status of the loans and to dispose of any real estate acquired through foreclosure.

The Company has experienced a decrease in our non-performing and impaired loans, and an increase in our non-performing assets. Detailed information concerning the Company’s non-performing and impaired loans is described in the paragraphs that follow. Overall, the loans that would be classified as high risk loans by the Company are very limited in number and in value. The Company does not originate subprime loans and holds a very small number and dollar value of ARM products. The Company does hold some junior lien mortgages and high loan-to-value ratio mortgages; however, they total an immaterial portion of our loan portfolio. The Company is reviewing these loans regularly and has not seen any increase in the delinquency trends for these products. Our allowance for loan loss methodology has remained consistent. As commercial loans mature and requests for renewals are processed, either a new appraisal is obtained or the Company performs an internal valuation of the collateral based on comparable sales. Additionally, the original appraisal is discounted if the Company believes it is warranted.

13

Non-Accrual Loans. All loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, there is reasonable probability of loss of principal or the collection of additional interest is deemed insufficient to warrant further accrual. Generally, we place all loans 90 days or more past due on non-accrual status. However, exceptions may occur when a loan is in process of renewal, but it has not yet been completed. In addition, we may place any loan on non-accrual status if any part of it is classified as loss or if any part has been charged-off. When a loan is placed on non-accrual status, total interest accrued and unpaid to date is reversed. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectibility of the loan. Loans are charged-off no later than 120 days following their delinquency, unless the loans are well-collateralized or in the process of collection.

As of December 31, 2010, our total non-accrual loans amounted to $12.2 million compared to $11.7 million at December 31, 2009. Details of the largest non-accrual relationships are included below.

Non-Performing and Impaired Loans and Non-Performing Assets. As of December 31, 2010, our total non-performing and impaired loans and non-performing assets were $23.5 million compared to $30.2 million at December 31, 2009.

At December 31, 2010, First Clover Leaf Bank had seven relationships classified as non-accrual with balances in excess of $500,000. The largest non-accrual relationship is a $3.8 million development credit to a subdivision with excess inventory that is selling slowly due to the economic slowdown. The credit is secured by the residential property and an updated appraisal was obtained in the first quarter of 2010. The note is currently being re-evaluated on a quarterly basis under a discounted cash flow analysis. We are currently working with the developer on a plan to increase lot sales. The second non-accrual relationship is a $1.5 million group of credits to a real estate investor, who is experiencing high vacancy rates and property repairs resulting in decreased cash flows due to the economic slowdown. A charge-off of $464,000 was recorded on this loan during the third quarter of 2010. We are working with a management company to continue leasing the properties. During the fourth quarter of 2010, we began foreclosure procedures on most of the properties. The third relationship is a $1.5 million credit to a residential real estate developer who is struggling with the economic downturn. The credit is currently secured by single family residences and some farm land. We are working with the developer on possible restructuring alternatives. Currently the collateral is sufficient to cover the outstanding balance. The fourth non-accrual relationship is a $1.2 million credit for a mobile home park. A $600,000 charge-off was recorded for this property in 2010. There was a pending contract on this property at September 30, 2010, which has since been rescinded. We began foreclosure proceedings late in the fourth quarter of 2010, and we acquired possession of this property in the first quarter of 2011. The fifth non-accrual relationship is a $900,000 credit to a real estate investor. The majority of this borrower’s property is residential real estate. The investor is experiencing cash flow difficulties due to higher vacancy rates and the need for property repairs. Currently the collateral is sufficient to cover the outstanding balance. The sixth non-accrual relationship is a $704,000 credit to a real estate investor. This relationship relates to several credits which are all related by common ownership. Most of the credits are single family residential properties, but some are related to commercial property. We have recently re-assessed the values of most of these properties. We began taking possession of several of the properties, totaling $367,000 in the fourth quarter of 2010. The seventh non-accrual relationship is a $661,000 credit to a real estate developer. The primary collateral consists of 30 vacant lots. The lots are continuing to sell in a manner that is allowing the borrower to continue to make principal payments. Two of these lots were under contract at December 31, 2010, and the sales were finalized in the first quarter of 2011.

In addition to the non-accrual loans in the previous paragraph, at December 31, 2010, our total other impaired loans amounted to $7.3 million compared to $14.8 million at December 31, 2009. There

14

are three impaired credits with balances in excess of $500,000 at December 31, 2010. The largest loan is a $3.7 million credit to a real estate investor. The majority of this borrower’s property is residential real estate. The investor is experiencing cash flow difficulties due to higher vacancy rates and the need for property repairs. Currently the collateral is sufficient to cover the outstanding balance. The second loan is a $1.6 million credit for a hotel/condominium development in a resort area. Currently the collateral is sufficient to cover the outstanding balance. The third credit is a $1.0 million credit to an investor who holds real estate and financial institution stock. The collateral for this credit is stock in a financial institution and multi-family real estate. The investor paid this credit down by $500,000 since the third quarter of 2010. Currently, the collateral is sufficient to cover the outstanding balance.

At December 31 2010, First Clover Leaf Bank had 13 properties classified as Real Estate Owned. The collateral on these properties consisted of a commercial building, a commercial land site with an outbuilding, farmland, two residential lot developments and eight single family residences. All of these properties were transferred into Real Estate Owned at the property’s fair value, less cost of disposal, at the date of foreclosure.

15

The table below sets forth the amount and categories of our non-performing and impaired loans and non-performing assets at the dates indicated. At each date presented, we had an insignificant amount of troubled debt restructurings, (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates) which are considered to be impaired loans. At December 31, 2010, we had loans of approximately $250,000 that were classified as troubled debt restructurings.

	At December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Non-accrual loans:
One- to four-family	$	1,856		$	2,260		$	1,598		$	1,269		$	579
Multi-family		2,435			2,324			556			412			395
Commercial real estate		1,290			1,346			3,463			977			396
Construction and land		6,177			5,410			―			―			―
Commercial business		109			293			―			―			―
Consumer		382			100			1			11			1
Total non-accrual loans		12,249			11,733			5,618			2,669			1,371
Accruing loans delinquent 90 days or more:
One- to four-family		81			107			764			285			16
Construction and land		―			1,600			―			―			―
Commercial business		12			873			—			—			―
Total accruing loans delinquent 90 days or more		93			2,580			764			285			16
Total non-performing loans		12,342			14,313			6,382			2,954			1,387
Other impaired loans:
One- to four-family		80			—			—			—			—
Multi-family		653			6,122			—			—			—
Commercial real estate		5,407			4,932			1,037			1,198			918
Construction and land		55			2,407			—			—			1,467
Commercial business		604			1,357			114			133			149
Consumer		480			—			—			—			—
Total other impaired loans		7,279			14,818			1,151			1,331			2,534
Total non-performing and impaired loans		19,621			29,131			7,533			4,285			3,921
Real estate owned:
One- to four-family		440			200			408			―			―
Commercial real estate		854			230			225			―			―
Construction and land		2,550			655			—			—			―
Total real estate owned		3,844			1,085			633			—			―
Total non-performing and impaired assets	$	23,465		$	30,216		$	8,166		$	4,285		$	3,921
Allowance for loan losses attributable to non-performing and impaired loans	$	2,186		$	2,126		$	553		$	307		$	396
Ratios:
Non-performing and impaired loans to total loans		5.06	%		7.07	%		1.75	%		1.50	%		1.60	%
Non-performing and impaired assets to total assets		4.08	%		5.16	%		1.25	%		1.04	%		0.96	%

16

For the year ended December 31, 2010, $754,361 of gross interest income would have been recorded had our non-accruing loans been current in accordance with their original terms. We recorded $562,527 of income on such loans for the year ended December 31, 2010.

At December 31, 2010, we had no loans which were not currently classified as non-accrual, 90 days past due or impaired, but where known information about possible credit problems of the borrower caused management to have serious concerns as to the ability of the borrower to comply with present loan repayment terms and would result in disclosure as non-accrual, 90 days past due or impaired.

Real Estate Owned. Real estate owned consists of property acquired through formal foreclosure or by deed in lieu of foreclosure and is recorded at the lower of recorded investment or fair value. Write-downs from recorded investment to fair value which are required at the time of foreclosure are charged to the allowance for loan losses. After transfer, the property is carried at the lower of recorded investment or fair value, less estimated selling expenses. Adjustments to the carrying value of the properties that result from subsequent declines in value are charged to operations in the period in which the declines occur. At December 31, 2010, we held 13 properties as real estate owned with a total value of $3.8 million.

Classification of Assets. Our policies, consistent with regulatory guidelines, require that we classify loans and other assets, such as securities, that are considered to be of lesser quality, as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that First Clover Leaf Bank will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Assets classified as loss are those considered uncollectable and of such little value that their continuance as assets is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess some weaknesses, are required to be designated as special mention by management.

General allowances represent loss allowances that have been established to recognize the probable risk associated with lending activities, but which have not been allocated to particular problem assets. When we classify problem assets as loss, we are required either to establish a specific allowance for losses equal to 100% of the amount of the assets so classified, or to charge-off the amount of the assets. Our determination as to the classification of assets and the amount of valuation allowances is subject to review by regulatory agencies, which can order the establishment of additional loss allowances. All loans classified as doubtful are also classified as impaired. As a general rule, loans classified as substandard are also classified as impaired. The loans that are an exception to this classification are generally mortgage and consumer loans, and they represent a small amount and percentage of the substandard category. Management regularly reviews our asset portfolio to determine whether any assets require classification in accordance with applicable regulatory guidelines and accounting principles generally accepted in the United States of America.

On the basis of management’s review of our assets, at December 31, 2010, we had classified $16.0 million of our assets as substandard and $4.4 million as doubtful.

17

The following table sets forth certain information with respect to our loan portfolio delinquencies at the dates indicated.

	Loans Delinquent For
	60-89 Days				90 Days or Over				Total
	Number		Amount		Number		Amount		Number		Amount
	(Dollars in thousands)
At December 31, 2010
One- to four-family residential		4	$	296		11	$	818		15	$	1,114
Multi-family		―		―		8		2,435		8		2,435
Commercial real estate		3		162		3		1,240		6		1,402
Construction and land		―		―		6		4,928		6		4,928
Commercial business		―		―		2		43		2		43
Consumer		3		96		3		367		6		463
Total		10	$	554		33	$	9,831		43	$	10,385
At December 31, 2009
One- to four-family residential		3	$	178		5	$	734		8	$	912
Multi-family		―		―		3		585		3		585
Commercial real estate		1		56		17		1,890		18		1,946
Construction and land		―		―		3		1,462		3		1,462
Commercial business		1		43		5		1,155		6		1,198
Consumer		1		12		1		100		2		112
Total		6	$	289		34	$	5,926		40	$	6,215
At December 31, 2008
One- to four-family residential		8	$	683		12	$	1,267		20	$	1,950
Multi-family		―		―		3		555		3		555
Commercial real estate		4		487		29		1,528		33		2,015
Construction and land		―		―		4		2,535		4		2,535
Commercial business		3		225		1		495		4		720
Consumer		4		67		1		1		5		68
Total (1)		19	$	1,462		50	$	6,381		69	$	7,843
At December 31, 2007
One- to four-family residential		4	$	249		14	$	1,554		18	$	1,803
Multi-family		―		―		1		412		1		412
Commercial real estate		1		304		5		977		6		1,281
Construction and land		1		985		―		―		1		985
Commercial business		2		1,280		―		―		2		1,280
Consumer		—		—		2		11		2		11
Total (1)		8	$	2,818		22	$	2,954		30	$	5,772
At December 31, 2006
One- to four-family residential		2	$	94		4	$	102		6	$	196
Multi-family		―		―		1		395		1		395
Commercial business		2		147		1		18		3		165
Consumer		2		28		―		―		2		28
Total		6		269		6		515		12		784

___________________

(1) The category of 90 Days or Over includes all non-accrual loans.

18

Allowance for Loan Losses. The following table sets forth activity in our allowance for loan losses for the years indicated.

	At or For the Years Ended December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Balance at beginning of year	$	6,317		$	3,895		$	1,898		$	1,710		$	428
Charge-offs:
One-to-four family residential		(268	)		(244	)		―			―			―
Commercial real estate		(1,936	)		(832	)		(56	)		―			―
Construction and land		―			(1,644	)		(124	)		(142	)		―
Commercial Business		(1,020	)		(414	)		―			(15	)		―
Consumer		(86	)		―			(91	)		(7	)		(1	)
Total charge-offs		(3,310	)		(3,134	)		(271	)		(164	)		(1	)
Recoveries:
Commercial real estate		148			―			―			―			―
Commercial Business		―			2			―			―			―
Consumer		―			―			16			5			5
Total recoveries		148			2			16			5			5
Net (charge-offs) recoveries		(3,162	)		(3,132	)		(255	)		(159	)		4
Allowance acquired		—			—			1,476			—			911
Provision for loan losses		2,573			5,554			776			347			367
Balance at end of year	$	5,728		$	6,317		$	3,895		$	1,898		$	1,710
Ratios:
Net charge-offs (recoveries) to average loans outstanding		0.78	%		0.74	%		0.07	%		0.06	%		0.00	%
Allowance for loan losses to non-performing and impaired loans		29.19	%		21.68	%		51.71	%		44.27	%		43.61	%
Allowance for loan losses to total loans		1.48	%		1.53	%		0.90	%		0.67	%		0.70	%

19

The allowance for loan losses is a valuation account that reflects our evaluation of the credit losses inherent in our loan portfolio. We maintain the allowance through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely.

Our evaluation of risk in maintaining the allowance for loan losses includes the review of all loans on which the collectibility of principal may not be reasonably assured. We consider the following factors as part of this evaluation: our historical loan loss experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. Management evaluates the total balance of the allowance for loan losses based on several factors that are not loan specific but are reflective of the losses inherent in the loan portfolio, including management’s periodic review of loan collectibility in light of historical experience, the nature and volume of the loan portfolio, prevailing economic conditions such as housing trends, inflation rates and unemployment rates, and geographic concentrations of loans within First Clover Leaf Bank’s immediate market area.

There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. During 2010, management increased the general allocation percentages used in the calculation of our allowance for loan losses. Management evaluated several factors in determining the need to increase these percentages. The loss history was the primary reason the general allocation was increased. Management also revised the watch and criticized/non-impaired allocation percentages to more accurately reflect the risk of our current portfolio. Management also reviewed the current economic conditions and determined that no adjustment was necessary to any of the qualitative factors during 2010.

In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our loan portfolio and the related allowance for loan losses. The Office of Thrift Supervision may require us to increase the allowance for loan losses based on its judgments of information available to it at the time of its examination, thereby adversely affecting our results of operations.

20

Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category, the total loan balances by category, and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

	At December 31,
	2010							2009							2008
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real Estate Loans:
One- to four-family	$	731	$	99,186		24.6	%	$	1,517	$	98,080		23.4	%	$	758	$	110,925		25.3	%
Multi-family		179		26,543		6.6			745		20,947		5.0			479		18,150		4.2
Commercial		1,714		160,799		39.9			2,402		179,923		42.8			1,453		168,432		38.4
Construction and land		2119		53,647		13.3			883		45,448		10.8			529		52,338		11.9
Commercial business		868		51,738		12.8			760		63,135		15.0			624		78,160		17.8
Consumer		117		10,915		2.8			10		12,477		3.0			52		10,270		2.4
Total	$	5,728	$	402,829		100.0	%	$	6,317	$	420,010		100.0	%	$	3,895	$	438,275		100.0	%

	At December 31,
	2007							2006
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans			Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real Estate Loans:
One- to four-family	$	532	$	112,764		39.2	%	$	400	$	120,355		48.5	%
Multi-family		84		13,931		4.8			65		8,895		3.6
Commercial		832		97,810		34.0			753		68,577		27.7
Construction and land		290		20,776		7.2			324		17,181		6.9
Commercial business		114		34,783		12.1			145		25,907		10.4
Consumer		46		7,770		2.7			23		7,125		2.9
Total	$	1,898	$	287,834		100.0	%	$	1,710	$	248,040		100.0	%

21

Investment Activities

We are permitted under federal law to invest in various types of liquid assets, including U.S. Government obligations, securities of various federal agencies and of state and municipal governments, deposits at the Federal Home Loan Bank of Chicago, certificates of deposit of federally insured institutions, certain bankers’ acceptances and federal funds. Within certain regulatory limits, we may also invest a portion of our assets in commercial paper and corporate debt securities. First Clover Leaf Bank is also required to invest in Federal Home Loan Bank stock.

The Financial Accounting Standards Board’s guidance regarding the accounting for certain investments in debt and equity securities requires that securities be categorized as “held to maturity,” “trading securities” or “available for sale,” based on management’s intent as to the ultimate disposition of each security. We have classified all of our securities as available for sale at December 31, 2010.

The guidance allows debt securities to be classified as “held to maturity” and reported in financial statements at amortized cost only if the reporting entity has the positive intent and ability to hold those securities to maturity. Securities that might be sold in response to changes in market interest rates, changes in the security’s prepayment risk, increases in loan demand, or other similar factors cannot be classified as “held to maturity.”

Debt and equity securities held for current resale are classified as “trading securities.” These securities are reported at fair value, and unrealized gains and losses on the securities are included in earnings. We do not currently use or maintain a trading account. Debt and equity securities not classified as either “held to maturity” or “trading securities” are classified as “available for sale.” These securities are reported at fair value, and unrealized gains and losses on the securities are excluded from earnings and reported, net of deferred taxes, as a separate component of equity.

All of our securities carry market risk insofar as increases in market interest rates may cause a decrease in their market value. Many also carry prepayment risk insofar as they may be called prior to maturity in times of low market interest rates, so that we may have to reinvest the funds at a lower interest rate. Investments in securities are made based on certain considerations, which include the interest rate, tax considerations, yield, settlement date and maturity of the security, our liquidity position, and anticipated cash needs and sources. The effect that the proposed security would have on our credit and interest rate risk and risk-based capital is also considered. We purchase securities to provide necessary liquidity for day-to-day operations, and when investable funds exceed loan demand.

Generally, our investment policy, as established by the board of directors, is to invest funds among various categories of investments and maturities based upon our liquidity needs, asset/liability management policies, investment quality, marketability and performance objectives.

Our investment policy does not permit engaging directly in hedging activities or purchasing high-risk mortgage derivative products.

Our debt securities are mainly composed of securities issued by the U.S. Government, government agencies and government-sponsored enterprises (primarily the Federal Home Loan Bank, Fannie Mae and Freddie Mac) and investment grade corporate debt securities, although from time to time we make other investments as permitted by applicable laws and regulations.

22

First Clover Leaf Financial Corp. utilizes a third party vendor for investment portfolio accounting. The vendor provides a monthly report indicating by individual bond the gain or loss position of the security, as well as any downgrades that have occurred. When a bond is downgraded, we contact a broker to gain a better understanding of the reason for the downgrade and any known or anticipated defaults by the issuer. We consider the grade of the bond and the payment history when determining if a bond should be classified as other than temporarily impaired and if a write down of the security is necessary. The board of directors is informed monthly of any bond downgrades and the overall gain or loss position of the investment portfolio. As of December 31, 2010, we had no securities considered to be other-than-temporarily impaired.

23

Available for Sale Portfolio. The following table sets forth the composition of our available for sale portfolio at the dates indicated. For further information see Notes 1 and 2 of the Notes to our Consolidated Financial Statements.

	At December 31,
	2010				2009				2008
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Investment Securities:
U.S. government agency obligations	$	41,857	$	42,690	$	47,783	$	48,514	$	58,414	$	59,346
Corporate bonds		2,096		2,058		2,596		2,546		3,094		2,829
State and municipal securities		17,803		17,774		14,468		15,379		12,238		12,451
Other securities		4		4		4		4		75		75
Mortgage-backed securities		15,739		15,949		18,816		19,964		27,849		28,866
Total investment securities available for sale	$	77,499	$	78,475	$	83,667	$	86,407	$	101,670	$	103,567

At December 31, 2010, we held 33 available-for-sale securities that had been in a loss position for less than twelve months, and one available-for-sale security that had been in a loss position for twelve months or more. Included in the 33 securities in the less-than-twelve month position are (a) two U.S. government agency obligations, both of which have been in a loss position for two months (b) 10 Mortgage-backed securities, five of which have been in a loss position for one month, three have been in a loss position for two months, one has been in a loss position for three months, and one has been in a loss position for four months (c) 21 state and municipal securities, two of which have been in a loss position for one month, 17 have been in a loss position for two months, one has been in a loss position for three months, and one has been in a loss position for four months. The security in the twelve-months-or-more position is a corporate bond.

As of December 31, 2010, management believes that the estimated fair values of the securities noted above are primarily dependent on movements in market interest rates. These investment securities are comprised of securities that are rated investment grade by at least one bond credit rating service. Management believes that these fair values will recover as the underlying portfolios mature. We do not intend to sell or expect that it is more likely than not that we will be required to sell these investment securities prior to the anticipated recovery in fair value. Accordingly, management does not believe any individual unrealized loss as of December 31, 2010, represents an other-than-temporary impairment.

24

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio and the mortgage-backed securities portfolio at December 31, 2010 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. State and municipal securities yields have not been adjusted to a tax-equivalent basis.

	One Year or Less					More than One Year through Five Years					More than Five Years through Ten Years					More than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Available for Sale:
Investment Securities
U.S. Government agency obligations	$	16,521		2.43	%	$	25,336		2.80	%	$	---		---	%	$	---		---	%	$	41,857	$	42,690		2.66	%
Corporate bonds		146		5.39			1,250		4.71			---		---			700		5.05			2,096		2,058		4.87
State and municipal securities		1,066		5.43			4,810		5.86			3,657		5.02			8,270		5.33			17,803		17,774		5.42
Other securities		4		---			---		---			---		---			---		---			4		4		---
Mortgage-backed securities		380		3.20			15,104		3.23			255		3.78			---		---			15,739		15,949		3.24
Total debt securities available for sale	$	18,117		2.65	%	$	46,500		3.31	%	$	3,912		4.94	%	$	8,970		5.31	%	$	77,499	$	78,475		3.47	%

25

Sources of Funds

General. Deposits are our primary source of funds for lending and other investment purposes. In addition to deposits, we derive funds primarily from principal and interest payments on loans. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by market interest rates. Borrowings may be used on a short-term basis to compensate for reductions in the availability of funds from other sources, and may be used on a longer-term basis for general business purposes.

Deposits. Residents of our primary market area are our main source of deposits. Deposit account terms vary, with the principal differences being the minimum balance required, the time periods the funds must remain on deposit, and the interest rate. From time to time, we supplement our funding with brokered deposits. At December 31, 2010 we had $70.3 million in brokered deposits, which includes $44.0 million of deposits generated from our local customer base that utilize the Certificate of Deposit Account Registry Service (CDARS) in order to obtain full FDIC insurance coverage. We have several additional sources for obtaining wholesale and brokered deposits if needed in the future. Our deposit products include demand and NOW, money market, savings, and term certificate accounts. Interest rates paid, maturity terms, service fees and withdrawal penalties are established by First Clover Leaf Bank on a periodic basis. Management determines the rates and terms based on competitive market rates, our needs for funds or liquidity, growth goals and federal and state regulations.

Noninterest-Bearing Deposits. The balances of our noninterest-bearing deposits at December 31, 2010 and 2009 were $ 34.2 million and $49.5 million, respectively.

26

Interest-Bearing Deposit Accounts by Type. The following table sets forth the average balances of our interest-bearing deposits in the various types of deposit programs for the years indicated.

	Years Ended December 31,
	2010								2009								2008
	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
	(Dollars in Thousands)
Interest-bearing transaction	$	190,368		46.8	%		1.20	%	$	180,606		42.8	%		1.60	%	$	107,054		34.9	%		2.53	%
Savings deposits		21,475		5.3			0.71			28,267		6.7			0.77			18,203		5.9			1.65
		211,843		52.1						208,873		49.5						125,257		40.8
Certificates of deposit		194,688		47.9			2.72			212,782		50.5			3.36			181,851		59.2			4.29
Total interest-bearing deposits	$	406,531		100.0	%		1.90	%	$	421,655		100.0	%		2.43	%	$	307,108		100.0	%		3.52	%

27

Time Deposit Balances and Maturities. The following table sets forth certificates of deposit by time remaining until maturity as of December 31, 2010.

	Maturity
	3 Months or Less		Over 3 to 6 Months		Over 6 to 12 Months		Over 12 Months		Total
	(In thousands)
Certificates of deposit less than $100,000	$	21,915	$	20,073	$	18,441	$	42,242	$	102,671
Certificates of deposit of $100,000 or more (1)		24,669		15,759		24,686		15,697		80,811
Total of certificates of deposit	$	46,584	$	35,832	$	43,127	$	57,939	$	183,482

___________________

(1) The weighted average interest rates for these accounts, by maturity period, were: 1.65% for 3 months or less; 1.75% for over 3 to 6 months; 1.49% for over 6 to 12 months; and 3.31% for over 12 months. The overall weighted average interest rate for accounts of $100,000 or more was 1.94%.

Borrowings. Our borrowings consist of Federal Home Loan Bank advances, reverse repurchase agreements and subordinated debentures. At December 31, 2010, we had $21.9 million in advances and access to additional Federal Home Loan Bank advances of up to $33.0 million, and we had $21.5 million in securities sold under agreements to repurchase. For additional information on our subordinated debentures, please see note 11 to our Consolidated Financial Statements, contained within our Annual Report to Stockholders.

The following table sets forth information concerning balances and interest rates on all of our borrowings at and for the periods shown:

	At or For the Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands)
Balance at end of year	$	47,355		$	62,790		$	108,957
Average balance during year		59,292			93,479			66,505
Maximum outstanding at any month end		88,292			97,776			152,376
Weighted average interest rate at end of year		0.86	%		2.64	%		1.51	%
Average interest rate during year		2.03	%		2.15	%		2.45	%

Subsidiary Activities

First Clover Leaf Financial Corp.’s only subsidiary is First Clover Leaf Bank. First Clover Leaf Bank’s only subsidiary is Clover Leaf Financial Services, an insurance agency that sells credit life and disability insurance policies.

Personnel

As of December 31, 2010, we had 71 full-time employees and 16 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees.

28

SUPERVISION AND REGULATION

General

First Clover Leaf Bank is a federally chartered savings association, and as such is regulated and supervised by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. This regulation and supervision establishes a comprehensive framework of activities in which a financial institution may engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation’s deposit insurance funds and depositors. Under this system of federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. After completing an examination, the federal agency critiques the financial institution’s operations and assigns its rating (known as an institution’s CAMELS). Under federal law, an institution may not disclose its CAMELS rating to the public. First Clover Leaf Bank also is a member of, and owns stock in, the Federal Home Loan Bank of Chicago, which is one of the twelve regional banks in the Federal Home Loan Bank System. First Clover Leaf Bank also is regulated to a lesser extent by the Board of Governors of the Federal Reserve System, governing reserves to be maintained against deposits and other matters. The Office of Thrift Supervision examines First Clover Leaf Bank and prepares reports for the consideration of its board of directors on any operating deficiencies.

Any change in these laws or regulations, whether by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or Congress, could have a material adverse impact on us and our operations.

As a savings and loan holding company, First Clover Leaf Financial Corp. is required to comply with the rules and regulations of the Office of Thrift Supervision and to file certain reports with and is subject to examination by the Office of Thrift Supervision. First Clover Leaf Financial Corp. is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act’) made extensive changes in the regulation of federal savings banks such First Clover Leaf Bank. Under the Dodd-Frank Act, the Office of Thrift Supervision will be eliminated. Responsibility for the supervision and regulation of federal savings banks will be transferred to the Office of the Comptroller of the Currency, which is the agency that is currently primarily responsible for the regulation and supervision of national banks. The Office of the Comptroller of the Currency will assume responsibility for implementing and enforcing many of the laws and regulations applicable to federal savings banks. The transfer of regulatory functions will take place over a transition period of up to one year from the Dodd-Frank Act enactment date of July 21, 2010, subject to a possible six-month extension. At the same time, responsibility for the regulation and supervision of savings and loan holding companies, such as First Clover Leaf Financial Corp., will be transferred to the Federal Reserve Board, which currently supervises bank holding companies. Additionally, the Dodd-Frank Act creates a new Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve Board. The Consumer Financial Protection Bureau will assume responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations, a function currently assigned to prudential regulators, and will have authority to impose new requirements. However, institutions of less than $10 billion in assets, such as First Clover Leaf Bank, will continue to be examined for compliance with consumer protection and fair lending laws and regulations by, and be subject to the primary enforcement authority of, their prudential regulator rather than the Consumer Financial Protection Bureau.

29

New Federal Legislation

The recently enacted Dodd-Frank Act will significantly change the current bank regulatory structure and affect the lending, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act will eliminate our current primary federal regulator, the Office of Thrift Supervision, and will require First Clover Leaf Bank to be regulated by the Office of the Comptroller of the Currency (the primary federal regulator for national banks). The Dodd-Frank Act also authorizes the Board of Governors of the Federal Reserve System to supervise and regulate all savings and loan holding companies like First Clover Leaf Financial Corp., in addition to bank holding companies which it currently regulates. As a result, the Federal Reserve Board’s current regulations applicable to bank holding companies, including holding company capital requirements, will apply to savings and loan holding companies like First Clover Leaf Financial Corp., unless an exemption exists. These capital requirements are substantially similar to the capital requirements currently applicable to First Clover Leaf Bank, as described in “—Federal Banking Regulation—Capital Requirements.” The Dodd-Frank Act also requires the Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital are restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. Bank holding companies with assets of less than $500 million are exempt from these capital requirements. Under the Dodd-Frank Act, the proceeds of trust preferred securities are excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank or savings and loan holding companies with less than $15 billion of assets. The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements within 18 months that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act also creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as First Clover Leaf Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. The new legislation also weakens the federal preemption available for national banks and federal savings associations, and gives state attorneys general the ability to enforce applicable federal consumer protection laws.

The legislation also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2012. Lastly, the Dodd-Frank Act will increase stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate and solicit votes for their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

30

Federal Banking Regulation

Business Activities. A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and the regulations of the Office of Thrift Supervision. Under these laws and regulations, First Clover Leaf Bank may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other loans and assets. First Clover Leaf Bank also may establish subsidiaries that may engage in activities not otherwise permissible for First Clover Leaf Bank directly, including real estate investment, securities brokerage and insurance agency. The Dodd-Frank Act authorizes the payment of interest on commercial checking accounts, effective July 21, 2011.

Capital Requirements. The Office of Thrift Supervision regulations require savings associations to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS rating system) and an 8% risk-based capital ratio. The prompt corrective action standards discussed below, in effect, establish a minimum 2% tangible capital standard.

The risk-based capital standard for savings associations requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to adjusted total assets of at least 4% and to risk-weighted assets of at least 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation based on the risks inherent in the type of asset. Core capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, allowance for loan and lease losses up to a maximum of 1.25% of risk-weighted assets, and up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

At December 31, 2010, First Clover Leaf Bank’s capital exceeded all applicable requirements.

Loans to One Borrower.A federal savings association generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of risk-based capital on an unsecured basis. An additional amount may be loaned, equal to 10% of risk-based capital, if the loan is secured by readily marketable collateral, which generally does not include real estate. At December 31, 2010, the maximum amount that First Clover Leaf Bank could have loaned to any one borrower under the 15% limit of risk-based capital was approximately $9.6 million. At that date, the largest lending relationship with First Clover Leaf Bank totaled $21.5 million and consisted of two loans secured primarily by accounts receivable, real estate and corporate assets. First Clover Leaf Bank also has an agreement in place with another financial institution to participate in this loan and had participated $12.5 million to this financial institution at year end. First Clover Leaf Bank’s remaining outstanding balance on this loan at year end was $4.2 million.

Qualified Thrift Lender Test.As a federal savings association, First Clover Leaf Bank is subject to a qualified thrift lender, or “QTL,” test. Under the QTL test, First Clover Leaf Bank must maintain at

31

least 65% of its “portfolio assets” in “qualified thrift investments” in at least nine months of the most recent 12-month period.

A savings association that fails the QTL test must operate under specified restrictions. The Dodd-Frank Act made noncompliance with the QTL test potentially subject to agency enforcement action for a violation of law. At December 31, 2010, First Clover Leaf Bank maintained portfolio assets in qualified thrift investments in excess of the percentage required to qualify it under the QTL test.

Capital Distributions.Office of Thrift Supervision regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the institution’s capital account. A savings association must file an application for approval of a capital distribution if:

· the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;

· the savings association would not be at least adequately capitalized following the distribution;

· the distribution would violate any applicable statute, regulation, agreement or Office of Thrift Supervision-imposed condition; or

· the savings association is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every savings association that is a subsidiary of a holding company must still file a notice with the Office of Thrift Supervision at least 30 days before the board of directors declares a dividend or approves a capital distribution.

The Office of Thrift Supervision may disapprove a notice or application if:

· the savings association would be undercapitalized following the distribution;

· the proposed capital distribution raises safety and soundness concerns; or

· the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

Liquidity. A federal savings association is required to maintain a sufficient amount of liquid assets to ensure its safe and sound operation.

Community Reinvestment Act and Fair Lending Laws. All savings associations have a responsibility under the Community Reinvestment Act and related regulations of the Office of Thrift Supervision to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In connection with its examination of a federal savings association, the Office of Thrift Supervision is required to assess the savings association’s record of compliance with the Community Reinvestment Act. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in regulatory restrictions on its activities. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of Thrift Supervision, as well as other federal regulatory agencies and the Department of Justice. First Clover Leaf Bank received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.

32

Transactions with Related Parties. A federal savings association’s authority to engage in transactions with its “affiliates” is limited by Office of Thrift Supervision regulations and by Sections 23A and 23B of the Federal Reserve Act. The term “affiliates” for these purposes generally means any company that controls or is under common control with an institution. First Clover Leaf Financial Corp. will be an affiliate of First Clover Leaf Bank. In general, transactions with affiliates must be on terms that are as favorable to the savings association as comparable transactions with non-affiliates. In addition, certain types of these transactions are restricted to an aggregate percentage of the savings association’s capital. Collateral in specified amounts must usually be provided by affiliates in order to receive loans from the savings association. In addition, Office of Thrift Supervision regulations prohibit a savings association from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.

First Clover Leaf Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions require that extensions of credit to insiders (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features, and (ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of First Clover Leaf Bank’s capital. In addition, extensions of credit in excess of certain limits must be approved by First Clover Leaf Bank’s board of directors.

Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over federal savings institutions and has the authority to bring enforcement action against all “institution-affiliated parties,” including stockholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution, receivership, conservatorship or the termination of deposit insurance. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The Federal Deposit Insurance Corporation also has the authority to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take action under specified circumstances.

The Comptroller of the Currency will assume the Office of Thrift Supervision’s enforcement authority under the Dodd-Frank Act regulatory restructuring.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines Prescribing Standards for Safety and Soundness to implement the safety and soundness standards required under federal law. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems, internal audit systems, credit

33

underwriting, loan documentation, interest rate risk exposure, asset growth, compensation, fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to submit a compliance plan.

Prompt Corrective Action Regulations. Under the prompt corrective action regulations, the Office of Thrift Supervision is required and authorized to take supervisory actions against undercapitalized savings associations. For this purpose, a savings association is placed in one of the following five categories based on the savings association’s capital:

· well-capitalized (at least 5% leverage capital, 6% tier 1 risk-based capital and 10% total risk-based capital);

· adequately capitalized (at least 4% leverage capital (3% for savings banks with a composite examination rating of 1), 4% tier 1 risk-based capital and 8% total risk-based capital);

· undercapitalized (less than 4% leverage capital (3% for savings banks with a composite examination rating of 1), 4% tier 1 risk-based capital or 8% total risk-based capital);

· significantly undercapitalized (less than 3% leverage capital, 3% tier 1 risk-based capital or 6% total risk-based capital); and

· critically undercapitalized (less than 2% tangible capital).

Generally, the banking regulator is required to appoint a receiver or conservator for a savings association that is “critically undercapitalized.” The regulation also provides that a capital restoration plan must be filed with the Office of Thrift Supervision within 45 days of the date a bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” In addition, numerous mandatory supervisory actions become immediately applicable to the savings association, including, but not limited to, restrictions on growth, investment activities, capital distributions and affiliate transactions. The Office of Thrift Supervision may also take any one of a number of discretionary supervisory actions against undercapitalized savings associations, including the issuance of a capital directive and the replacement of senior executive officers and directors.

At December 31, 2010, First Clover Leaf Bank met the criteria for being considered “well-capitalized.”

Insurance of Deposit Accounts.First Clover Leaf Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.

Under the Federal Deposit Insurance Corporation’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors, with less risky institutions paying lower assessments. An institution’s assessment rate depends upon the category to which it is assigned, and certain adjustments specified by Federal Deposit Insurance Corporation regulations. Assessment rates currently range from seven to 77.5 basis points of assessable deposits. The Federal Deposit Insurance Corporation may adjust the scale uniformly, except that no adjustment can deviate more than three basis points from the base scale without notice and comment. No institution may pay a dividend if in default of the federal deposit insurance assessment.

34

The Dodd-Frank Act requires the Federal Deposit Insurance Corporation to revise its procedures to base its assessments upon total assets less tangible equity instead of deposits. The Federal Deposit Insurance Corporation recently finalized a rule that would implement that change, effective April 1, 2011. Among other things, the final rule changes the assessment range.

The Federal Deposit Insurance Corporation imposed on all insured institutions a special emergency assessment of five basis points of total assets minus Tier 1 capital (as of June 30, 2009), capped at ten basis points of an institution’s deposit assessment base, in order to cover losses to the Deposit Insurance Fund. That special assessment was collected on September 30, 2009. The Federal Deposit Insurance Corporation provided for similar assessments during the final two quarters of 2009, if deemed necessary. In lieu of further special assessments, however, the Federal Deposit Insurance Corporation required insured institutions to prepay estimated quarterly risk-based assessments for the fourth quarter of 2009 through the fourth quarter of 2012. The estimated assessments, which included an assumed annual assessment base increase of 5%, were recorded as a prepaid expense asset as of December 30, 2009. As of December 31, 2009, and each quarter thereafter, a charge to earnings is recorded for each regular assessment with an offsetting credit to the prepaid asset.

Due to the recent difficult economic conditions, deposit insurance per account owner has been raised to $250,000. That coverage was made permanent by the Dodd-Frank Act. In addition, the Federal Deposit Insurance Corporation adopted an optional Temporary Liquidity Guarantee Program by which, for a fee, noninterest-bearing transaction accounts would receive unlimited insurance coverage until June 30, 2010, subsequently extended to December 31, 2010, and certain senior unsecured debt issued by institutions and their holding companies between October 13, 2008 and October 31, 2009 would be guaranteed by the Federal Deposit Insurance Corporation through June 30, 2012, or in some cases, December 31, 2012. First Clover Leaf Bank opted not toparticipate in the unlimited noninterest-bearing transaction account coverage and opted not toparticipate in the unsecured debt guarantee program. The Dodd-Frank Act extended the unlimited coverage for certain noninterest-bearing transaction accounts from January 1, 2011 until December 31, 2012 without the opportunity for opt out.

In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. That payment is established quarterly and during the four quarters ended December 31, 2010 averaged 1.045 basis points of assessable deposits.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The Federal Deposit Insurance Corporation must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit Insurance Corporation and the Federal Deposit Insurance Corporation has recently exercised that discretion by establishing a long range fund ratio of 2%.

The Federal Deposit Insurance Corporation has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of First Clover Leaf Bank. We cannot predict what insurance assessment rates will be in the future.

Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory

35

condition imposed in writing. We do not know of any practice, condition or violation that might lead to termination of deposit insurance.

Prohibitions Against Tying Arrangements. Federal savings associations are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Federal Home Loan Bank System. First Clover Leaf Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a member of the Federal Home Loan Bank of Chicago, First Clover Leaf Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20th of its borrowings from the Federal Home Loan Bank, whichever is greater. As of December 31, 2010, First Clover Leaf Bank was in compliance with this requirement and held $4.3 million of excess stock in the Federal Home Loan Bank of Chicago.

Federal Reserve System

Federal Reserve Board regulations require savings associations to maintain non-interest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. As of December 31, 2010, First Clover Leaf Bank was in compliance with these reserve requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements imposed by the Office of Thrift Supervision.

The USA PATRIOT Act

The USA PATRIOT Act gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. The Act also requires the federal banking regulators to take into consideration the effectiveness of controls designed to combat money-laundering activities in determining whether to approve a merger or other acquisition application of an FDIC-insured institution. As such, if we or First Clover Leaf Bank were to engage in a merger or other acquisition, the effectiveness of its anti-money-laundering controls would be considered as part of the application process. First Clover Leaf Bank believes it has established policies, procedures and systems that comply with the applicable requirements of the law.

Holding Company Regulation

General. First Clover Leaf Financial Corp. is a unitary savings and loan holding company, subject to regulation and supervision by the Office of Thrift Supervision. The Office of Thrift Supervision has enforcement authority over First Clover Leaf Financial Corp. and its non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a risk to First Clover Leaf Bank. The Dodd-Frank Act regulatory restructuring transfers to the Federal Reserve Board the responsibility for regulating and supervising savings and loan holding companies. That will occur one year from the July 21, 2010 effective date of the Dodd-Frank Act, subject to a possible six-month extension.

36

First Clover Leaf Financial Corp. is limited to the activities permissible for financial holding companies or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance, incidental to financial activities or complementary to a financial activity. The Dodd-Frank Act added that any savings and loan holding company that engages in activities permissible for a financial holding company must meet the qualitative requirements for a bank holding company to be a financial holding company and conduct the activities in accordance with the requirements that would apply to a financial holding company’s conduct of the activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain additional activities authorized by Office of Thrift Supervision regulations.

Federal law prohibits a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring control of another savings institution or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with specified exceptions, more than 5% of the equity securities of a company engaged in activities that are not closely related to banking or financial in nature or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources and future prospects of the savings institution involved, the effect of the acquisition on the risk to the insurance fund, the convenience and needs of the community and competitive factors.

Savings and loan holding companies are not currently subject to specific regulatory capital requirements. The Dodd-Frank Act, however, requires the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. Instruments such as cumulative preferred stock and trust preferred securities will no longer be includable as Tier 1 capital, as is currently the case with bank holding companies. Instruments issued by May 19, 2010 will be grandfathered for companies with consolidated assets of $15 billion or less. There is a five-year transition period (from the July 21, 2010 effective date of the Dodd-Frank Act) before the capital requirements will apply to savings and loan holding companies.

The Dodd-Frank Act also extends the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must issue regulations requiring that all bank and savings and loan holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Federal Securities Laws

First Clover Leaf Financial Corp.’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. First Clover Leaf Financial Corp. is subject to the information, proxy solicitation, insider trader restrictions and other requirements under the Securities Exchange Act of 1934.

First Clover Leaf Financial Corp. common stock held by persons who are affiliates (generally officers, directors and principal stockholders) of First Clover Leaf Financial Corp. may not be resold without registration or unless sold in accordance with certain resale restrictions. If First Clover Leaf Financial Corp. meets specified current public information requirements, each affiliate of First Clover

37

Leaf Financial Corp. is able to sell in the public market, without registration, a limited number of shares in any three-month period.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act of 2002, our Chief Executive Officer and Chief Financial Officer each are required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002 have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal controls; and they have included information in our quarterly and annual reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls.

TAXATION

Federal Taxation

General. First Clover Leaf Financial Corp. and First Clover Leaf Bank file a consolidated tax return and are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. First Clover Leaf Financial Corp.’s and First Clover Leaf Bank’s tax returns have not been audited during the past five years. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to First Clover Leaf Financial Corp. or First Clover Leaf Bank.

Method of Accounting. For federal income tax purposes, First Clover Leaf Financial Corp. and First Clover Leaf Bank currently report their income and expenses on the accrual method of accounting and use a tax year ending December 31 for filing their federal income tax returns.

Bad Debt Reserves. Prior to the Small Business Protection Act of 1996 (the “1996 Act”), we were permitted to establish a reserve for bad debts and to make annual additions to the reserve. These additions could, within specified formula limits, be deducted in arriving at our taxable income. We were required to use the specific charge off method in computing our bad debt deduction beginning with our 1996 federal tax return. Savings institutions were required to recapture any excess reserves over those established as of December 31, 1987 (base year reserve). At December 31, 2010, First Clover Leaf Bank had no reserves subject to recapture.

Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt reserves created prior to January 1, 1988 were subject to recapture into taxable income if First Clover Leaf Bank failed to meet certain thrift asset and definitional tests. Federal legislation has eliminated these thrift related recapture rules. At December 31, 2010, our total federal pre-1988 base year reserve was approximately $3.0 million. However, under current law, pre-1988 base year reserves remain subject to recapture if First Clover Leaf Bank makes certain non-dividend distributions, repurchases any of its stock, pays dividends in excess of tax earnings and profits, or ceases to maintain a bank charter.

38

Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended (the “Code”) imposes an alternative minimum tax (“AMT”) at a rate of 20% on a base of regular taxable income plus certain tax preferences (“alternative minimum taxable income” or “AMTI”). The AMT is payable to the extent such AMTI is in excess of an exemption amount and the AMT exceeds the regular income tax. Net operating losses can offset no more than 90% of AMTI. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. First Clover Leaf Bank has not been subject to the alternative minimum tax and has no such amounts available as credits for carryover.

Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31, 2010, First Clover Leaf Bank had no net operating loss carryforwards for federal income tax purposes.

Corporate Dividends-Received Deduction. First Clover Leaf Financial Corp. may exclude from its income 100% of dividends received from First Clover Leaf Bank as a member of the same affiliated group of corporations. The corporate dividends-received deduction is 80% in the case of dividends received from corporations with which a corporate recipient does not file a consolidated return, and corporations which own less than 20% of the stock of a corporation distributing a dividend may deduct only 70% of dividends received or accrued on their behalf.

State Taxation

Illinois State Taxation. First Clover Leaf Financial Corp. is required to file Illinois income tax returns and pay tax at a stated tax rate of 7.30% of Illinois taxable income. For these purposes, Illinois taxable income generally means federal taxable income subject to certain modifications, primarily the exclusion of interest income on United States obligations. Effective January 1, 2011 the stated Illinois income tax rate increased to 9.50%.

ITEM 1A.          RISK FACTORS

The risks set forth below, in addition to the other risks described in this Annual Report on Form 10-K, may adversely affect our business, financial condition and operating results. In addition to the risks set forth below and the other risks described in this annual report, there may also be additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial that could materially and adversely affect our business, financial condition or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

Financial reform legislation recently enacted by Congress will, among other things, tighten capital standards, create a new Consumer Financial Protection Bureau and result in new laws and regulations that are expected to increase our costs of operations.

Congress recently enacted the Dodd-Frank Act. This new law will significantly change the current bank regulatory structure and affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare

39

numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

Certain provisions of the Dodd-Frank Act are expected to have a near term effect on us. For example, the new law provides that the Office of Thrift Supervision, which is the current primary federal regulator for First Clover Leaf Bank, will cease to exist one year from the date of the new law’s enactment. The Office of the Comptroller of the Currency, which is currently the primary federal regulator for national banks, will become the primary federal regulator for federal thrifts. Moreover, the Board of Governors of the Federal Reserve System will supervise and regulate all savings and loan holding companies that were formerly regulated by the Office of Thrift Supervision, including First Clover Leaf Financial Corp.

Also effective one year after the date of enactment is a provision of the Dodd-Frank Act that eliminates the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse effect on our interest expense.

The Dodd-Frank Act also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2012.

The Dodd-Frank Act requires publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and authorizes the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

The Dodd-Frank Act creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. The Dodd-Frank Act also weakens the federal preemption rules that have been applicable for national banks and federal savings associations, and gives state attorneys general the ability to enforce federal consumer protection laws.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on community banks. However, it is expected that at a minimum they will increase our operating and compliance costs and could increase our interest expense.

40

Future legislative or regulatory actions responding to perceived financial and market problems could impair our ability to collect our loans and foreclose on collateral.

There have been proposals made by members of Congress and others that would reduce the amount distressed borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral. Were proposals such as these, or other proposals limiting our rights as a creditor, to be implemented, we could experience increased credit losses or increased expense in pursuing our remedies as a creditor. In addition, there have been legislative proposals to create a federal consumer protection agency that may, among other powers, have the ability to limit our rights as a creditor.

Concentration of loans in our primary market area, which has recently experienced an economic downturn, may increase risk.

Our success depends primarily on the general economic conditions in the St. Louis metropolitan area, as nearly all of our loans are to customers in this market. Accordingly, the local economic conditions in this market have a significant impact on the ability of borrowers to repay loans as well as our ability to originate new loans. As such, a continuation of the weakness in real estate values in this market would also lower the value of the collateral securing loans on properties in our market. In addition, a continued weakening in general economic conditions caused by inflation, recession, unemployment or other factors beyond our control could negatively affect our financial results.

Risks Related to Recent Economic Conditions and Governmental Response Efforts

Our business has been and may continue to be adversely affected by current conditions in the financial markets and economic conditions generally. The global, United States and St. Louis economies are experiencing significantly reduced business activity and consumer spending as a result of, among other factors, disruptions in the capital and credit markets. Dramatic declines in the housing market, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. A sustained weakness or weakening in business and economic conditions generally or specifically in the principal markets in which we do business could have one or more of the following adverse effects on our business:

• a decrease in the demand for loans or other products and services offered by us;

• a decrease in the value of our loans or other assets secured by residential or commercial real estate;

• a decrease in deposit balances due to overall reductions in the accounts of customers;

• an impairment of our investment securities;

• an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us. An increase in the number of delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net charge-offs and provision for credit losses, which would reduce our earnings.

41

Any future Federal Deposit Insurance Corporation insurance premium increases will adversely affect our earnings.

On May 22, 2009, the Federal Deposit Insurance Corporation adopted a final rule levying a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. We recorded an expense of $280,000 during the quarter ended June 30, 2009, to reflect the special assessment. Any further special assessments that the Federal Deposit Insurance Corporation levies will be recorded as an expense during the appropriate period. In addition, the Federal Deposit Insurance Corporation increased the general assessment rate and our prior credits for federal deposit insurance were fully utilized during the quarter ended June 30, 2009.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

In response to the developments described above, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions, and the Federal Deposit Insurance Corporation has taken actions to increase insurance coverage on deposit accounts.

The potential exists for additional federal or state laws and regulations, or changes in policy, regarding lending and funding practices and liquidity standards, and bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders. Bank regulatory agencies, such as the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws, regulations, and other regulatory changes may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws, regulations, and other regulatory changes may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability. Proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor.

If our investment in the common stock of the Federal Home Loan Bank of Chicago is classified as other-than-temporarily impaired or as permanently impaired, our earnings and stockholders’ equity could decrease.

We own common stock of the Federal Home Loan Bank of Chicago. We hold this stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank of Chicago’s advance program. The aggregate cost and fair value of our Federal Home Loan Bank of Chicago common stock as of December 31, 2010 was $6.3 million based on its par value. Federal Home Loan Bank common stock is not a marketable security and can only be redeemed by the Federal Home Loan Bank. However, the Federal Home Loan Bank of Chicago is currently not repurchasing excess stock outstanding.

In addition, Federal Home Loan Banks may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank of Chicago, could be substantially diminished or reduced to zero. Consequently, we believe that there is a risk that our investment in Federal Home Loan Bank of Chicago common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the after-tax amount of the impairment charge.

42

Our earnings have been negatively affected by the suspension of dividends by the Federal Home Loan Bank of Chicago since the fourth quarter of 2007 on its common stock.

The Federal Home Loan Bank of Chicago suspended dividend payments beginning with the fourth quarter of 2007. They did reinstate their dividend payments in the first quarter of 2011, paying a dividend of 0.10%. However, there is no guarantee that we will continue to receive dividends from the Federal Home Loan Bank of Chicago in the near future. We received $129,000 in total dividends from the Federal Home Loan Bank of Chicago during fiscal 2007, and the failure of the Federal Home Loan Bank of Chicago to pay dividends for any quarter will reduce our earnings during that quarter. In addition, the Federal Home Loan Bank of Chicago is an important source of liquidity for us, and any restrictions on their operations may hinder our ability to use it as a liquidity source.

We may face increasing deposit-pricing pressures, which may, among other things, reduce our profitability.

Checking and savings account balances and other forms of deposits can decrease when our deposit customers perceive alternative investments, such as the stock market or other non-depository investments, as providing superior expected returns or seek to spread their deposits over several banks to maximize FDIC insurance coverage. Furthermore, technology and other changes have made it more convenient for bank customers to transfer funds into alternative investments, including products offered by other financial institutions or non-bank service providers. Additional increases in short-term interest rates could increase transfers of deposits to higher yielding deposits. Efforts and initiatives we undertake to retain and increase deposits, including deposit pricing, can increase our costs. When bank customers move money out of bank deposits in favor of alternative investments or into higher yielding deposits, or spread their accounts over several banks, we can lose a relatively inexpensive source of funds, thus increasing our funding costs.

An Inadequate Allowance for Loan Losses Would Negatively Impact Our Results of Operations.

We are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to avoid losses. Credit losses are inherent in the lending business and could have a material adverse effect on our operating results. Volatility and deterioration in the broader economy may also increase our risk of credit losses. The determination of an appropriate level of allowance for loan losses is an inherently uncertain process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and charge-offs may exceed current estimates. We evaluate the collectability of our loan portfolio and provide an allowance for loan losses that we believe is adequate based upon such factors as, including, but not limited to: the risk characteristics of various classifications of loans; previous loan loss experience; specific loans that have loss potential; delinquency trends; the estimated fair market value of the collateral; current economic conditions; the views of our regulators; and geographic and industry loan concentrations. If any of our evaluations are incorrect and borrower defaults result in losses exceeding our allowance for loan losses, our results of operations could be significantly and adversely affected. We cannot assure you that our allowance will be adequate to cover probable loan losses inherent in our portfolio.

43

The Need to Account for Assets at Market Prices May Adversely Affect Our Results of Operations.

We report certain assets, including investments and securities, at fair value. Generally, for assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value. Because we carry these assets on our books at their fair value, we may incur losses even if the asset in question presents minimal credit risk. Given the continued disruption in the capital markets, we may be required to recognize other-than-temporary impairments in future periods with respect to securities in our portfolio. The amount and timing of any impairment recognized will depend on the severity and duration of the decline in fair value of the securities and our estimation of the anticipated recovery period.

Our Commercial Real Estate, Commercial Business and Construction Loans Expose Us to Increased Credit Risks.

At December 31, 2010, our portfolio of commercial real estate loans totaled $160.8 million, or 39.9% of total loans, our commercial business loan portfolio totaled $51.7 million, or 12.8% of total loans, and our portfolio of construction and land loans totaled $53.6 million, or 13.3% of total loans. We plan to continue to emphasize the origination of these types of loans. Commercial real estate, commercial business and construction loans generally have greater credit risk than one- to four-family residential mortgage loans because repayment of these loans often depends on the successful business operations of the borrowers. These loans typically have larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans. Many of our borrowers also have more than one commercial real estate, commercial business or construction loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship may expose us to significantly greater risk of loss, compared to an adverse development with respect to a one- to four-family residential mortgage loan.

Changes in the Value of Goodwill and Intangible Assets Could Reduce Our Earnings and Stockholders’ Equity.

We are required by U.S. generally accepted accounting principles to test goodwill and other intangible assets for impairment at least annually. Testing for impairment of goodwill and intangible assets involves the identification of reporting units and the estimation of fair values. The estimation of fair values involves a high degree of judgment and subjectivity in the assumptions used. As of December 31, 2010, if our goodwill and intangible assets were fully impaired and we were required to charge-off all of our goodwill and intangible assets, the pro forma reduction to our stockholders’ equity would be approximately $1.60 per share. However, we performed our annual evaluation for impairment of goodwill and intangible assets as of September 30, 2010, and it is management’s opinion that we were not impaired at that time.

Our ability to originate mortgage loans for portfolio has been adversely affected by the increased competition resulting from the unprecedented involvement of the U.S. government and GSEs in the residential mortgage market.

Over the past few years, we have faced increased competition for mortgage loans due to the unprecedented involvement of government-sponsored entities (“GSEs”) in the mortgage market. This involvement is a result of the recent economic crisis and has caused the interest rate for thirty year fixed-rate mortgage loans that conform to the GSEs’ loan purchase guidelines to remain exceptionally low. We

44

originate and purchase such conforming loans and retain them for portfolio. In addition, the U.S. Congress recently extended through September 2011 the expanded GSE conforming loan limits in many of our operating markets, allowing larger balance loans to be acquired by the GSEs, and more loans in our portfolio qualified under the expanding conforming loan limits and were refinanced into fixed-rate mortgages. As a result of these factors, we expect that our one-to four-family loan repayments will remain at elevated levels, making it difficult for us to grow our mortgage loan portfolio. Accordingly, we are likely to experience a decrease in the size of our balance sheet while current economic conditions prevail.

Both Fannie Mae and Freddie Mac are under conservatorship with the Federal Housing Finance Agency, an agency of the U.S. government. On February 11, 2011, the Obama administration presented the U.S. Congress with a report of its proposals for reforming America’s housing finance market with the goal of scaling back the role of the U.S. government in, and promoting the return of private capital to, the mortgage markets and ultimately winding down Fannie Mae and Freddie Mac. Without mentioning a specific time frame, the report calls for the reduction of the role of Fannie Mae and Freddie Mac in the mortgage markets by, among other things, reducing conforming loan limits, increasing guarantee fees and requiring larger down payments by borrowers. The report presents three options for the long-term structure of housing finance, all of which call for the unwinding of Fannie Mae and Freddie Mac and a reduced role of the government in the mortgage market: (i) a system with U.S. government insurance limited to a narrowly targeted group of lower- and moderate-income borrowers; (ii) a system similar to (i) above except with an expanded guarantee during times of crisis; and (iii) a system where the U.S. government offers reinsurance for the securities of a broad range of mortgages behind significant private capital. We cannot be certain if or when Fannie Mae and Freddie Mac will be wound down, if or when reform of the housing finance market will be implemented or what the future role of the U.S. government will be in the mortgage market, and, accordingly, we will not be able to determine the impact that any such reform may have on us until a definitive reform plan is adopted.

ITEM 1B.          UNRESOLVED STAFF COMMENTS

None

45

ITEM 2.             PROPERTIES

The following table provides certain information with respect to our offices as of December 31, 2010:

Location	Leased or Owned	Year Acquired	Net Book Value of Real Property
			(In thousands)
Main Office 6814 Goshen Road Edwardsville, Illinois 62025	Owned	2006	$ 2,381
2143 Route 157 Edwardsville, Illinois 62025	Owned	2006	954
300 St. Louis Street Edwardsville, Illinois 62025	Owned	1964	1,656
1046 E. Madison St Wood River, Illinois 62095	Owned	2008	1,898

The net book value of our premises, land and equipment was approximately $10.6 million at December 31, 2010. In 2008, we purchased land in Highland, Illinois for possible future branch expansion. First Clover Leaf Bank continues to pursue other expansion opportunities.

ITEM 3.             LEGAL PROCEEDINGS

We are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of our business. At December 31, 2010, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

ITEM 4.             [REMOVED AND RESERVED]

PART II

ITEM 5.             MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY

SECURITIES

(a) The information required by this item is incorporated by reference to our Annual Report to Stockholders which is attached as Exhibit 13 hereto. No equity securities were sold during the year ended December 31, 2010 that were not registered under the Securities Act.

(b) Not applicable.

46

(c) The following table presents for the periods indicated a summary of the purchases made by or on behalf of First Clover Leaf Financial Corp. of shares of its common stock.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
October 1, 2010 through October 31, 2010		1,637	$	5.77		1,637		21,863
November 1, 2010 through November 30, 2010		20,619	$	6.43		20,619		26,244
December 1, 2010 through December 31, 2010		1,244	$	6.17		1,244		25,000
Total		23,500				23,500

___________________

(1) The Company’s board of directors approved a stock repurchase program on November 12, 2008 for the repurchase of up to 924,480 shares of common stock, and on December 11, 2008, they increased the number of shares that may be repurchased pursuant to that plan by an additional 382,641 shares.Additional increases to that plan were made on April 27, 2010 and November 23, 2010 for 25,000 shares, respectively.

ITEM 6.             SELECTED FINANCIAL DATA

Incorporated by reference to our Annual Report to Stockholders included as Exhibit 13 to this Form 10-K.

ITEM 7.             MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The information contained in the section captioned “Management’s Discussion and Analysis of First Clover Leaf Financial Corp.’s Financial Condition and Results of Operations” is incorporated herein by reference to our Annual Report to Stockholders included as Exhibit 13 to this Form 10-K.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Incorporated by reference to the Annual Report to Stockholders included as Exhibit 13 to this Form 10-K.

ITEM 8.             FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements included in our Annual Report to Stockholders included as Exhibit 13 to this Form 10-K are incorporated herein by reference.

ITEM 9.             CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

47

ITEM 9A.          CONTROLS AND PROCEDURES

(a)            Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in timely alerting them to the material information relating to us (or our consolidated subsidiaries) required to be included in our periodic SEC filings.

There were no significant changes made in our internal controls during the period covered by this report or, to our knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.

(b)            Management’s annual report on internal control over financial reporting.

Management of First Clover Leaf Financial Corp. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework.” Based on the assessment, management determined that, as of December 31, 2010, the Company’s internal control over financial reporting is effective, based on those criteria.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to provisions of the Dodd-Frank Act that permit the Company to provide only the management’s report in this annual report.

48

ITEM 9B.          OTHER INFORMATION

None.

PART III

ITEM 10.           DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning directors and executive officers of First Clover Leaf Financial Corp. is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Proposal I—Election of Directors.”

ITEM 11.           EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by reference from the Proxy Statement; specifically the section captioned “Executive Compensation.”

ITEM 12.           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information concerning security ownership of certain owners and management is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Voting Securities and Principal Holder Thereof.”

ITEM 13.           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

DIRECTOR INDEPENDENCE

Information concerning relationships and transactions is incorporated herein by reference from the Proxy Statement, specifically the section captioned “Transactions with Certain Related Persons.”

ITEM 14.           PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning principal accountant fees and services is incorporated herein by reference from the Proxy Statement; specifically the section captioned “Proposal II-Ratification of Appointment of Auditors.”

PART IV

ITEM 15.           EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are either filed or attached as part of this report or are incorporated herein by reference:

3.1 Articles of Incorporation of First Clover Leaf Financial Corp. (1)

3.2 Bylaws of First Clover Leaf Financial Corp. (1)

4. Form of common stock certificate of First Clover Leaf Financial Corp. (1)

49

10.1 Employee Stock Ownership Plan (2)

10.2 Description of Bonus Plan (2)

10.3 [Reserved]

10.4 Amended and Restated Employment Agreement of Dennis M. Terry (4)

10.5 Amended and Restated Employment Agreement of Lisa M. Fowler (4)

10.6 Amended and Restated Employment Agreement of Darlene F. McDonald (4)

10.7 Employment Agreement of Brad S. Rench (5)

10.8 Amendment to Amended and Restated Employment Agreement of Dennis M. Terry

13 Portions of Annual Report to Stockholders

14 Code of Conduct (3)

21 Subsidiaries of the Registrant

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

______________________________

(1) Incorporated by reference to the Registration Statement on Form SB-2 of First Clover Leaf Financial Corp. (File No. 333-132423), originally filed with the Securities and Exchange Commission on March 14, 2006.

(2) Incorporated by reference to the Registration Statement on Form SB-2 of First Federal Financial Services, Inc. (File No. 333- 113615), originally filed with the Securities and Exchange Commission on March 15, 2004.

(3) Incorporated by reference to the Annual Report on Form 10-KSB of First Federal Financial Services, Inc for the year ended December 31, 2004, filed with the Commission on March 31, 2005.

(4) Incorporated by reference to the Annual Report on Form 10-KSB of First Clover Leaf Financial Corp. for the year ended December 31, 2006, filed with the Commission on April 2, 2007.

(5) Incorporated by reference to the Annual Report on Form 10-K of First Clover Leaf Financial Corp. for the year ended December 31, 2009, filed with the Commission on March 31, 2010.

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	First Clover Leaf Financial Corp.
Date: March 31, 2011	By:	/s/ Dennis M. Terry
		Dennis M. Terry, President and
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Dennis M. Terry	By:	/s/ Joseph Helms
	Dennis M. Terry, President, and Chief		Joseph Helms
	Executive Officer and Director		Chairman of the Board
	(Principal Executive Officer)
Date: March 31, 2011		Date: March 31, 2011
By:	/s/ Darlene F. McDonald	By:	/s/ Nina Baird
	Darlene F. McDonald, Senior Vice President		Nina Baird
	and Chief Financial Officer		Director
	(Principal Financial and Accounting Officer)
Date: March 31, 2011		Date: March 31, 2011
By:	/s/ Joseph J. Gugger	By:	/s/ Kenneth Highlander
	Joseph J. Gugger		Kenneth Highlander
	Director		Director
Date: March 31, 2011		Date: March 31, 2011
By:	/s/ Gary Niebur	By:	/s/ Gerard Schuetzenhofer
	Gary Niebur		Gerard Schuetzenhofer
	Director		Director
Date: March 31, 2011		Date: March 31, 2011

51

By:	/s/ Robert W. Schwartz	By:	/s/ Joseph Stevens
	Robert W. Schwartz		Joseph Stevens
	Director		Director
Date: March 31, 2011		Date: March 31, 2011
By:	/s/ Dennis Ulrich
	Dennis Ulrich
	Director
Date: March 31, 2011

52

EX-10.8

EXHIBIT 10.8

AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT

OF DENNIS M. TERRY

FIRST AMENDMENT TO

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This First Amendment (“Amendment”) is made effective as of December 27, 2010(the “Effective Date”), by and between First Clover Leaf Bank (the “Bank”), with its principal office in Edwardsville, Illinois, and Dennis M. Terry (“Executive”) and shall be effective as of January 1, 2011 (the “Effective Date”).

WHEREAS, the Bank and the Executive are parties to the Second Amended and Restated Employment Agreement, effective January 1, 2008 (the “Agreement”); and

WHEREAS, the Bank and the Executive wish to amend the Agreement to provide that the Executive shall not be entitled to receive any fees for serving as a director of the Bank or First Clover Leaf Financial Corp. (the “Company”).

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:

1. The following is added to the end of Section 3(a):

Notwithstanding the preceding provisions of this Section, effective January 1, 2011, the Executive shall not be entitled to receive any fees for serving as a director of the Bank or the Company.

IN WITNESS WHEREOF, the parties have executed this Amendment on the dates set forth below.

	FIRST CLOVER LEAF BANK
December 28, 2010	By:	/s/ Joseph Helms
Date		Joseph Helms, Chairman of the Board
January 10, 2011	/s/ Dennis M. Terry
Date	Dennis M. Terry

EX-13

EXHIBIT 13

PORTIONS OF ANNUAL REPORT TO STOCKHOLDERS

Exhibit 13

PORTIONS OF 2010 ANNUAL REPORT TO STOCKHOLDERS

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

OF FIRST CLOVER LEAF FINANCIAL CORP.

The following information is derived from the audited consolidated financial statements of First Clover Leaf Financial Corp. For additional information, reference is made to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of First Clover Leaf Financial Corp. and related notes included elsewhere in this Annual Report.

	At December 31,
	2010		2009		2008		2007		2006
	(In thousands)
Selected Financial Condition Data:
Total assets	$	574,970	$	585,527	$	653,325	$	413,252	$	410,292
Loans, net (1)		387,568		411,899		430,919		284,919		245,025
Cash and cash equivalents		66,253		47,997		67,135		37,085		92,665
Securities available for sale		78,475		86,407		103,568		54,150		45,832
Federal Home Loan Bank stock		6,306		6,306		6,306		5,604		5,604
Deposits		447,483		442,554		447,303		291,195		270,830
Securities sold under agreements to repurchase		21,457		18,936		55,103		15,893		29,438
Subordinated debentures		3,974		3,930		3,886		3,842		3,798
Federal Home Loan Bank advances		21,924		39,924		49,968		10,432		10,326
Stockholders’ equity – substantially restricted (2)		77,333		76,928		93,657		88,681		93,329

	Years Ended December 31,
	2010		2009			2008 (3)		2007		2006 (4)
	(In thousands, except per share data)
Selected Operating Data:
Total interest income	$	25,441	$	28,008		$	24,686	$	22,401	$	13,869
Total interest expense		8,936		12,260			12,445		12,084		6,545
Net interest income		16,505		15,748			12,241		10,317		7,324
Provision for loan losses		2,573		5,554			777		347		367
Net interest income after provision for loan losses		13,932		10,194			11,464		9,970		6,957
Other income		2,246		1,418			809		626		298
Other expense		10,400		20,526			8,086		6,771		4,392
Income (loss) before income taxes		5,778		(8,915	)		4,188		3,825		2,863
Income tax expense (benefit)		1,972		(92	)		1,486		1,419		1,026
Net income (loss)	$	3,806	$	(8,823	)	$	2,702	$	2,406	$	1,837
Basic earnings (losses) per share	$	0.49	$	(1.08	)	$	0.33	$	0.27	$	0.23
Diluted earnings (losses) per share	$	0.49	$	(1.08	)	$	0.33	$	0.27	$	0.23

________________

(1) Net of the allowance for loan losses. Includes loans held for sale.

(2) Stockholders’ equity is substantially restricted due to capital requirements imposed under Federal capital regulations.

(3) 2008 operating data includes results of operations from Partners Financial Holdings, Inc. and its subsidiary, Partners Bank, after October 10, 2008.

(4) 2006 operating data includes results of operations from Clover Leaf Financial Corp. and its subsidiary, Clover Leaf Bank, after July 10, 2006.

1

	At or For the Years Ended December 31,
	2010			2009			2008			2007			2006
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income (loss) to average total assets)		0.65	%		(1.39	)%		0.56	%		0.63	%		0.77	%
Return on equity (ratio of net income (loss) to average stockholders’ equity)		4.88			(10.25	)		3.08			2.62			3.32
Average interest rate spread (1)		2.77			2.39			2.16			1.88			2.36
Dividend payout ratio (2)		48.98			(22.22	)		72.73			88.89			104.35
Dividends per share		0.24			0.24			0.24			0.24			0.24
Net interest margin (3)		3.04			2.68			2.72			2.90			3.25
Efficiency ratio (4)		55.46			119.57			61.96			61.88			57.63
Non-interest expense to average total assets		1.79			3.24			1.67			1.77			1.80
Average interest-earning assets to average interest-bearing liabilities		116.45			114.05			120.43			130.12			130.90
Asset Quality Ratios:
Non-performing assets and impaired loans to total assets		4.08	%		5.16	%		1.25	%		1.04	%		0.96	%
Non-performing and impaired loans to total loans		5.06			7.07			1.75			1.50			1.60
Net charge-offs to average loans outstanding		0.78			0.74			0.08			0.06			—
Allowance for loan losses to non-performing and impaired loans		29.19			21.68			51.71			44.27			43.61
Allowance for loan losses to total loans		1.48			1.53			0.90			0.67			0.70
Capital Ratios:
Stockholders’ equity to total assets at end of year		13.45	%		13.14	%		14.34	%		21.46	%		22.75	%
Average stockholders’ equity to average assets		13.43			13.60			18.14			24.03			23.06
Tangible capital		10.50			9.55			8.45			16.97			16.16
Tier 1 (core) capital		10.50			9.55			8.45			16.97			16.16
Tier 1 risk-based capital ratio (5)		15.69			12.88			12.59			23.32			25.33
Total risk-based capital ratio (6)		16.22			13.75			13.17			23.65			26.02
Other Data:
Number of full service offices		4			4			4			3			4

_______________________________

(1) The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the year.

(2) Dividends declared per share divided by diluted earnings per share.

(3) The net interest margin represents net interest income as a percent of average interest-earning assets for the year.

(4) The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income. The 2009 ratio includes a $9.3 million goodwill impairment expense.

(5) Tier 1 risk-based capital ratio represents Tier 1 capital of First Clover Leaf Bank divided by its risk-weighted assets as defined in federal regulations on required capital.

(6) Total risk-based capital ratio represents total capital divided by risk-weighted assets.

2

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects First Clover Leaf Financial Corp.’s consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from our audited consolidated financial statements, which appear elsewhere in this Annual Report. You should read the information in this section in conjunction with the business and financial information regarding First Clover Leaf Financial Corp. (First Clover Leaf) provided elsewhere in this annual report.

Forward Looking Statements

This document contains certain "forward-looking statements," which may be identified by the use of words such as "believe," "expect," "anticipate," "should," "planned," "estimated" and "potential." These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and local economic conditions, changes in interest rates, deposit flows, demand for mortgage and other loans, real estate values, competition, changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services.

Overview

First Clover Leaf’s results of operations depend primarily on net interest income. Net interest income is the difference between the interest earned on interest-earning assets, consisting primarily of loans, investment securities, mortgage-backed securities and other interest-earning assets (primarily cash and cash equivalents), and the interest paid on interest-bearing liabilities, consisting of demand and NOW accounts, money market, savings and term certificate accounts and borrowings. Our results of operations also are affected by our provision for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges and fee income on deposit accounts and customer debit and credit card holders as well as loan servicing income, gain on sale of securities and gain on sale of loans that we sold but on which we retained the servicing rights. Non-interest expense currently consists primarily of compensation and employee benefits, occupancy, data processing, Federal Deposit Insurance Corporation insurance premiums and professional fees. Unusual items such as goodwill impairment and asset impairment may also have a significant impact on non-interest expense. The results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Total assets decreased to $575.0 million at December 31, 2010 from $585.5 million at December 31, 2009. The decrease was primarily due to lower balances in securities available for sale and net loans offset by an increase in cash and cash equivalents. Securities available for sale decreased to $78.5 million at December 31, 2010 compared to $86.4 million at December 31, 2009 primarily due to calls, maturities, paydowns, and sales exceeding purchases by $7.7 million. Loans including loans held for sale, net amounted to $387.6 million at December 31, 2010, compared to $411.9 million at December 31, 2009. The decrease was primarily due to loan collections in excess of new loan originations of $15.9 million and $4.0 million of assets acquired in settlement of loans. Cash and cash equivalents increased to $66.3 million at December 31, 2010 compared to $48.0 million at December 31, 2009. The $18.3 million increase was due to an increase in federal funds sold.

3

Total liabilities decreased to $497.6 million at December 31, 2010 from $508.6 million at December 31, 2009. Deposits increased slightly to $447.5 million at December 31, 2010 from $442.6 million at December 31, 2009. This net increase of $4.9 million was primarily due to a $34.8 million increase in our interest bearing transaction accounts and a $1.0 million increase in our saving accounts offset by decreases of $15.4 million and $15.5 million in our noninterest-bearing deposits and time deposits, respectively. Federal Home Loan Bank advances decreased to $21.9 million at December 31, 2010 compared to $39.9 million at December 31, 2009. This decrease was due to repayments exceeding new advances by $18.0 million. Securities sold under agreements to repurchase increased to $21.5 million at December 31, 2010 from $18.9 million at December 31, 2009. Accrued interest payable decreased to $562,000 at December 31, 2010 from $1.2 million at December 31, 2009 due to lower balances and lower rates on our time deposits and borrowings.

Stockholders’ equity increased to $77.3 million at December 31, 2010 from $76.9 million at December 31, 2009 primarily due to net income of $3.8 million, offset by the payment of cash dividends in the amount of $1.9 million, and a reduction in unrealized gains on securities of $1.1 million.

Net interest income increased to $16.5 million for 2010 from $15.7 million for 2009. This increase was due primarily to the decline in interest rates for interest-bearing liabilities being greater than the decline in interest rates for interest-earning assets.

Critical Accounting Policies

First Clover Leaf considers the allowance for loan losses and goodwill to be its critical accounting estimates, due to the higher degree of judgment and complexity than its other significant accounting estimates.

Allowance for loan losses. The allowance for loan losses is a valuation account that reflects our evaluation of the credit losses inherent in our loan portfolio. We maintain the allowance through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely.

Our evaluation of risk in maintaining the allowance for loan losses includes the review of all loans on which the collectibility of principal may not be reasonably assured. We consider the following factors as part of this evaluation: our historical loan loss experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. Management evaluates the total balance of the allowance for loan losses based on several factors that are not loan specific but are reflective of the losses inherent in the loan portfolio, including management’s periodic review of loan collectibility in light of historical experience, the nature and volume of the loan portfolio, prevailing economic conditions such as housing trends, inflation rates and unemployment rates, and geographic concentrations of loans within First Clover Leaf Bank’s immediate market area.

There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. During 2010, management increased the general allocation percentages used in the calculation of our allowance for loan losses. Management evaluated several factors in determining the need to increase these percentages. The loss history was the primary reason the general allocation was increased. Management also revised the watch and criticized/non-impaired allocation percentages to more accurately reflect the risk of our current portfolio. Management also reviewed the current economic conditions and determined that no adjustment was necessary to any of the qualitative factors during 2010.

4

In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our loan portfolio and the related allowance for loan losses. The Office of Thrift Supervision may require us to increase the allowance for loan losses based on its judgments of information available to it at the time of its examination, thereby adversely affecting our results of operations.

Goodwill and Other Intangible Assets. Over the past several years, First Clover Leaf has grown through acquisitions accounted for under the purchase method of accounting in effect at the time of the acquisitions. Under the purchase method, First Clover Leaf is required to allocate the cost of an acquired company to the assets acquired, including identified intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition. The excess cost over the net assets acquired represents goodwill, which is not subject to periodic amortization.

Customer relationship intangibles are required to be amortized over their estimated useful lives. The method of amortization reflects the pattern in which the economic benefits of these intangible assets are estimated to be consumed or otherwise used up. Our customer relationship intangibles are being amortized over 7.6 and 9.7 years using the double declining balance method. Since First Clover Leaf’s acquired customer relationships are subject to routine customer attrition, the relationships are more likely to produce greater benefits in the near-term than in the long-term, which typically supports the use of an accelerated method of amortization for the related intangible assets. Management is required to evaluate the useful life of customer relationship intangibles to determine if events or circumstances warrant a change in the estimated life. Should management determine the estimated life of any intangible asset is shorter than originally estimated, First Clover Leaf would adjust the amortization of that asset, which could increase future amortization expense.

Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill recorded by First Clover Leaf in connection with its acquisitions relates to the inherent value in the businesses acquired and this value is dependent upon First Clover Leaf’s ability to provide quality, cost effective services in a competitive market place. The continued value of recorded goodwill is impacted by the value of our stock and continued profitability of the organization. In the event that the stock price experiences significant declines or the operations of the company lack profitability an impairment of goodwill may need to be recognized. Any impairment recognized would adversely impact earnings in the period in which it is recognized.

First Clover Leaf utilizes a two step valuation approach to test for goodwill impairment. We estimate the fair value of our single reporting unit as of the measurement date utilizing two valuation methodologies including the comparable transactions approach, and the control premium approach which utilizes the company’s stock price. We then compare the estimated fair value of the reporting unit to the current carrying value of the reporting unit to determine if goodwill impairment had occurred as of the measurement date. In June 2009, we recorded an impairment charge of $9.3 million. At our annual impairment assessment date of September 30, 2010, our analysis indicated that no additional impairment existed. Future events, such as adverse changes to First Clover Leaf’s business or changes in the economic market, could cause management to conclude that impairment indicators exist and require management to re-evaluate goodwill. Should such re-evaluation determine goodwill is impaired; the resulting impairment loss recognized could have a material, adverse impact on First Clover Leaf’s financial condition and results of operations. In accordance with current accounting guidance, management has determined that the Company has only one reporting unit for purposes of evaluating goodwill.

5

Comparison of Financial Condition at December 31, 2010 and December 31, 2009

Total Assets. Total assets decreased to $575.0 million at December 31, 2010 from $585.5 million at December 31, 2009. The decrease was primarily due to lower balances in securities available for sale and net loans offset by an increase in cash and cash equivalents and an increase of $2.8 million in foreclosed assets.

Cash and cash equivalents increased to $66.3 million at December 31, 2010 from $48.0 million at December 31, 2009 due to an increase in federal funds sold. Additionally, we held $1.7 million in interest-earning time deposits at December 31, 2010, compared to none at December 31, 2009.

Securities available for sale decreased to $78.5 million at December 31, 2010 from $86.4 million at December 31, 2009. The decrease was primarily due to calls, maturities, paydowns, and sales exceeding purchases by $7.7 million.

Loans, net, decreased to $387.6 million at December 31, 2010 from $411.9 million at December 31, 2009. The decrease was primarily due to loan collections in excess of new loan originations of $15.9 million and $4.0 million transferred to foreclosed assets. The loan portfolio has experienced some shifts in categories over the past year. One- to four-family loans increased to $99.2 million at December 31, 2010 from $98.1 million at December 31, 2009. The majority of loans that are originated in this category are sold to the secondary market with servicing rights retained. Multi-family real estate loans increased to $26.5 million at December 31, 2010 from $20.9 million at December 31, 2009. Commercial real estate loans decreased to $160.8 million at December 31, 2010 from $179.9 million at December 31, 2009. Construction and land loans increased to $53.6 million at December 31, 2010 from $45.4 million at December 31, 2009. Commercial business loans decreased to $51.7 million at December 31, 2010 from $63.1 million at December 31, 2009. Due to the current economic environment, new loan demand in the commercial real estate and commercial business categories has significantly declined.

Foreclosed assets increased to 13 properties held at December 31, 2010 with a value of $3.8 million compared to three properties at December 31, 2009 with a value of $1.1 million. The increase is due to the continuing economic slowdown.

Prepaid Federal Deposit Insurance Corporation insurance premiums decreased to $2.3 million at December 31, 2010 compared to $3.0 million at December 31, 2009. The decrease represents the portion of the prepayment that was expensed during 2010, which was originally required to be prepaid in 2009 along with the estimated assessment for the calendar years 2011 and 2012.

Total Liabilities. Deposits increased to $447.5 million at December 31, 2010 from $442.6 million at December 31, 2009. This net increase of $4.9 million was primarily due to a $34.8 million increase in our interest bearing transaction accounts and a $1.0 million increase in our saving accounts offset by decreases of $15.4 million and $15.5 million in our noninterest-bearing deposits and time deposits, respectively.

Federal Home Loan Bank advances at December 31, 2010 were $21.9 million compared to $39.9 million at December 31, 2009. The decrease was primarily due to repayments of $23.0 million offset by an additional advance of $5.0 million. Securities sold under agreements to repurchase were $21.5 million at December 31, 2010 compared to $18.9 million at December 31, 2009. Due to repayments in loans and securities, we did not require additional borrowings to fund operations.

Stockholders’ Equity. Stockholders’ equity increased to $77.3 million at December 31, 2010 from $76.9 million at December 31, 2009 primarily due to net income of $3.8 million, offset by the payment of

6

cash dividends in the amount of $1.9 million, and a reduction in unrealized gains on securities of $1.1 million.

Comparison of Operating Results for the Years Ended December 31, 2010 and 2009.

General. We recorded net income of $3.8 million for the year ended December 31, 2010 compared to a net loss of $8.8 million for the year ended December 31, 2009. The increase in net income for the year ended December 31, 2010 resulted from higher net interest income, a lower provision for loan losses, a gain on sale of securities for the year ended December 31, 2010, and no comparable goodwill or assets impairment charges for the year ended December 31, 2010 compared to the year ended December 31, 2009, offset by higher income taxes in 2010.

During 2010, yields on loans and securities continued to decline primarily due to assets re-pricing in the current rate environment. Our commercial loans are more sensitive to changes in market interest rates because they often have shorter terms to maturity, and therefore, the interest rates adjust more frequently. A significant number of the bonds in our security portfolio have been called and were replaced with current market lower yielding bonds. Our interest-earning balances from depository institutions have remained at a constant rate from 2009 to 2010. We have also experienced time deposits re-pricing as they mature, however, these fixed-rate contracts do not allow for immediate re-pricing as rates fluctuate. Our ability to lower rates paid on deposits is limited due to the already low deposit rates and the competitive environment in which we operate. Overall, further downward pressure on interest rates is unlikely to significantly benefit our net interest margin or net income.

Net interest income. Net interest income increased to $16.5 million for the year ended December 31, 2010 from $15.7 million for the year ended December 31, 2009. Net average interest-earning assets were $76.6 million for 2010, compared to $72.4 million for 2009. The ratio of average interest-earning assets to average interest-bearing liabilities increased to 116.45% for 2010 from 114.05% for 2009. Our interest rate spread increased to 2.77% for 2010 from 2.39% for 2009, and our net interest margin increased to 3.04% in 2010 from 2.68% for 2009. The average rate earned on interest-earning assets decreased by eight basis points during 2010 to 4.69% from 4.77% during 2009, while the average rate paid on interest-bearing liabilities decreased by 46 basis points to 1.92% from 2.38% during 2009. The increase in the interest rate spread was attributable to the cost of funds declining faster than the yield on interest-earning assets.

7

The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred loan fees, discounts and premiums that are amortized or accreted to interest income or expense.

	Years Ended December 31,
	2010							2009							2008 (5)
	Average Outstanding Balance		Interest (4)		Yield/Rate			Average Outstanding Balance		Interest (4)		Yield/Rate			Average Outstanding Balance		Interest (4)		Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans, gross	$	405,296	$	22,562		5.57	%	$	422,142	$	23,947		5.67	%	$	340,062	$	20,824		6.12	%
Securities		85,413		2,767		3.24			98,050		3,907		3.98			68,265		3,086		4.52
Federal Home Loan Bank stock		6,306		---		0.00			6,306		---		0.00			5,761		---		0.00
Interest-earning balances from depository institutions		45,439		112		0.25			61,037		154		0.25			35,845		776		2.16
Total interest-earning assets		542,454		25,441		4.69			587,535		28,008		4.77			449,933		24,686		5.49
Non-interest-earning assets		38,705							45,264							32,978
Total assets	$	581,159						$	632,799						$	482,911
Interest-bearing liabilities:
Interest-bearing transaction…	$	190,368		2,285		1.20		$	180,606		2,893		1.60		$	107,054		2,710		2.53
Savings deposits		21,475		152		0.71			28,267		218		0.77			18,203		301		1.65
Time deposits		194,688		5,293		2.72			212,782		7,141		3.36			181,851		7,803		4.29
Securities sold under agreement to repurchase		25,738		27		0.10			44,669		59		0.13			38,627		374		0.97
Federal Home Loan Bank advances		29,603		994		3.36			44,903		1,651		3.68			24,016		958		3.99
Subordinated debentures		3,951		185		4.68			3,907		298		7.63			3,862		299		7.74
Total interest-bearing liabilities		465,823		8,936		1.92			515,134		12,260		2.38			373,613		12,445		3.33
Non-interest-bearing liabilities		37,292							31,573							21,686
Total liabilities		503,115							546,707							395,299
Stockholders’ equity		78,044							86,092							87,612
Total liabilities and stockholders’ equity	$	581,159						$	632,799						$	482,911
Net interest income			$	16,505						$	15,748						$	12,241
Net interest rate spread (1)						2.77	%						2.39	%						2.16	%
Net interest-earning assets (2)	$	76,631						$	72,401						$	76,320
Net interest margin (3)						3.04	%						2.68	%						2.72	%
Ratio of interest-earning assets to interest-bearing liabilities						116.45	%						114.05	%						120.43	%

________________

(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

(4) Interest on loans includes $228,152, $218,847 and $190,804 of loan fees collected in 2010, 2009 and 2008, respectively.

(5) The year ended December 31, 2009 represents the first full year of operations following the acquisition of Partners Financial Holdings, Inc. and its subsidiary, Partners Bank, on October 10, 2008. 2008 results reflect only three months of income and expense related to Partners Bank.

8

The following tables present the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate. The year ended December 31, 2009 represents the first full year of operations following the acquisition of Partners Financial Holdings, Inc. and its subsidiary, Partners Bank, on October 10, 2008. 2008 results reflect only three months of income and expense related to Partners Bank.

	Year Ended December 31,
	2010 vs. 2009
	Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	(968	)	$	(417	)	$	(1,385	)
Securities		(506	)		(634	)		(1,140	)
Interest-earning balances from depository institutions		(41	)		(1	)		(42	)
Total interest-earning assets		(1,515	)		(1,052	)		(2,567	)
Interest-bearing liabilities:
Interest-bearing transactions		154			(762	)		(608	)
Savings deposits		(53	)		(13	)		(66	)
Time deposits		(605	)		(1,243	)		(1,848	)
Securities sold under agreement to repurchase		(24	)		(8	)		(32	)
Federal Home Loan Bank advances		(562	)		(95	)		(657	)
Subordinated debentures		4			(117	)		(113	)
Total interest-bearing liabilities		(1,086	)		(2,238	)		(3,324	)
Change in net interest income	$	(429	)	$	1,186		$	757

	Year Ended December 31,
	2009 vs. 2008
	Increase (Decrease) Due to					Total Increase
	Volume		Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	5,023	$	(1,900	)	$	3,123
Securities		1,348		(527	)		821
Interest-earning balance from depository institutions		544		(1,166	)		(622	)
Total interest-earning assets		6,915		(3,593	)		3,322
Interest-bearing liabilities:
Interest-bearing transactions		1,862		(1,679	)		183
Savings deposits		166		(249	)		(83	)
Time deposits		1,322		(1,984	)		(662	)
Securities sold under agreement to repurchase		60		(375	)		(315	)
Federal Home Loan Bank advances		832		(139	)		693
Subordinated debentures		3		(4	)		(1	)
Total interest-bearing liabilities		4,245		(4,430	)		(185	)
Change in net interest income	$	2,670	$	837		$	3,507

9

           Interest and fee income. Interest and fee income on loans decreased to $22.6 million for 2010 from $23.9 million for 2009. This decrease was primarily a result of a lower average balance of loans due primarily to the current economic conditions and decreased commercial loan demand. The average balance of loans was $405.3 million and $422.1 million during 2010 and 2009, respectively. The average yield on loans decreased to 5.57% for 2010 from 5.67% for 2009. Interest income on loans for 2010 and 2009 included amortization of the purchase accounting adjustment for loans of $58,000 and $60,000, respectively.

Interest income on securities decreased to $2.8 million for 2010 from $3.9 million for 2009. Interest income on securities decreased due primarily to a lower average balance as a result of sales in addition to a significant number of bonds being called during 2010 due to the low rate environment, and replacement bonds being difficult to find at the desired risk, duration and interest rate levels. The average balance of securities was $85.4 million and $98.1 million for 2010 and 2009, respectively. The average yield on securities decreased to 3.24% for 2010 from 3.98% for 2009. The purchase accounting amortization recorded in 2010 and 2009 increased interest income on securities by $59,000 and $55,000, respectively.

We must maintain an investment portfolio that meets our pledging and collateral needs. Due to the low rate environment, we had a significant number of higher yielding bonds called, requiring us to reinvest these funds at lower rates.

Interest on other interest-earning deposits decreased due to a decline in average balances. The average balance of other interest-earning deposits was $45.4 million and $61.0 million for 2010 and 2009, respectively. The average yield on other interest-earning deposits was 0.25% for 2010 and for 2009. Components of interest income vary from time to time based on the availability and interest rates of loans, securities and other interest-earning assets.

Interest expense. Interest expense on deposits decreased to $7.7 million for 2010 from $10.3 million for 2009. The average balance of interest bearing deposits decreased to $406.5 million during 2010 from $421.7 million for 2009, and the average rate on interest-bearing deposits decreased to 1.90% for 2010 from 2.43% for 2009. The purchase accounting amortization recorded in 2010 and 2009 decreased interest expense for deposits by $44,000 and $144,000, respectively.

Interest on securities sold under agreements to repurchase decreased to $27,000 from $59,000 due to a significant decline in average balances, along with a slight decline in rate. The average balance of securities sold under agreements to repurchase was $25.7 million and $44.7 million for 2010 and 2009, respectively. The average rate declined to 0.10% for 2010 from 0.13% for 2009.

Interest on Federal Home Loan Bank advances decreased in 2010 due to a lower average balance and a decline in rate. The decrease in average balances was primarily the result of advances that matured that were no longer needed due to the decreased loan demand. The average balance of Federal Home Loan Bank advances was $29.6 million and $44.9 million for 2010 and 2009, respectively. The average rate on Federal Home Loan Bank advances decreased to 3.36% for 2010 compared to 3.68% for 2009. There was no net impact on interest expense for 2010 from purchase accounting amortization. The purchase accounting amortization recorded in 2009 decreased interest expense on Federal Home Loan Bank advances by $39,000.

Interest expense on subordinated debentures decreased to $185,000 for 2010 from $298,000 for 2009. In accordance with the terms of our subordinated debentures, in June 2010 the rate converted from a fixed rate to a variable rate that adjusts quarterly. Given the low interest rate environment, the average rate declined to 4.68% for 2010 compared to 7.63% for 2009. Interest expense on subordinated

10

debentures included amortization of the purchase accounting adjustment for subordinated debt of $44,000 for both 2010 and 2009, respectively.

Provision for loan losses. Provision for loan losses decreased to $2.6 million for 2010 from $5.6 million for 2009. Provision for loan losses is based upon management’s consideration of current economic conditions, First Clover Leaf’s loan portfolio composition and historical loss experience coupled with current market valuations on collateral, and management’s estimate of probable losses in the portfolio as well as the level of non-performing and impaired loans. Non-performing and impaired loans totaled $19.6 million at December 31, 2010 compared to $29.1 million at December 31, 2009. Management also reviews individual loans for which full collectability may not be reasonably assured and considers, among other matters, the estimated fair value of the underlying collateral. This evaluation is ongoing and results in variations in First Clover Leaf’s provision for loan losses. There may be other factors that may warrant our consideration in maintaining an allowance at a level sufficient to provide for probable losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. During 2010, management increased the general allocation percentages used in the calculation of our allowance for loan losses. Management evaluated several factors in determining the need to increase these percentages. The loss history was the primary reason the general allocation was increased. Management also revised the watch and criticized/non-impaired allocation percentages to more accurately reflect the risk of our current portfolio. Management also reviewed the current economic conditions and determined that no adjustment was necessary to any of the qualitative factors during 2010.

In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our loan portfolio and the related allowance for loan losses. The Office of Thrift Supervision may require us to increase the allowance for loan losses based on its judgments of information available to it at the time of its examination, thereby adversely affecting our results of operations.

Non-interest income. Non-interest income increased to $2.2 million for the year ended December 31, 2010 from $1.4 million for the year ended December 31, 2009. The most significant increase was a $664,000 gain on sale of securities in 2010 compared to no income from security sales for the year ended December 31, 2009. We chose to sell securities as a strategic plan to restructure the portfolio. Selling these securities and using the proceeds to purchase both tax-exempt and taxable municipal securities and mortgage backed securities should allow, over time, for a higher yield. This also allowed us to restructure the cash flows from securities into a more laddered distribution. These security sales allowed us to capture some of the gain in the portfolio that existed and would diminish if interest rates were to rise, or the securities were called or matured. Gains on sale of loans declined to $555,000 for the year ended December 31, 2010, compared to $578,000 for the year ended December 31, 2009. The decline was due to decreased loan demand resulting in $22.6 million in loans sold in 2010 compared to $28.5 million in loans sold in 2009. Service fees on deposit accounts and other service charges and fees increased $73,000 for the year ended December 31, 2010, compared to the prior year ended December 31, 2009. Other service charges and fees increased $66,000 for the year ended December 31, 2010, compared to the prior year ended December 31, 2009. The increases in these two categories are primarily due to the increase in our deposit transaction accounts and the related increase in debit and credit card surcharge fees.

Non-interest expense. Non-interest expense decreased to $10.4 million for 2010 from $20.5 million for 2009. The largest contributor to the decrease was the goodwill impairment charge which was $9.3 million in 2009 with no goodwill impairment recorded in 2010. Also declining was impairment loss on assets which was $475,000 in 2009 with no impairment loss recorded in 2010.

11

Compensation and employee benefits increased to $4.7 million for 2010 from $4.5 million for 2009. Compensation and employee benefits increased primarily as a result of increased insurance, retirement and compensation expenses in addition to a reduction in deferred loan fees which offsets compensation expense.

Occupancy expense declined $82,000 for the year 2010 compared to the year 2009. The decrease is due primarily to the decrease in property owned by First Clover Leaf. A branch location acquired in the 2008 acquisition of Partners Bank was sold during the third quarter of 2009. There were no expenses related to that property in 2010.

Data processing services increased to $664,000 for 2010 from $566,000 for 2009. The increase was due primarily to additional services including online account origination and increased expenses due to new regulations.

Professional services decreased to $340,000 for 2010 from $859,000 for 2009. The decrease was due primarily to the completion of a consulting agreement with the former CEO of Partners Bank and the 2010 reversal of $150,000 of accrued expenses in connection with that agreement which was based on certain contingencies that ultimately were not attained.

FDIC insurance premiums decreased to $752,000 for 2010 from $773,000 for 2009. This decrease is the result of a $280,000 special assessment by the FDIC which was recorded in June 2009, with no similar special assessment being recorded in 2010. This decrease was substantially offset by increased insurance assessment rates in 2010.

There was no impairment loss on assets for 2010 with $475,000 recorded in 2009. A loss of $403,000 in 2009 was related to the sale of a building acquired in the Partners Bank acquisition that was classified as held for sale. In addition, a loss of $72,000 was related to the disposition of Independent Bankers Bank stock that was deemed to have no value after the FDIC took over the organization in December 2009. The stock was originally acquired through the Partners Bank acquisition in 2008. First Clover Leaf incurred no similar losses in 2010.

Other expenses increased to $1.8 million in 2010 from $1.6 million in 2009. Expenses related to foreclosed property, which is included in other expenses, increased to $259,000 for 2010 compared to $205,000 for 2009. The increase in expense was primarily due to an increase in the number of properties held by the bank during 2010 as a result of the unstable economic environment in 2010. Bad debt and collection fees also increased to $76,000 for 2010 compared to $20,000 for 2009. The increase is again related to the current economic conditions.

Income taxes. Income taxes increased to an expense of $2.0 million for 2010 from a benefit of $92,000 for 2009. The effective tax rate was 34.13% for 2010 versus a tax benefit rate of 1.03% for 2009. The primary reason for the change in income taxes was the higher level of pre-tax income for the 2010 period. The $9.3 million non-cash expense recorded for goodwill impairment in 2009 was not tax deductible (see Note 12 to the Consolidated Financial Statements), and therefore the goodwill impairment expense was not tax effected.

Management of Market Risk

General

The majority of First Clover Leaf’s assets and liabilities are monetary in nature. Consequently, the most significant form of market risk is interest rate risk. First Clover Leaf’s assets, consisting primarily of

12

loans, have longer maturities than its liabilities, consisting primarily of deposits. As a result, the principal part of First Clover Leaf’s business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, the board of directors has established an Asset/Liability Management Committee which is responsible for evaluating the interest rate risk inherent in assets and liabilities, for determining the level of risk that is appropriate given First Clover Leaf’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors. Senior management monitors the level of interest rate risk on a regular basis, and the Asset/Liability Management Committee meets at least quarterly to review the asset/liability policies and interest rate risk position.

During the relatively low interest rate environment that has existed in recent years, we have implemented the following strategies to manage interest rate risk: (i) maintaining a high equity-to-assets ratio; and (ii) offering a variety of adjustable rate loan products, including adjustable rate one- to four-family, multifamily and non-residential mortgage loans, short-term consumer loans, and a variety of adjustable-rate commercial loans. By maintaining a high equity-to-assets ratio and by investing in adjustable-rate and short-term assets, we are better positioned to react to increases in market interest rates. However, maintaining high equity balances reduces the return-on-equity ratio, and investments in shorter-term assets generally bear lower yields than longer-term investments.

Net Portfolio Value

The Office of Thrift Supervision requires the computation of amounts by which the net present value of an institution’s cash flow from assets, liabilities and off-balance sheet items (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates. The Office of Thrift Supervision provides all institutions that file a Consolidated Maturity/Rate Schedule as a part of their quarterly Thrift Financial Report with an interest rate sensitivity report of net portfolio value. The Office of Thrift Supervision simulation model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. Historically, the Office of Thrift Supervision model estimated the economic value of each type of asset, liability and off-balance-sheet contract under the assumption that the United States Treasury yield curve increases or decreases instantaneously by 100 to 300 basis points in 100 basis point increments. However, given the current low level of market interest rates, First Clover Leaf did not receive a NPV calculation for an interest rate decrease of greater than 100 basis points for December 2010 or 2009. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

13

The tables below set forth, as of December 31, 2010 and 2009, the estimated changes in the NPV that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

The 2010 table below indicates that at December 31, 2010, in the event of a 100 basis point decrease in interest rates, we would experience a 3% increase in the net portfolio value. In the event of a 300 basis point increase in interest rates, we would experience a 16% decrease in net portfolio value.

December 31, 2010
										Net Portfolio Value as a
										Percentage of Present Value of
				NPV						Assets
Change in				Estimated Increase
Interest Rates		Estimated		(Decrease) in NPV									Change in
(basis points)		NPV		Amount			Percent			NPV Ratio			(basis points)
		(Dollars in thousands)
	+300	$	69,537	$	(12,789	)		(16	)%		12.26	%		(179	)
	+200		74,569		(7.757	)		(9	)		12.99			(106	)
	+100		78,978		(3,348	)		(4	)		13.61			(44	)
	+50		80,653		(1,673	)		(2	)		13.83			(22	)
	—		82,326		—			—			14.05			—
	-50		83,121		795			1			14.14			9
	-100		84,741		2,415			3			14.36			32

December 31, 2009
										Net Portfolio Value as a
										Percentage of Present Value of
				NPV						Assets
Change in				Estimated Increase
Interest Rates		Estimated		(Decrease) in NPV									Change in
(basis points)		NPV		Amount			Percent			NPV Ratio			(basis points)
		(Dollars in thousands)
	+300	$	61,633	$	(14,434	)		(19	)%		10.70	%		(202	)
	+200		67,256		(8,811	)		(12	)		11.51			(121	)
	+100		73,007		(3,060	)		(4	)		12.32			(40	)
	+50		73,964		(2,102	)		(3	)		12.44			(28	)
	—		76,067		—			—			12.72			—
	-50		76,961		895			1			12.82			10
	-100		77,806		1,739			2			12.92			20

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value table presented assumes that the composition of the interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net portfolio value table provides an indication of the interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on its net interest income and will differ from actual results.

14

Liquidity and Capital Resources

First Clover Leaf maintains liquid assets at levels considered adequate to meet liquidity needs. We adjust our liquidity levels to fund deposit outflows, pay real estate taxes on mortgage loans, repay our borrowings and fund loan commitments. We also adjust liquidity as appropriate to meet asset and liability management objectives.

Our primary sources of liquidity are deposits, amortization and prepayment of loans, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements.

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At December 31, 2010 and 2009, $66.3 million and $48.0 million, respectively, were invested in cash and cash equivalents. The primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of investment securities, increases in deposit accounts and related securities sold under agreements to repurchase, and advances from the Federal Home Loan Bank of Chicago.

Cash flows are derived from operating activities, investing activities and financing activities as reported in the Consolidated Statements of Cash Flows included with the Consolidated Financial Statements.

Our primary investing activities are the origination of loans and the purchase of investment securities. During the years ended December 31, 2010 and 2009, our principal collections on loans exceeded loan origination by $15.9 million and $13.5 million, respectively. We sold $22.6 million and $28.5 million of one-to-four family real estate loans in 2010 and 2009, respectively. Cash received from calls, maturities and paydowns of available-for-sale investment securities totaled $137.6 million and $141.0 million for 2010 and 2009, respectively. During 2010, we also received proceeds of $11.9 million from sales of available-for-sale investment securities. We purchased $141.7 million and $122.9 million in available-for-sale investment securities during 2010 and 2009, respectively.

Deposit flows are generally affected by market interest rates, the products offered by local competitors, and other factors. The net increase in total deposits was $4.9 million for 2010 compared to a decrease of $4.7 million for 2009.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Chicago, which provides an additional source of funds. At December 31, 2010, we had $21.9 million in advances from the Federal Home Loan Bank of Chicago and an available borrowing limit of approximately $33.0 million. Additionally, we will sell investment securities under agreements to repurchase (commonly referred to as “repurchase agreements”) if we require additional liquidity. At December 31, 2010, our repurchase agreements totaled $21.5 million.

First Clover Leaf Bank is required to maintain certain minimum capital requirements under Office of Thrift Supervision regulations. Failure by a savings institution to meet minimum capital requirements

15

can result in certain mandatory and possible discretionary actions by regulators, which, if undertaken, could have a direct material effect on First Clover Leaf Bank’s financial statements. First Clover Leaf Bank was considered “well-capitalized” at December 31, 2010. See Note 14 to the Consolidated Financial Statements for additional discussion of capital requirements.

At December 31, 2010, we had outstanding commitments to extend credit of $49.4 million and standby letters of credit of $4.6 million. At December 31, 2010, certificates of deposit scheduled to mature within one year totaled $125.5 million. Based on prior experience, management believes that a significant portion of such deposits will remain with First Clover Leaf Bank, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained, First Clover Leaf Bank will have to utilize other funding sources, such as Federal Home Loan Bank of Chicago advances, in order to maintain our level of assets. Alternatively, First Clover Leaf Bank would reduce the level of liquid assets, such as cash and cash equivalents. In addition, the cost of such deposits may be significantly higher if market interest rates are higher at the time of renewal.

Off-Balance Sheet Arrangements

In the ordinary course of business, First Clover Leaf Bank is a party to credit-related financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit. First Clover Leaf Bank follows the same credit policies in making commitments as it does for on-balance sheet instruments.

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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by First Clover Leaf Bank, is based on management’s credit evaluation of the customer.

Unfunded commitments under construction lines of credit for residential and multi-family properties are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which First Clover Leaf Bank is committed.

At December 31, 2010 and 2009, First Clover Leaf Bank had $49.4 million and $41.7 million, respectively, of commitments to extend credit, and $4.6 million and $6.4 million, respectively, of standby letters of credit.

16

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include agreements with respect to borrowed funds and deposit liabilities, agreements with respect to investments, and agreements with respect to securities sold under agreements to repurchase.

The following table summarizes our significant fixed and determinable contractual obligations and other funding needs by payment date at December 31, 2010. The payment amounts represent those amounts due to the recipient and do not include any unamortized premiums or discounts or other similar carrying amount adjustments.

	Payments Due by Period
Contractual Obligations	Less than One Year		More than One Year through Three Years		More than Three Years through Five Years		More than Five Years		Total
	(In thousands)
Federal Home Loan Bank advances	$	-	$	13,005	$	7,956	$	963	$	21,924
Subordinated debentures		-		-		-		3,974		3,974
Certificates of deposit		125,543		49,758		8,121		60		183,482
Securities sold under agreements to repurchase		21,457		-		-		-		21,457
Total	$	147,000	$	62,763	$	16,077	$	4,997	$	230,837

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements.

Impact of Inflation and Changing Prices

The consolidated financial statements and related notes of First Clover Leaf Financial Corp. have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

17

Market for Common Stock

First Clover Leaf Financial Corp.’s common stock trades on the Nasdaq Capital Market under the trading symbol “FCLF.”

The following table sets forth the high and low trading prices for shares of our common stock and cash dividends paid per share for the periods indicated. As of December 31, 2010, there were 7,887,702 shares of our common stock issued and outstanding held by approximately 750 holders of record.

We expect that, subject to regulatory requirements and our financial condition and results of operations, quarterly dividends will continue to be paid in the future. See Note 14 to our Consolidated Financial Statements for information on regulatory restrictions on the payment of dividends.

Year Ended December 31, 2010	High		Low		Dividend Paid Per Share
Fourth quarter	$	6.78	$	5.60	$	0.06
Third quarter		6.00		5.20		0.06
Second quarter		6.99		5.25		0.06
First quarter		7.35		6.11		0.06

Year Ended December 31, 2009	High		Low		Dividend Paid Per Share
Fourth quarter	$	7.75	$	6.50	$	0.06
Third quarter		8.00		7.00		0.06
Second quarter		8.79		6.48		0.06
First quarter		7.75		6.86		0.06

STOCKHOLDER INFORMATION

ANNUAL MEETING The Annual Meeting of Stockholders will be held at 4:00 p.m. Illinois time on May 24, 2011 at Sunset Hills Country Club located at 2525 South State Route 157, Edwardsville, Illinois 62025.	TRANSFER AGENT Registrar and Transfer Company 10 Commerce Drive Cranford, New Jersey 07016 If you have any questions concerning your stockholder account, please call our transfer agent, noted above, at (800) 525-7686. This is the number to call if you require a change of address or need records or information about lost certificates.
STOCK LISTING The Company's Common Stock trades on the Nasdaq Capital Market under the symbol "FCLF."	ANNUAL REPORT ON FORM 10-K A copy of the Company's Form 10-K for the year ended December 31, 2010, will be furnished without charge to stockholders as of the record date, upon written request to the Secretary, First Clover Leaf Financial Corp. 6814 Goshen Road, Edwardsville, Illinois 62025.
SPECIAL COUNSEL Luse Gorman Pomerenk & Schick, P.C. 5335 Wisconsin Avenue, N.W., Suite 780 Washington, D.C. 20015	INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM McGladrey & Pullen, LLP 1806 Fox Drive Champaign, Illinois 61820

DIRECTORS AND OFFICERS

DIRECTORS		OFFICERS
Joseph Helms Chairman of the Board Semi-retired, Veterinarian, Hawthorne Animal Hospital	Gary D. Niebur Executive Director, Edwardsville YMCA Mayor of Edwardsville, Illinois	Lisa R. Fowler Senior Vice President and Chief Lending Officer
Robert W. Schwartz Vice Chairman of the Board President, Schwartz Ventures	Gerard A. Schuetzenhofer President, Coldwell Banker Brown Realtors/Coldwell Banker Commercial Brown Realtors	Darlene F. McDonald Senior Vice President and Chief Financial Officer
Nina Baird Retired, Edwardsville City Clerk	Joseph Stevens Owner, Market Basket Grocery & Garden Center	Brad Rench Executive Vice President and Chief Operating Officer
Joseph J. Gugger Partner, Fastechnology LLC Owner, Gugger Group, Inc.	Dennis M. Terry President & Chief Executive Officer, First Clover Leaf Bank
Kenneth P. Highlander Retired, President, Ready-Mix Services Inc.	Dennis E. Ulrich Managing Principal, Scheffel and Company, P.C.

First Clover Leaf Financial

Corp. and Subsidiary

Consolidated Financial Statements

12.31.10

Contents

Report of Independent Registered Public Accounting Firm	F-1
Consolidated Financial Statements
Consolidated balance sheets	F-2
Consolidated statements of operations	F-3
Consolidated statements of stockholders’ equity	F-4
Consolidated statements of cash flows	F-5 – F-6
Notes to consolidated financial statements	F-7 – F-43
Report of Independent Registered Public Accounting Firm on the Supplementary Information	F-44
Supplementary Information
Consolidating balance sheet information	F-45
Consolidating statement of income information	F-46

Report of Independent Registered Public Accounting Firm

To the Board of Directors

First Clover Leaf Financial Corp. and Subsidiary

Edwardsville, Illinois

We have audited the accompanying consolidated balance sheets of First Clover Leaf Financial Corp. and Subsidiary (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ McGLADREY & PULLEN, LLP

Champaign, Illinois

March 31, 2011

F-1

First Clover Leaf Financial Corp. and Subsidiary

Consolidated Balance Sheets

December 31, 2010 and 2009

	2010			2009
Assets
Cash and due from banks	$	11,294,266		$	14,104,442
Interest-earning deposits		12,773,854			14,306,726
Federal funds sold		42,184,927			19,585,586
Total cash and cash equivalents		66,253,047			47,996,754
Interest-earning time deposits		1,718,651			-
Securities available for sale		78,474,908			86,407,138
Federal Home Loan Bank stock		6,306,273			6,306,273
Loans, net of allowance for loan losses of $5,728,395 and
$6,316,829 at December 31, 2010 and 2009, respectively		387,567,638			410,110,923
Loans held for sale		-			1,787,900
Property and equipment, net		10,562,321			11,096,748
Goodwill		11,385,323			11,385,323
Core deposit intangible		1,120,000			1,480,001
Foreclosed assets		3,844,347			1,084,548
Mortgage servicing rights		601,325			680,776
Accrued interest receivable		1,866,511			2,183,520
Prepaid Federal Deposit Insurance Corporation insurance premiums		2,301,408			2,993,995
Other assets		2,968,232			2,012,715
Total assets	$	574,969,984		$	585,526,614
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest bearing	$	34,172,434		$	49,533,776
Interest bearing		413,310,775			393,020,692
Total deposits		447,483,209			442,554,468
Federal Home Loan Bank advances		21,924,000			39,924,000
Securities sold under agreements to repurchase		21,457,075			18,936,168
Subordinated debentures		3,974,272			3,930,208
Accrued interest payable		561,687			1,211,552
Other liabilities		2,236,302			2,041,941
Total liabilities		497,636,545			508,598,337
Commitments, Contingencies and Credit Risk (Note 15)
Stockholders' Equity
Preferred stock, $.10 par value, 10,000,000 shares authorized,
no shares issued		-			-
Common stock, $.10 par value, 20,000,000 shares authorized,
7,887,702 and 7,960,523 shares issued and outstanding at
December 31, 2010 and December 31, 2009, respectively		788,770			796,052
Additional paid-in capital		62,116,845			62,569,654
Retained earnings		14,384,059			12,451,069
Accumulated other comprehensive income		614,774			1,726,434
Unearned Employee Stock Ownership Plan shares		(571,009	)		(614,932	)
Total stockholders' equity		77,333,439			76,928,277
Total liabilities and stockholders' equity	$	574,969,984		$	585,526,614

See Accompanying Notes to Consolidated Financial Statements.

F-2

First Clover Leaf Financial Corp. and Subsidiary

Consolidated Statements of Operations

Years Ended December 31, 2010 and 2009

	2010		2009
Interest and dividend income:
Interest and fees on loans	$	22,562,083	$	23,947,127
Securities:
Taxable interest income		2,170,774		3,309,871
Nontaxable interest income		595,869		597,601
Interest-earning deposits, federal funds sold, and other		111,992		153,596
Total interest and dividend income		25,440,718		28,008,195
Interest expense:
Deposits		7,729,676		10,251,782
Federal Home Loan Bank advances		993,646		1,651,067
Securities sold under agreements to repurchase		27,060		59,193
Subordinated debentures		185,075		298,286
Total interest expense		8,935,457		12,260,328
Net interest income		16,505,261		15,747,867
Provision for loan losses		2,573,000		5,553,990
Net interest income after provision for loan losses		13,932,261		10,193,877
Other income:
Service fees on deposit accounts		395,460		322,017
Other service charges and fees		343,993		277,691
Loan servicing fees		203,929		183,209
Gain on sale of securities		663,814		-
Gain on sale of loans		554,575		577,828
Other		83,999		56,940
		2,245,770		1,417,685
Other expenses:
Compensation and employee benefits		4,699,393		4,508,815
Occupancy expense		1,367,504		1,449,030
Data processing services		664,073		565,572
Director fees		186,500		212,050
Professional fees		340,155		858,880
Federal Deposit Insurance Corporation insurance premiums		751,589		773,284
Amortization of core deposit intangible		360,001		468,000
Amortization of mortgage servicing rights		273,499		271,822
Goodwill impairment		-		9,300,000
Impairment loss on assets		-		475,283
Other		1,757,360		1,643,680
		10,400,074		20,526,416
Income (loss) before income taxes		5,777,957		(8,914,854	)
Income tax expense (benefit)		1,972,085		(92,177	)
Net income (loss)	$	3,805,872	$	(8,822,677	)
Basic earnings (losses) per share	$	0.49	$	(1.08	)
Diluted earnings (losses) per share	$	0.49	$	(1.08	)

See Accompanying Notes to Consolidated Financial Statements.

F-3

First Clover Leaf Financial Corp. and Subsidiary

Consolidated Statements of Stockholders' Equity

Years Ended December 31, 2010 and 2009

													Unearned
										Accumulated			Employee
				Additional						Other			Stock
	Common			Paid-in			Retained			Comprehensive			Ownership
	Stock			Capital			Earnings			Income			Plan Shares			Total
Balance, December 31, 2008	$	879,375		$	69,009,706		$	23,230,811		$	1,195,673		$	(658,856	)	$	93,656,709
Comprehensive income (loss):
Net loss		-			-			(8,822,677	)		-			-			(8,822,677	)
Other comprehensive income, net of tax:
Unrealized gains on securities available for sale
arising during period, net of taxes of $311,962		-			-			-			530,761			-			530,761
Comprehensive loss																	(8,291,916	)
Dividends ($0.24 per share)		-			-			(1,957,065	)		-			-			(1,957,065	)
Purchase of 833,230 shares of treasury stock		(83,323	)		(6,460,906	)		-			-			-			(6,544,229	)
Allocation of ESOP shares		-			20,854			-			-			43,924			64,778
Balance, December 31, 2009		796,052			62,569,654			12,451,069			1,726,434			(614,932	)		76,928,277
Comprehensive income (loss):
Net income		-			-			3,805,872			-			-			3,805,872
Other comprehensive income (loss), net of tax:
Unrealized losses on securities available for sale
arising during period, net of taxes of $(416,852)		-			-			-			(683,500	)		-			(683,500	)
Reclassification adjustment for realized gains
included in income, net of taxes of $(235,654)											(428,160	)					(428,160	)
Comprehensive income																	2,694,212
Dividends ($0.24 per share)		-			-			(1,872,882	)		-			-			(1,872,882	)
Purchase of 72,821 shares of treasury stock		(7,282	)		(461,652	)		-			-			-			(468,934	)
Allocation of ESOP shares		-			8,843			-			-			43,923			52,766
Balance, December 31, 2010	$	788,770		$	62,116,845		$	14,384,059		$	614,774		$	(571,009	)	$	77,333,439

See Accompanying Notes to Consolidated Financial Statements.

F-4

First Clover Leaf Financial Corp. and Subsidiary

Consolidated Statements of Cash Flows

Years Ended December 31, 2010 and 2009

	2010			2009
Cash Flows from Operating Activities
Net income (loss)	$	3,805,872		$	(8,822,677	)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Deferred income taxes		176,474			(1,392,486	)
Amortization (accretion) of:
Deferred loan origination costs, net		92,228			41,844
Premiums and discounts on securities		(843,918	)		(86,758	)
Core deposit intangible		360,001			468,000
Mortgage servicing rights		273,499			271,822
Amortization of fair value adjustments on:
Loans		(57,600	)		(59,500	)
Time deposits		(44,000	)		(143,500	)
Federal Home Loan Bank advances		-			(38,999	)
Subordinated debt		44,064			44,064
Investment securities		(59,000	)		(55,400	)
Property & equipment		16,071			16,071
Goodwill impairment		-			9,300,000
Impairment loss on assets		-			475,283
Provision for loan losses		2,573,000			5,553,990
Depreciation		592,552			704,813
ESOP expense		52,766			64,778
Gain on sale of securities available for sale		(663,814	)		-
Gain on sale of loans		(554,575	)		(577,828	)
Gain on sale of property and equipment		(35,089	)		-
Loss on sale of foreclosed assets		15,715			30,561
Proceeds from sales of loans held for sale		22,605,506			28,497,476
Originations of loans held for sale		(20,263,031	)		(29,467,548	)
Change in assets and liabilities:
Decrease (increase) in prepaid Federal Deposit Insurance
Corporation insurance premiums		692,587			(2,939,144	)
Decrease in accrued interest receivable		317,009			277,800
Increase in mortgage servicing rights		(194,048	)		(294,938	)
Increase in other assets		(1,131,991	)		(262,896	)
Decrease in accrued interest payable		(649,865	)		(34,003	)
Increase in other liabilities		846,867			443,965
Net cash flows provided by operating activities		7,967,280			2,014,790
Cash Flows from Investing Activities
Proceeds from maturity of interest-earning time deposits		-			25,847,832
Purchase of interest-earning time deposits		(1,718,651	)		(20,637,371	)
Available for sale securities:
Purchases		(141,739,231	)		(122,950,000	)
Proceeds from calls, maturities, and paydowns		137,621,361			141,023,571
Proceeds from sales		11,852,666			-
Decrease increase in loans		15,925,994			13,487,667
Purchase of property and equipment		(120,329	)		(470,546	)
Proceeds from the sale of property and equipment		81,222			762,246
Proceeds from the sale of foreclosed assets		1,234,149			1,061,490
Net cash flows provided by investing activities		23,137,181			38,124,889

(Continued)

F-5

First Clover Leaf Financial Corp. and Subsidiary

Consolidated Statements of Cash Flows (Continued)

Years Ended December 31, 2010 and 2009

	2010			2009
Cash Flows from Financing Activities
Net increase (decrease) in deposit accounts	$	4,972,741		$	(4,604,950	)
Net increase (decrease) in securities sold under agreements to
repurchase		2,520,907			(36,167,145	)
Proceeds from Federal Home Loan Bank advances		5,000,000			5,000,000
Repayments of Federal Home Loan Bank advances		(23,000,000	)		(15,004,920	)
Repurchase of common stock		(468,934	)		(6,544,229	)
Cash dividends paid		(1,872,882	)		(1,957,065	)
Net cash flows used in financing activities		(12,848,168	)		(59,278,309	)
Net increase (decrease) in cash and cash equivalents		18,256,293			(19,138,630	)
Cash and cash equivalents:
Beginning		47,996,754			67,135,384
Ending	$	66,253,047		$	47,996,754
Supplemental Schedule of Noncash Investing and Financing Activities
Assets acquired in settlement of loans	$	4,009,663		$	1,543,803
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	9,585,258		$	12,432,766
Income taxes, net of refunds		1,170,000			1,329,593

See Accompanying Notes to Consolidated Financial Statements.

F-6

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies

First Clover Leaf Financial Corp. (the Company) is a one-bank holding company, whose savings bank subsidiary, First Clover Leaf Bank (the Bank), provides savings deposits and loans to individual and corporate customers in Edwardsville, Illinois and the surrounding communities. The Bank is subject to competition from other financial institutions and nonfinancial institutions providing financial products and services. Additionally, the Company and the Bank are subject to the regulations of certain regulatory agencies and undergo periodic examinations by those regulatory agencies.

Principles of consolidation: The consolidated financial statements of First Clover Leaf Financial Corp. and Subsidiary have been prepared in conformity with U.S. generally accepted accounting principles and conform to predominate practices in the banking industry.

The consolidated financial statements include the accounts of First Clover Leaf Financial Corp. and its wholly owned subsidiary, First Clover Leaf Bank. The financial statements also include a wholly-owned entity on a deconsolidated basis, First Clover Leaf Statutory Trust I. All material intercompany accounts and transactions have been eliminated in the consolidation.

Use of estimates: In preparing the accompanying consolidated financial statements, the Company’s management is required to make estimates and assumptions which affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the value of goodwill, and the fair value of financial instruments.

Cash equivalents: For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks, including cash items in process of clearing and federal funds sold. Generally, federal funds are sold for one-day periods. Cash flows from loans, deposits, and securities sold under agreements to repurchase are treated as net increases or decreases in the statement of cash flows.

The Company is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank. Those reserve balances were approximately $4,786,000 and $3,117,000, respectively, at December 31, 2010 and 2009.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Interest-earning time deposits: Interest-earning time deposits in banks are carried at cost. At December 31, 2010, interest-earning time deposits amounted to $1,718,651. The Bank did not have any interest-earning time deposits at December 31, 2009.

F-7

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies (Continued)

Securities: Securities classified as available for sale are those debt securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors.

Securities available for sale are carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Company evaluates its debt securities for other-than-temporary impairment (OTTI) on an ongoing basis for those securities with a fair value below amortized cost. The review takes into consideration current market conditions, issuer rating changes and trends, the credit worthiness of the obligator of the security, current analysts’ evaluations, failure of the issuer to make scheduled interest or principal payments, the Company’s lack of intent to sell the security or whether it is more-likely-than-not that the Company will be required to sell the debt security before its anticipated recovery, as well as other qualitative factors. The term OTTI is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Any portion of such a decline in value associated with credit loss is recognized in earnings as an impairment loss with the remaining noncredit-related component being recognized in other comprehensive income. A credit loss is determined by assessing whether the amortized cost basis of the security will be recovered, by comparing the present value of cash flows expected to be collected from the security, computed using original yield as the discount rate, to the amortized cost basis of the security. The shortfall of the present value of the cash flows expected to be collected in relation to the amortized cost basis is considered to be the “credit loss.”

Federal Home Loan Bank stock: The Company held Federal Home Loan Bank of Chicago (FHLB) stock of $6.3 million for each of the years ended December 31, 2010 and 2009. The Company is required to maintain these equity securities as a member of the FHLB and in amounts as required by this institution. These equity securities are “restricted” in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable equity securities and their fair value is not readily available. The stock was reviewed for impairment at December 31, 2010, and it was concluded no impairment existed.

Loans: The Company grants real estate, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by real estate loans throughout Edwardsville, Illinois and the surrounding area. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred costs (fees) on originated loans.

Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs (fees), are deferred and recognized as an adjustment of the related loan yield using the interest method.

The accrual of interest on real estate, commercial business, and consumer loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer loans are typically charged off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

F-8

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies (Continued)

All interest accrued but not collected for loans that are placed on non-accrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans held for sale: Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value which is based on a current appraisal. All loans sold to the Federal National Mortgage Association are required to have a current appraisal. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Allowance for loan losses: The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as doubtful, substandard or special mention and also considered to be impaired. For such loans, an allowance is established when the fair value of the collateral, less estimated costs to sell, is lower than the carrying value of that loan for collateral dependent loans. Impaired loans may also be valued based on a discounted cash flow analysis. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors.

Impaired loans: A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by the fair value of the collateral if the loan is collateral dependent. The Company does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

Property and equipment: Land is stated at cost. Property and equipment are stated at cost less accumulated depreciation. Depreciation is determined under the straight-line method over the following estimated useful lives of the assets:

	Years
Building and improvements	2 - 50
Furniture and equipment	2 - 10

F-9

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies (Continued)

Foreclosed assets: Real estate acquired through foreclosure or deed in lieu of foreclosure represents specific assets to which the Bank has acquired legal title in satisfaction of indebtedness. Such real estate is initially recorded at the property’s fair value at the date of foreclosure less estimated selling costs. Initial valuation adjustments, if any, are charged against the allowance for losses on loans. Property is evaluated regularly to ensure the recorded amount is supported by its current fair value. Subsequent declines in estimated fair value are charged to expense when incurred. Revenues and expenses related to holding and operating these properties are included in operations.

Mortgage servicing rights: Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. For sales of one-to-four family loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. To determine impairment the Company applies a pooling methodology to the servicing valuation, in which loans with similar characteristics are “pooled” together for valuation purposes. Once pooled, each grouping of loans is evaluated on a discounted earnings basis to determine the present value of future earnings that a purchaser could expect to realize from the portfolio. Earnings are projected from a variety of sources including loan servicing fees, interest earned on float, net interest earned on escrows, miscellaneous income and costs to service the loans. If the Company later determines that all or a portion of the impairment no longer exists for a particular pool, a reduction of the allowance may be recorded as an increase to income. Capitalized servicing rights are amortized in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Goodwill: Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill recorded by First Clover Leaf in connection with its acquisitions relates to the inherent value in the businesses acquired. The continued value of recorded goodwill is impacted by the value of our stock and continued profitability of the organization. In the event that the stock price experiences significant declines or the operations of the company lack profitability an impairment of goodwill would need to be recognized. Any impairment recognized would adversely impact earnings in the period in which it is recognized.

Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate there may be an impairment. If the carrying amount of the reporting unit goodwill exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Operations of the Company are managed and financial performance is evaluated on a company-wide basis. As a result, all of the Company’s operations are considered by management to be aggregated in one reporting unit. Accordingly, all goodwill will be assigned to the operations of the Company as one reporting unit. Management has elected September 30th as the date for our annual impairment analysis. At our annual impairment assessment date of September 30, 2010, no impairment existed.

Core deposit intangible: Core deposit intangible represents the value of acquired customer relationships. The balances created from our 2006 and 2008 acquisitions are being amortized over 7.6 and 9.7 years, respectively, using the double declining balance method.

F-10

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies (Continued)

Income taxes: Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not realizable. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

The Company adopted the revised provisions of Accounting Standards Codification Topic 740, Income Taxes, effective January 1, 2007. The guidance prescribes recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being recognized upon ultimate settlement. The Company has no uncertain tax positions for which a liability has been recorded. Income tax returns for fiscal years 2008 through 2010, with few exceptions, remain open to examination by federal and state taxing authorities.

Earnings (losses) per common share: Basic earnings (losses) per share represents net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding. Employee stock ownership plan shares, which are committed to be released, are considered outstanding for basic and diluted earnings per share. Unallocated shares of the employee stock ownership plan are not considered as outstanding for basic or diluted earnings per share. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued.

	Year Ended
	December 31,
	2010			2009
Net earnings (losses) available to common stockholders	$	3,805,872		$	(8,822,677	)
Basic potential common shares:
Weighted average shares outstanding		7,925,906			8,274,830
Weighted average unallocated Employee Stock Ownership
Plan shares		(115,818	)		(124,322	)
Basic weighted average shares outstanding		7,810,088			8,150,508
Dilutive potential common shares		-			-
Diluted weighted average shares outstanding		7,810,088			8,150,508
Basic and diluted earnings (losses) per share	$	0.49		$	(1.08	)

Segment reporting: Management views the Company as one operating segment, therefore, separate reporting of financial segment information is not considered necessary. Management approaches the Company as one business enterprise which operates in a single economic environment since the products and services, types of customers and regulatory environment all have similar characteristics.

Fair value measurements: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 16. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or in market conditions could significantly affect the estimates.

F-11

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies (Continued)

Recent accounting pronouncements: The following accounting standards were recently issued relating to the financial services industry:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance relating to the accounting for transfers of financial assets. The new guidance, which was issued as SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted into Codification in December 2009 through the issuance of Accounting Standards Update (“ASU”) 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. Among other provisions, this ASU eliminates the concept of a “qualifying special-purpose entity” and removes the exception from applying certain accounting guidance to qualifying special-purpose entities. In addition, this ASU provides guidance as to when a portion of a transferred financial asset can be evaluated for sale accounting, provides additional guidance with regard to accounting for transfers of financial assets and requires additional disclosures. ASU 2009-16 was effective at the beginning of a reporting entity’s first fiscal year that begins after November 15, 2009. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820); Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires new disclosures on transfers into and out of Level 1 and 2 measurements of the fair value hierarchy and requires separate disclosures about purchases, sales, issuances, and settlements relating to the level of disaggregation and inputs and valuation techniques used to measure fair value. It is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchase, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. The adoption of this pronouncement related to Level 1 and 2 measurements did not have a material impact on the Company’s consolidated financial statements. The adoption of this pronouncement related to Level 3 measurements is not expected to have a material impact on the Company’s consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 requires new disclosures that facilitate financial statement users’ evaluation of the following: (1) the nature of credit risk inherent in the entity’s portfolio of financing receivables; (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses; and (3) the changes and reasons for those changes in the allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The adoption of this guidance significantly expanded existing disclosure requirements but did not and will not have an impact on the Company’s financial position, results of operations or cash flows.

In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments affect any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

F-12

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies (Continued)

In January 2011, the FASB issued ASU 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. The amendments in ASU 2011-01 temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, for public entities. The delay is intended to allow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011.

Reclassifications: Certain reclassifications have been made to the balances, with no effect on net income (loss) or total stockholders’ equity, as of and for the year ended December 31, 2009, to be consistent with the classifications adopted as of and for the year ended December 31, 2010.

F-13

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 2. Securities

The amortized cost and fair values of securities available for sale, with gross unrealized gains and losses, are summarized as follows:

	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
U.S. government agency obligations	$	41,856,949	$	846,029	$	(12,585	)	$	42,690,393
Corporate bonds		2,096,569		43,509		(82,439	)		2,057,639
State and municipal securities		17,803,252		358,089		(387,070	)		17,774,271
Other securities		3,501		-		-			3,501
Mortgage-backed securities		15,738,693		362,007		(151,596	)		15,949,104
	$	77,498,964	$	1,609,634	$	(633,690	)	$	78,474,908

	December 31, 2009
U.S. government agency obligations	$	47,783,283	$	770,854	$	(39,618	)	$	48,514,519
Corporate bonds		2,596,146		45,710		(95,938	)		2,545,918
State and municipal securities		14,468,352		910,564		-			15,378,916
Other securities		3,501		-		-			3,501
Mortgage-backed securities		18,815,746		1,148,552		(14	)		19,964,284
	$	83,667,028	$	2,875,680	$	(135,570	)	$	86,407,138

F-14

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 2. Securities (Continued)

Unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2010 and 2009, are summarized as follows:

	2010
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Securities available for sale:
U.S. government agency
obligations	$	2,486,130	$	12,585	$	-	$	-	$	2,486,130	$	12,585
Corporate bonds		-		-		617,561		82,439		617,561		82,439
State & Municipal Securities		8,028,070		387,070		-		-		8,028,070		387,070
Mortgage-backed securities		8,437,418		151,596		-		-		8,437,418		151,596
	$	18,951,618	$	551,251	$	617,561	$	82,439	$	19,569,179	$	633,690

	2009
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Securities available for sale:
U.S. government agency
obligations	$	8,469,750	$	37,800	$	1,995,000	$	1,818	$	10,464,750	$	39,618
Corporate bonds		-		-		751,062		95,938		751,062		95,938
Mortgage-backed securities		8,254		14		-		-		8,254		14
	$	8,478,004	$	37,814	$	2,746,062	$	97,756	$	11,224,066	$	135,570

Management evaluates the investment portfolio on at least a quarterly basis to determine if investments have suffered an other-than-temporary decline in value. In addition, management monitors market trends, investment grades, bond defaults and other circumstances to identify trends and circumstances that might impact the carrying value of equity securities.

At December 31, 2010, the Company had 34 securities in an unrealized loss position which included: two U.S. government agency obligations, one corporate bond, 21 state and municipal securities, and 10 mortgage-backed securities. These securities had an aggregate depreciation of 3.14% from the Company’s amortized cost basis. The unrealized losses resulted from changes in market interest rates and liquidity, not from changes in the probability of contractual cash flows. The Company does not intend to sell the securities, and it is not more-likely-than-not that the Company will be required to sell the securities prior to recovery of amortized cost. Full collection of the amounts due according to the contractual terms of the securities is expected; therefore, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2010.

F-15

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 2. Securities (Continued)

The amortized cost and fair value at December 31, 2010, by contractual maturity, are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Other securities have no stated maturity. Therefore, stated maturities are not disclosed for these categories.

	Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	17,734,436	$	17,841,722
Due after one year through five years		31,395,561		32,392,385
Due after five years through ten years		3,656,561		3,703,171
Due after ten years		8,970,212		8,585,025
Mortgage-backed securities		15,738,693		15,949,104
Other securities		3,501		3,501
	$	77,498,964	$	78,474,908

Securities with a carrying amount of approximately $74,023,000 and $78,977,000 were pledged to secure deposits as required or permitted by law at December 31, 2010 and 2009, respectively.

Note 3. Loans

The components of loans, including loans held for sale, are as follows:

	At December 31,
	2010			2009
Real estate loans:
One-to-four-family	$	99,186,894		$	96,292,506
One-to-four-family, loans held for sale		-			1,787,900
Multi-family		26,543,285			20,946,534
Commercial		160,798,616			179,923,276
Construction and land		53,646,900			45,447,453
		340,175,695			344,397,669
Commercial business		51,737,884			63,134,579
Consumer:
Home equity		9,170,067			9,870,907
Other		1,745,125			2,606,531
		10,915,192			12,477,438
Total gross loans		402,828,771			420,009,686
Less undisbursed portion of construction loans		(9,589,505	)		(1,772,947	)
Less deferred loan origination costs (fees), net		56,767			(21,087	)
Less allowance for loan losses		(5,728,395	)		(6,316,829	)
	$	387,567,638		$	411,898,823

F-16

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and presents these policies to the Board at least annually. A reporting system supplements the review process by providing management with reports related to loan production, loan quality, loan delinquencies and non-performing and potential problem loans.

One-to-four-family real estate loans are predominately collateralized by properties located in our market area. Virtually all of these loans have fixed rates of interest. We generally sell most of the conforming, fixed-rate loans that we originate, but we generally retain the servicing rights on these loans. We may lend up to 80% of the property’s appraised value, or up to 100% of the property’s appraised value if the borrower obtains private mortgage insurance. We require title insurance on all of our one-to-four-family mortgage loans, and we also require that fire and extended coverage casualty insurance be maintained in an amount equal to at least the lesser of the loan balance or the replacement cost of the improvements on the property. We also require a property appraisal for all one-to-four family loans that are underwritten to comply with secondary market standards. Appraisals are conducted by independent appraisers from a list approved by our board of directors.

Multi-family real estate loans are generally secured by apartment buildings and rental properties. All of our multi-family real estate loans are secured by properties located within our lending area. Multi-family real estate loans generally are offered with interest rates that adjust after one, three or five years. The interest rate adjustments are tied to either a Treasury Bill Index tied to the adjustment period, or to a Cost of Funds index. When originating multi-family real estate loans we evaluate the qualifications and financial condition of the borrower, profitability and expertise, as well as the value and condition of the mortgaged property securing the loans. We also consider the financial resources of the borrower, the borrower’s experience in owning or managing a similar property, and the borrower’s payment history with us and other financial institutions. Multi-family real estate loans are originated in amounts up to 80% of the lower of the sale price or the appraised value of the mortgaged property securing the loans. All multi-family real estate loans over $250,000 are appraised by outside independent appraisers approved by the board of directors.

Commercial real estate loans are secured predominately by office buildings, and to a lesser extent warehouse properties and more specialized properties such as churches. We originate commercial real estate loans with a typical term of five years with balloon payments. These loans generally amortize over 15 to 20 years. We offer both adjustable and fixed rates of interest on commercial real estate loans, with the interest rate for adjustable rate loans tied to the prime interest rate. We may lend up to 75% of the properties appraised value on loans secured by other commercial properties. We require independent appraisals for all commercial real estate loans in excess of $250,000. Creditworthiness is determined by considering the character, experience, management and financial strength of the borrower, and the ability of the property to generate adequate funds to cover both operating expenses and debt service. We require title insurance on all of our commercial real estate loans, and we also require that fire and extended coverage casualty insurance be maintained.

Construction lending generally involves a greater degree of risk than our other real estate lending. The repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of the project. The construction phase of a loan generally lasts up to six months, and the interest rate charged generally corresponds to the rate of the committed permanent loan, with loan-to-value ratios of up to 80%, (or up to 100% if the borrower obtains private mortgage insurance) of the appraised estimated value of the completed property or cost, whichever is less. Our procedures for underwriting construction loans include an assessment of the borrower’s credit history and the borrower’s ability to meet other existing debt obligations, as well as payment of principal and interest on the proposed loan. We use the same underwriting standards and procedures for construction/permanent lending as we do for one-to-four family residential real estate lending.

F-17

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

Commercial business loans vary in type and include secured and unsecured commercial business loans for the purpose of financing equipment acquisition, expansion, working capital and other general business purposes. The terms of these loans are generally for less than five years. The loans are either negotiated on a fixed-rate basis or carry variable interest rates indexed to the prime rate. Commercial credit decisions are based upon a complete credit review of the borrower. A determination is made as to the borrower’s ability to repay in accordance with the proposed terms as well as an overall assessment of the credit risks involved. Personal guarantees of borrowers are generally required. In evaluating a commercial business loan, we consider debt service capabilities, actual and projected cash flows, and the borrower’s inherent industry risks. Credit agency reports of the borrower’s credit history as well as bank checks and trade investigations supplement the analysis of the borrower’s creditworthiness. Although we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon borrower demand, market interest rates, borrower preference for fixed-versus adjustable-rate loans, and the interest rates offered on each type of loan by competing lenders in our market area. Loan originations are derived from a number of sources, including existing or prior customers and walk-in customers.

Consumer loans consist primarily of home equity lines of credit, automobile loans, overdraft loans, loans secured by deposits and securities, and unsecured personal loans. Home equity lines of credit account for the largest segment of our consumer loans. They are generally made for owner-occupied homes and are secured by first or second mortgages on the residential properties. We generally offer home equity lines of credit with a maximum loan to appraised value ratio of 90%, including senior liens on the subject property. Our procedures for underwriting consumer loans include an assessment of the borrower’s credit history and ability to meet other existing debt obligations, as well as payments of principal and interest on the proposed loans. Although the borrower’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral security, if any, to the proposed loan.

The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, principal officers, their immediate families and companies in which they have a 10% or more beneficial ownership. In the opinion of management, these loans including the undisbursed commitments are made in the ordinary course of business, with substantially the same terms, including interest rate and collateral as those prevailing for comparable transactions with persons not related to the Bank, and do not involve more than the normal risk of collectibility. Changes in these loans for the years ended December 31, 2010 and 2009 are summarized as follows:

	Year Ended
	December 31,
	2010			2009
Balance, beginning of year	$	10,060,907		$	11,718,292
Additions		1,549,743			1,501,456
Repayments		(598,253	)		(3,158,841	)
Change in status of borrower		(665,180	)		-
Balance, end of year	$	10,347,217		$	10,060,907

The loan portfolio includes a concentration of loans in commercial real estate amounting to approximately $160,799,000 and $179,923,000 as of December 31, 2010 and 2009, respectively. The loans are expected to be repaid from cash flows or from proceeds from the sale of selected assets of the borrowers. The concentration of credit within commercial real estate is taken into consideration by management in determining the allowance for loan losses. The Company’s opinion as to the ultimate collectibility of these loans is subject to estimates regarding future cash flows from operations and the value of the property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

F-18

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

On occasion, the Company originates loans secured by single-family dwellings with high loan to value ratios exceeding 90%. The Company does not consider the level of such loans to be a significant concentration of credit as of December 31, 2010 or 2009.

The following table presents our past-due loans, segregated by class, as of December 31, 2010.

	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total		Accruing Loans 90 or More Days Past Due
Real estate loans:
One-to-four family	$	2,090,585	$	295,620	$	818,215	$	3,204,420	$	95,982,474	$	99,186,894	$	80,886
Multi-family		1,010,870		-		2,434,837		3,445,707		23,097,578		26,543,285		-
Commercial		-		162,159		1,240,250		1,402,409		159,396,207		160,798,616		-
Construction and land		-		-		4,927,268		4,927,268		48,719,632		53,646,900		-
		3,101,455		457,779		9,420,570		12,979,804		327,195,891		340,175,695		80,886
Commercial business		30,639		-		43,118		73,757		51,664,127		51,737,884		11,842
Consumer:
Home equity		119,671		96,029		367,304		583,004		8,587,063		9,170,067		-
Other		-		297		-		297		1,744,828		1,745,125		-
		119,671		96,326		367,304		583,301		10,331,891		10,915,192		-
	$	3,251,765	$	554,105	$	9,830,992	$	13,636,862	$	389,191,909	$	402,828,771	$	92,728

All loans are reviewed on a regular basis and are placed on non-accrual status when, in the opinion of management, there is reasonable probability of loss of principal or collection of additional interest is deemed insufficient to warrant further accrual. Generally, we place all loans 90 days or more past due on non-accrual status. However, exceptions may occur when a loan is in process of renewal, but it has not yet been completed. In addition, we may place any loan on non-accrual status if any part of it is classified as loss or if any part has been charged-off. When a loan is placed on non-accrual status, total interest accrued and unpaid to date is reversed Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectability of the loan.

Year-end non-accrual loans, segregated by class, are as follows:

	At December 31,
	2010		2009
Real estate loans:
One-to-four family	$	1,855,789	$	2,259,774
Multi-family		2,434,837		2,324,260
Commercial		1,289,711		1,346,342
Construction and land		6,177,386		5,410,193
		11,757,723		11,340,569
Commercial business		109,114		292,749
Consumer:
Home equity		382,343		99,891
Other		-		-
		382,343		99,891
Total non-accrual loans	$	12,249,180	$	11,733,209

F-19

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense. The allowance for loan losses is evaluated on at least a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. The allowance is prepared in accordance with ASC Topic 310 and ASC Topic 450. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The amount of the provision reflects not only the necessary increases in the allowance for loan losses related to loans newly categorized as special mention, substandard, or doubtful, but it also reflects actions taken related to other loans including, but not limited to, any necessary increases or decreases in required allowances for specific loans or loan pools.

The allowance consists of specific and general components. The specific component relates to loans that are classified as doubtful, substandard or special mention and also considered to be impaired. For such loans, an allowance is established when the fair value of the collateral, less estimated costs to sell, is lower than the carrying value of that loan for collateral dependent loans. Impaired loans may also be valued based on a discounted cash flow analysis. The general component covers non-impaired loans and is based on historical loss experience, and adjustments for general economic conditions and other qualitative risk factors that impact the Company, when such adjustments are deemed necessary.

The Bank separates its various credits into risk categories for the purposes of estimating credit losses. Risk categories are determined using a variety of financial indicators applied consistently to all credits within our portfolio. The potential loss factor that is applied to each of the risk categories is based on historical losses sustained within these categories, weighted with generally accepted regulatory and industry averages giving consideration to current economic conditions. For all loans that are classified in the Pass category, which is the majority of the Company’s loans, the Bank assigns a potential loss factor based on the most recent 3 years of loss history.

Loans identified as losses by management, internal loan review and/or bank examiners are charged-off. Furthermore, consumer loan accounts are charged-off automatically based on regulatory requirements.

A summary analysis of the allowance for loan losses follows:

	Year Ended
	December 31,
	2010			2009
Balance, beginning	$	6,316,829		$	3,895,246
Provision for loan losses		2,573,000			5,553,990
Loans charged-off		(3,309,666	)		(3,134,605	)
Recoveries		148,232			2,198
Balance, ending	$	5,728,395		$	6,316,829

F-20

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

The following table provides additional detail of the allowance for loan losses, by portfolio segment, for the year ended December 31, 2010. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Real Estate Loans			Commercial Business			Consumer			Total
Allowance for Loan Losses:
Beginning balance	$	5,547,149		$	759,817		$	9,863		$	6,316,829
Charge-offs		(2,203,196	)		(1,020,438	)		(86,032	)		(3,309,666	)
Recoveries		148,232			-			-			148,232
Provisions		1,251,074			1,128,306			193,620			2,573,000
Ending balance	$	4,743,259		$	867,685		$	117,451		$	5,728,395
Period-end amount allocated to:
Loans individually evaluated for impairment	$	2,114,959		$	12,766		$	-		$	2,127,725
Loans collectively evaluated for impairment		2,628,300			854,919			117,451			3,600,670
Ending balance	$	4,743,259		$	867,685		$	117,451		$	5,728,395
Loans:
Loans individually evaluated for impairment	$	17,807,362		$	1,265,034		$	-		$	19,072,396
Loans collectively evaluated for impairment		322,368,333			50,472,850			10,915,192			383,756,375
Ending balance	$	340,175,695		$	51,737,884		$	10,915,192		$	402,828,771

Credit Quality Indicators. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt and comply with various terms of their loan agreements. The Company considers current financial information, historical payment experience, credit documentation, public information and current economic trends. Generally, all sizeable credits receive a financial review no less than annually to monitor and adjust, if necessary, the credit’s risk profile. Credits classified as watch generally receive a review more frequently than annually. For special mention, substandard, and doubtful credit classifications, the frequency of review is increased to no less than quarterly in order to determine potential impact on credit loss estimates.

The Company categorizes loans into the following risk categories based on relevant information about the ability of borrowers to service their debt:

Pass– A pass asset is well protected by the current worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Pass assets also include certain assets considered watch, which are still protected by the worth and paying capacity of the borrower but deserve closer attention and a higher level of credit monitoring.

Special Mention – A special mention asset has potential weaknesses that deserve management’s close attention. The asset may also be subject to a weak or speculative market or to economic conditions, which may, in the future adversely affect the obligor. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard – A substandard asset is an asset with a well-defined weakness that jeopardizes repayment, in whole or in part, of the debt. These credits are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These assets are characterized by the distinct possibility that the institution will sustain some loss of principal and/or interest if the deficiencies are not corrected. It is not necessary for a loan to have an identifiable loss potential in order to receive this rating.

F-21

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

Doubtful – An asset that has all the weaknesses inherent in the substandard classification, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely likely, but it is not identified at this point due to pending factors.

Loss – An asset, or portion thereof, classified as loss is considered uncollectible and of such little value that its continuance on the Company’s books as an asset is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. As such, it is not practical or desirable to defer the write-off. Therefore, there is no balance to report at December 31, 2010.

The following table presents our credit quality indicators, segregated by class, as of December 31, 2010.

	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
One-to-four family	$	95,736,843	$	771,951	$	1,706,072	$	972,028	$	99,186,894
Multi-family		23,455,816		-		1,589,248		1,498,221		26,543,285
Commercial		142,382,980		11,718,507		5,407,417		1,289,712		160,798,616
Construction and land		46,809,444		605,162		5,830,405		401,889		53,646,900
		308,385,083		13,095,620		14,533,142		4,161,850		340,175,695
Commercial business		45,743,054		5,281,761		713,069		-		51,737,884
Consumer:
Home equity		8,212,078		40,563		707,283		210,143		9,170,067
Other		1,745,125		-		-		-		1,745,125
		9,957,203		40,563		707,283		210,143		10,915,192
Total	$	364,085,340	$	18,417,944	$	15,953,494	$	4,371,993	$	402,828,771

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by the fair value of the collateral if the loan is collateral dependent. The Company does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a restructuring agreement.

F-22

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

The following is a summary comparison of impaired loans at December 31, 2010 and 2009:

	December 31,
	2010		2009
Impaired loans for which there is a related allowance for loan losses	$	7,989,543	$	17,260,097
Impaired loans for which there is no related allowance for loan losses		11,082,853		8,248,180
Total impaired loans	$	19,072,396	$	25,508,277
Allowance for loan losses for impaired loans included in the allowance
for loan losses	$	2,127,725	$	1,909,854
Average recorded investment in impaired loans	$	23,648,902	$	17,731,303
Cash basis income recognized from impaired loans	$	122,724	$	1,003,905
Loans contractually past due over 90 days and still accruing interest	$	92,728	$	2,580,077
Loans no longer accruing interest, not included in impaired	$	456,042	$	1,043,432
Loans no longer accruing interest, included in impaired	$	11,793,138	$	10,689,777

F-23

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

The following tables provide additional detail of impaired loans, segregated by class, as of December 31, 2010. At December 31, 2010 we had loans of approximately $250,000 that were classified as troubled debt restructurings which are included in our impaired loans. The unpaid contractual balance represents the recorded balance prior to any partial charge-offs. The recorded investment represents customer balances net of any partial charge-offs recognized on the loans. The interest income recognized column represents all interest income reported either on a cash or accrued basis after the loan became impaired. The cash basis income column represents only the interest income recognized on a cash basis after the loan was classified as impaired.

	Unpaid Contractual Principal Balance		Recorded Investment with No Related Allowance		Recorded Investment with Allowance		Total Recorded Investment		Related Allowance
Real Estate Loans:
One-to-four family	$	2,134,451	$	1,828,061	$	34,420	$	1,862,481	$	10,000
Multi-family		3,331,813		1,589,249		1,498,221		3,087,470		371,940
Commercial		7,114,333		5,526,878		1,170,250		6,697,128		290,250
Construction and land		6,961,294		1,059,996		5,172,298		6,232,294		1,442,769
		19,541,891		10,004,184		7,875,189		17,879,373		2,114,959
Commercial business		809,440		598,715		114,354		713,069		12,766
Consumer:
Home equity		479,954		479,954		-		479,954		-
Other		-		-		-		-		-
		479,954		479,954		-		479,954		-
Total	$	20,831,285	$	11,082,853	$	7,989,543	$	19,072,396	$	2,127,725

	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized from Impaired Loans
Real Estate Loans:
One-to-four family	$	6,915,027	$	52,135	$	48,880
Multi-family		2,936,288		26,006		-
Commercial		4,655,640		337,718		21,674
Construction and land		7,603,909		50,799		50,799
		22,110,864		466,658		121,353
Commercial business		1,156,307		93,411		1,371
Consumer:
Home equity		381,731		2,458		-
Other		-		-		-
		381,731		2,458		-
Total	$	23,648,902	$	562,527	$	122,724

F-24

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 4. Property and Equipment

The components of property and equipment are as follows:

	December 31,
	2010			2009
Land	$	1,830,711		$	1,874,648
Buildings and improvements		8,796,739			9,107,791
Construction in process		14,896			14,896
Furniture and equipment		829,502			1,788,978
		11,471,848			12,786,313
Less accumulated depreciation		(909,527	)		(1,689,565	)
	$	10,562,321		$	11,096,748

Depreciation expense for the years ended December 31, 2010, and 2009 amounted to $592,552 and $704,813, respectively.

Note 5. Mortgage Servicing Rights

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage and other loans serviced for others were approximately $68,332,000 and $70,914,000 at December 31, 2010 and 2009, respectively.

The fair values of these servicing rights were approximately $601,000 and $681,000, respectively, at December 31, 2010 and 2009. The fair value of servicing rights was determined using a discount rate of 8.00%, monthly prepayment speeds ranging from 1.78% to 8.33%, depending on the stratification of the specific right, ancillary income of $48 per loan annually, and incremental cost to service of approximately $43 per loan annually. The ancillary income and cost to service assumptions include projected loan defaults.

The following summarizes the activity pertaining to mortgage servicing rights along with the aggregate activity in related valuation allowances:

	Year Ended
	December 31,
	2010			2009
Balance, beginning	$	680,776		$	657,660
Mortgage servicing rights capitalized		194,048			294,938
Mortgage servicing rights amortized		(216,908	)		(200,757	)
Provision for loss in fair value		(56,591	)		(71,065	)
Balance, ending	$	601,325		$	680,776
Valuation allowances:
Balance, beginning	$	109,220		$	38,155
Additions		56,591			71,065
Balance, ending	$	165,811		$	109,220

F-25

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 5. Mortgage Servicing Rights (Continued)

Estimated future amortization expense on mortgage servicing rights is as follows:

Year Ending December 31,	Amount
2011	$	125,769
2012		120,083
2013		102,232
2014		81,966
2015		48,456
Thereafter		122,819
	$	601,325

Note 6. Core Deposit Intangible

The gross carrying value and accumulated amortization of the core deposit intangible is presented below:

	December 31,
	2010			2009
Core deposit intangible	$	3,258,000		$	3,258,000
Less accumulated amortization		(2,138,000	)		(1,777,999	)
	$	1,120,000		$	1,480,001

Amortization expense on core deposit intangible for the years ended December 31, 2010 and 2009 was $360,001 and $468,000, respectively.

Estimated future amortization expense on core deposit intangible for the five succeeding fiscal years is as follows:

Year Ending December 31,	Amount
2011	$	304,000
2012		281,000
2013		264,000
2014		75,000
2015		58,000

Note 7. Goodwill

The Company reported goodwill from its acquisition of Clover Leaf Bank in 2006 in the amount of $9,402,608 and its acquisition of Partners Bank in 2008 in the amount of $11,282,715, for a total of $20,685,323 in goodwill. In June 2009, we recorded an impairment charge of $9,300,000, reducing the amount of goodwill to $11,385,323. In accordance with ASC Topic 350, Intangibles-Goodwill and Other, goodwill and intangible assets with indefinite useful lives are no longer amortized; rather they are assessed, at least annually, for impairment. The Company tests goodwill for impairment on an annual basis as of September 30, or more often if events or circumstances indicate there may be impairment. Management has determined that the Company has only one reporting unit for purposes of evaluating goodwill.

F-26

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 7. Goodwill (Continued)

As outlined in ASC Topic 350, the goodwill impairment analysis involves a two-step test. Step one includes two valuation methodologies; (i) the comparable transactions approach, and (ii) the control premium approach. The first valuation methodology, used to identify potential impairment, involves comparing the fair value of the reporting unit to its carrying value including goodwill. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired. If the carrying value exceeds fair value, there is an indication of impairment, and the second valuation methodology is performed to measure the amount of impairment. The second valuation methodology involves calculating an implied fair value of goodwill for the reporting unit, in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first valuation methodology, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the carrying value of the reporting unit goodwill exceeds the implied fair value of the goodwill, an impairment charge is recorded against earnings for the excess.

Due to the current economic environment and other uncertainties, it is possible that our estimates and assumptions may adversely change in the future, and we may be required to record additional goodwill impairment losses in future periods. It is not possible at this time to determine if any such future impairment loss would result or, it if does, whether such charge would be material. However, any such future impairment loss would be limited to the remaining goodwill balance of $11,385,323 at December 31, 2010. Subsequent reversal of goodwill impairment losses is not permitted. At our annual impairment assessment date of September 30, 2010, our analysis indicated that no further impairment existed.

Note 8. Deposits

Deposits are summarized as follows:

	December 31,
	2010		2009
Noninterest bearing	$	34,172,434	$	49,533,776
Interest bearing transaction accounts		209,846,389		175,051,476
Savings		19,982,473		18,942,269
Time		183,481,913		199,026,947
	$	447,483,209	$	442,554,468

Included in time deposits were approximately $45,846,000 and $50,148,000 of brokered deposits for the years ended December 31, 2010 and 2009, respectively. Included in interest bearing transaction accounts were approximately $24,441,000 and $17,424,000 of brokered deposits for the years ended December 31, 2010 and 2009, respectively.

Interest expense on deposits is summarized as follows:

	Year Ended
	December 31,
	2010		2009
Interest bearing transaction accounts	$	2,285,206	$	2,893,114
Savings		151,622		74,062
Time		5,292,848		7,284,606
	$	7,729,676	$	10,251,782

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was approximately $80,811,000 and $64,346,000 at December 31, 2010 and 2009, respectively.

F-27

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 8. Deposits (Continued)

At December 31, 2010, the scheduled maturities of time deposits are as follows:

Year Ending December 31,	Amount
2011	$	125,542,898
2012		41,734,021
2013		8,023,783
2014		3,906,657
2015		4,214,551
Thereafter		60,003
	$	183,481,913

Note 9. Federal Home Loan Bank Advances

The Bank had total advances from the Federal Home Loan Bank (“FHLB”) of $21,924,000 and $39,924,000 at December 31, 2010 and 2009, respectively. The weighted average interest rate on the advances was 1.33% and 3.54% at December 31, 2010 and 2009, respectively. The range of rates on the outstanding advances at December 31, 2010 varied from 0.78% to 4.85%.

The contractual maturities of advances are as follows:

Year Ending December 31,	Amount
2011	$	-
2012		5,000,000
2013		8,005,000
2014		6,483,000
2015		1,473,000
2016		963,000
	$	21,924,000

At December 31, 2010, in addition to FHLB stock, eligible residential real estate loans totaling approximately $56,612,000 were pledged to the FHLB to secure advances outstanding compared to $58,760,000 at December 31, 2009.

Note 10. Securities Sold under Agreements to Repurchase

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The balance of our securities sold under agreements to repurchase fluctuates based upon our customers’ needs and activity. The Company has one significant customer whose balances fluctuate on a regular basis. Due to the nature of this customer’s business, large fluctuations in its accounts are a normal occurrence. The Company may be required to provide additional collateral based on the fair value of the underlying securities.

F-28

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 11. Subordinated Debentures

The financial statements also include the following wholly-owned entity on a deconsolidated basis, First Clover Leaf Statutory Trust I. The sole asset of this trust is junior subordinated deferrable interest debentures. Clover Leaf issued $4,000,000 in May 2005 in cumulative trust preferred securities through this newly formed special-purpose trust. The proceeds of the offering were invested by the trust in junior subordinated debentures of Trust I. Distributions are cumulative and were payable at a fixed rate of 6.08% through May 2010 and then adjusted quarterly at a variable rate of 1.85% over the 3 month LIBOR rate, per annum of the stated liquidation amount of $1,000 per preferred security. The obligations of the trust are fully and unconditionally guaranteed, on a subordinated basis, by the Company. The trust preferred securities for Trust I are mandatorily redeemable upon the maturity of the debentures in May 2025, or to the extent of any earlier redemption of any debentures by the Company, and are callable beginning in May 2010. Holders of the capital securities have no voting rights, are unsecured, and rank junior in priority of payment to all of the Company’s indebtedness and senior to the Company’s capital stock. For regulatory purposes, the trust preferred securities qualify as Tier I capital subject to certain provisions. In conjunction with the Acquisition on July 10, 2006, a market value adjustment of ($223,000) was recorded.

Note 12. Income Taxes

Allocation of federal and state income taxes between current and deferred portions is as follows:

	Year Ended
	December 31,
	2010		2009
Federal:
Current	$	1,449,943	$	1,089,398
Deferred		171,566		(1,132,575	)
		1,621,509		(43,177	)
State:
Current		345,668		210,911
Deferred		4,908		(259,911	)
		350,576		(49,000	)
	$	1,972,085	$	(92,177	)

The Company's income tax expense differed from the maximum statutory federal rate of 35% as follows:

	Year Ended
	December 31,
	2010			2009
Expected income taxes	$	2,022,285		$	(3,120,199	)
Income tax effect of:
State taxes, net of federal income tax benefit		227,875			(32,120	)
Tax exempt interest, net		(215,371	)		(201,560	)
Income taxed at lower rates		(57,780	)		89,148
Goodwill impairment loss		-			3,255,000
Other		(4,924	)		(82,446	)
	$	1,972,085		$	(92,177	)

F-29

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 12. Income Taxes (Continued)

The tax effects of principal temporary differences are shown in the following table:

	December 31,
	2010			2009
Deferred tax assets:
Allowance for loan losses	$	2,207,408		$	2,423,647
Deferred compensation		280,422			258,304
ESOP expense		74,774			64,903
Accrued expenses		107,502			146,837
Purchase accounting adjustments for:
Loans		74,879			97,238
Securities		209,770			299,449
Time deposits		11,257			28,337
Deferred Fees and Costs		21,988			-
Premises and equipment		-			44,184
Other		69,384			26,458
		3,057,384			3,389,357
Deferred tax liabilities:
Federal Home Loan Bank stock		(640,438	)		(640,438	)
Core deposit intangible		(434,762	)		(574,507	)
Mortgage servicing rights		(233,422	)		(264,264	)
Unrealized gain on securities available for sale		(361,696	)		(1,014,202	)
Purchase accounting adjustments for:
Premises and equipment		(303,035	)		(309,274	)
Federal Home Loan Bank advances		(29,502	)		(29,502	)
Subordinated debentures		(9,987	)		(27,092	)
Deferred loan costs, net		-			(13,813	)
Premises and equipment		(52,245	)		-
		(2,065,087	)		(2,873,092	)
Net deferred taxes	$	992,297		$	516,265

Retained earnings at December 31, 2010 and 2009 include approximately $3,044,000 of the tax bad debt reserve which accumulated prior to 1988, for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $1,157,000 at December 31, 2010 and 2009. Management has determined that the probability of recapturing the reserve is not sufficient to record a liability.

F-30

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 13. Employee Benefits

The Company has adopted a 401k plan and profit sharing defined contribution plan covering substantially all of its employees. The contribution to the plan for the profit sharing contribution is determined by the Board of Directors. The Company contributed $99,863 and $99,520 to the plan for the profit sharing contribution for the years ended December 31, 2010 and 2009, respectively. The 401k component of the plan allows participants to defer up to 50% of their compensation. Such deferral accumulates on a tax deferred basis until the employee withdraws the funds. The Company matches the employee contributions for the 401k plan up to 2% of compensation. Total expense recorded for the Company’s match for the 401k plan was $62,819 and $61,731 for the years ended December 31, 2010 and 2009, respectively.

Certain directors participate in a deferred compensation agreement. The Bank accrues the liability for these agreements based on the present value of the amount the director is currently eligible to receive. The Company recorded expenses of $10,362 and $13,006 in 2010 and 2009, respectively, related to these agreements. At December 31, 2010 and 2009, the Bank had a recorded liability in the amount of $722,401 and $678,429, respectively, for these plans.

The Company has an employee stock ownership plan (ESOP) that covers substantially all employees who have attained the age of 21 and completed one year of service. In connection with its initial stock offering in 2004, the Company loaned funds to the ESOP for the purchase of its common stock at the initial public offering price. The loan is being repaid based on a variable interest rate over 20 years beginning December 31, 2004. All shares are held in a suspense account for allocation among the participants as the loan is repaid. Shares are released for allocation to participants based upon the ratio of the current year’s debt service to the sum of total principal and interest payments over the remaining life of the note. Shares released from the suspense account are allocated among the participants based upon their pro rata annual compensation. The purchase of shares by the ESOP was recorded by the Company as unearned ESOP shares in a contra equity account. As ESOP shares are committed to be released to compensate employees, the contra equity account is reduced and the Company recognizes compensation expense equal to the average fair market value of the shares committed to be released. Compensation expense of $52,766 and $64,778 was incurred for the years ended December 31, 2010 and 2009, respectively.

Dividends on unallocated ESOP shares, together with Company contributions, are used by the ESOP to repay principal and interest on the outstanding note.

The following table reflects the shares held by the plan at December 31, 2010 and 2009:

	2010		2009
Unallocated shares (fair value at December 31, 2010 and
2009 of $749,509 and $875,025, respectively)		110,547		119,051
Allocated shares		60,212		51,708
		170,759		170,759

F-31

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 14. Capital Ratios

The Company’s primary source of funds is dividends received from the Bank. By regulation, the Bank is prohibited from paying dividends that would reduce regulatory capital below a specific percentage of assets, without regulatory approval. As a practical matter, dividends distributed by the Bank are restricted to amounts that maintain prudent capital levels.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tangible and Tier I capital (as defined by the regulations) to tangible assets (as defined), total and Tier I capital (as defined) to risk-weighted assets (as defined). Management believes, as of December 31, 2010 and 2009, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2010, the most recent notification from the Office of Thrift Supervision categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank's actual capital amounts and ratios as of December 31, 2010 and 2009 are presented in the following table.

											To be Well Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	2010
Tangible Capital to Tangible Assets	$	58,904,000		10.50	%	$	8,412,000		1.50	%		N/A		N/A
Tier I Capital to Adjusted Total Assets	$	58,904,000		10.50	%	$	22,432,000		4.00	%	$	28,039,000		5.00	%
Tier I Capital to Risk Weighted Assets	$	58,904,000		15.69	%		N/A		N/A		$	22,520,000		6.00	%
Total Capital to Risk Weighted Assets	$	60,898,000		16.22	%	$	30,027,000		8.00	%	$	37,534,000		10.00	%

	2009
Tangible Capital to Tangible Assets	$	54,322,000	9.55	%	$	8,537,000	1.50	%		N/A	N/A
Tier I Capital to Adjusted Total Assets	$	54,322,000	9.55	%	$	22,764,000	4.00	%	$	28,455,000	5.00	%
Tier I Capital to Risk Weighted Assets	$	54,322,000	12.88	%		N/A	N/A		$	25,297,000	6.00	%
Total Capital to Risk Weighted Assets	$	57,985,000	13.75	%	$	33,729,000	8.00	%	$	42,161,000	10.00	%

F-32

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 15. Commitments, Contingencies and Credit Risk

The Company and the Bank could be a party to legal actions which are in the normal course of business activities. In the opinion of management, the ultimate resolution of these matters is not expected to have a material effect on the financial position or the results of operations of the Company.

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in addition to the amounts recognized in the consolidated balance sheets.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

A summary of the notional or contractual amounts of financial instruments, primarily variable rate, with off-balance-sheet risk follows:

							Range of Rates
	Variable Rate		Fixed Rate		Total		on Fixed Rate
	Commitments		Commitments		Commitments		Commitments
	2010
Commitments to extend credit	$	40,434,568	$	8,977,545	$	49,412,113		3.50% - 18.00	%
Standby letters of credit	$	1,633,332	$	2,969,681	$	4,603,013		4.00% - 9.25	%

	2009
Commitments to extend credit	$	33,654,649	$	8,029,863	$	41,684,512	2.51% - 18.00	%
Standby letters of credit	$	1,836,784	$	4,542,563	$	6,379,347	4.00% - 9.25	%

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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by the Company upon extension of credit, varies and is based on management's credit evaluation of the counterparty.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities of customers. The Company's policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The Bank holds collateral, which may include accounts receivables, inventory, property and equipment, income producing properties, supporting those commitments if deemed necessary. In the event the customer does not perform in accordance with the terms of the agreement with the third party, the Bank would be required to fund the commitment. The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount shown in the summary above. If the commitment is funded, the Bank would be entitled to seek recovery from the customer. At December 31, 2010 and 2009, no amounts have been recorded as liabilities for the Bank’s potential obligations under these guarantees.

The Company does not engage in the use of interest rate swaps, futures, forwards, or option contracts.

F-33

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 16. Fair Value of Financial Instruments

FASB ASC Topic 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet. Fair value is determined under the framework established by ASC Topic 820, Fair Value Measurement and Disclosures. ASC Topic 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The following information presents estimated fair values of the Company’s financial instruments as of December 31, 2010 and 2009 and the methods and assumptions used to estimate those fair values.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amounts of cash and cash equivalents approximate fair values.

Interest-earning time deposits: Due to the short term nature of these deposits, generally three months or less, the carrying amounts of these deposits approximate fair values.

Securities available for sale: The fair value of available-for-sale securities are determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. The Company has no securities classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. For these investments, the pricing applications apply available information as applicable through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to prepare evaluations. They also use model processes, such as the Option Adjusted Spread model to assess interest rate impact and develop prepayment scenarios. In the case of municipal securities, information on the Bloomberg terminal such as credit ratings, credit support, and call features are used to set the matrix values for the issues, which will be used to determine the yields from which the market values are calculated each month. Because they are not price quote valuations, the pricing methods are considered level 2 inputs. At this time all of the Company’s securities fall within the Level 2 hierarchy for pricing. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company currently has no securities classified within Level 3.

Federal Home Loan Bank stock: The Company is required to maintain these equity securities as a member of the Federal Home Loan Bank of Chicago and in amounts as required by this institution. These equity securities are “restricted” in that they can only be sold back to the respective institution or another member institution at par. Therefore, they are less liquid than other tradable securities and their fair value is not readily available.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segmented by type such as real estate, commercial business, and consumer loans. Each loan segment is further segregated into fixed and adjustable rate interest terms and by performing and non-performing classifications. The fair value of fixed rate loans is estimated by discounting future cash flows using discount rates that reflect the Company’s current pricing for loans with similar characteristics, such as loan type, pricing and remaining maturity. Additional factors are applied to the loan portfolio by loan quality categories.

Accrued interest receivable: The carrying amount of accrued interest receivable approximates its fair value.

F-34

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 16. Fair Value of Financial Instruments (Continued)

Deposit liabilities: The fair values disclosed for demand deposits (savings) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for fixed-term money market accounts approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Federal Home Loan Bank advances: The fair value of Federal Home Loan Bank advances, which are at a fixed rate, are estimated using discounted cash flow analyses based on current rates for similar advances.

Securities sold under agreements to repurchase: The carrying amounts of securities sold under agreements to repurchase approximate fair value.

Subordinated debentures: This debenture was a fixed/floating rate instrument. It was at a fixed rate for the first five years, and then it converted to a floating rate based on the three-month Libor rate plus 1.85% as of June 15, 2010. The fair value of variable rate trust preferred debentures approximate carrying value. Prior to June 15, 2010, the trust preferred debentures had a fixed rate and the fair value was estimated using discounted cash flow analyses based on current rates for similar advances.

Accrued interest payable: The carrying amount of accrued interest payable approximates its fair value.

The estimated fair values and related carrying or notional amounts of the Company's financial instruments are as follows:

	December 31, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	66,253,047	$	66,253,047	$	47,996,754	$	47,996,754
Interest-earning time deposits		1,718,651		1,718,651		-		-
Securities		78,474,908		78,474,908		86,407,138		86,407,138
Federal Home Loan Bank stock		6,306,273		6,306,273		6,306,273		6,306,273
Loans, net		387,567,638		384,965,267		411,898,823		412,792,748
Accrued interest receivable		1,866,511		1,866,511		2,183,520		2,183,520
Financial liabilities:
Non-interest bearing deposits		34,172,434		34,172,434		49,533,776		49,533,776
Interest bearing deposits		413,310,775		415,075,294		393,020,692		395,518,484
Federal Home Loan Bank advances		21,924,000		22,021,145		39,924,000		40,471,672
Securities sold under agreement
to repurchase		21,457,075		21,457,075		18,936,168		18,936,168
Subordinated debentures		3,974,272		3,974,272		3,930,208		3,992,868
Accrued interest payable		561,687		561,687		1,211,552		1,211,552

In addition, other assets and liabilities of the Company that are not defined as financial instruments are not included in the above disclosures, such as property and equipment. Also, nonfinancial instruments typically not recognized in financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earnings power of core deposit accounts, the trained work force, customer goodwill and similar items.

F-35

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 17. Fair Value Measurements

The Company determines the fair market values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures, which requires an entity to maximize the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value.

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included with Level 1 that are observable for the asset or liability either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived from or corroborated by market data by correlation or other means. Level 3 inputs are unobservable inputs for determining the fair value of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. During the year ended December 31, 2010, there were no transfers between Level 1 and Level 2. The valuation methodology was consistent for the years ended December 31, 2010 and 2009.

Assets and liabilities measured at fair value on a recurring basis segregated by fair value hierarchy level during the period ended December 31, 2010 and 2009 are summarized below:

	December 31, 2010
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Investment securities:
U.S. government agency obligations	$	-	$	42,690,393	$	-	$	42,690,393
Corporate bonds		-		2,057,639		-		2,057,639
State and municipal securities		-		17,774,271		-		17,774,271
Other securities		-		3,501		-		3,501
Mortgage-backed securities		-		15,949,104		-		15,949,104
Total investment securities available
for sale	$	-	$	78,474,908	$	-	$	78,474,908

F-36

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 17. Fair Value Measurements (Continued)

	December 31, 2009
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Investment securities:
U.S. government agency obligations	$	-	$	48,514,519	$	-	$	48,514,519
Corporate bonds		-		2,545,918		-		2,545,918
State and municipal securities		-		15,378,916		-		15,378,916
Other securities		-		3,501		-		3,501
Mortgage-backed securities		-		19,964,284		-		19,964,284
Total investment securities available
for sale	$	-	$	86,407,138	$	-	$	86,407,138

Assets and liabilities measured at fair value on a nonrecurring basis by fair value hierarchy level during the periods ended December 31, 2010 and 2009 are summarized below:

	December 31, 2010
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Impaired loans	$	-	$	-	$	5,861,818	$	5,861,818

	December 31, 2009
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets:	(Level 1)		(Level 2)		(Level 3)		Total
Impaired loans	$	-	$	15,350,243	$	-	$	15,350,243
Goodwill		-		11,385,323		-		11,385,323

F-37

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 17. Fair Value Measurements (Continued)

Impaired loans that are collateral dependent have been written down to the fair value of the collateral, less estimated costs to sell, through the establishment of a specific allowance or by recording charge-offs when the carrying value exceeds the fair value of the collateral. Valuation techniques consistent with the market approach, income approach, and/or cost approach were used to measure fair value and primarily included observable inputs for the individual impaired loans being evaluated such as recent sales of similar assets or observable market data for operational or carrying costs. In cases where such inputs were unobservable, the loan balance is reflected within the Level 3 hierarchy. For the period ended September 30, 2010, management reassessed the valuation methods for impaired loans, and due to the volatility in the market and the subjectivity that goes into the valuation process, specifically the discounts on appraisals, management determined it was appropriate to reclassify impaired loans from Level 2 into Level 3. The calculated valuation amount does not necessarily represent the value of the loans if sold to a willing buyer. Management believes it is more likely than not that a workout solution or liquidation of the collateral is the best use of the asset and therefore has measured fair value based on the underlying collateral of the loans. If management were to sell the impaired loan portfolio to a third party instead of liquidating the collateral, the measurement of fair value could be significantly different.

Foreclosed assets are collateral dependent and are recorded at the lessor of the recorded investment in the receivable or the appraised value less costs to sell. For the years ended December 31, 2010 and 2009, no foreclosed assets were written down to fair value after acquisition.

As noted in Note 7, an implied fair value of goodwill was measured for the reporting unit, in the same manner as the amount of goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination.

Note 18. Liquidation Account

As required by current regulations, a liquidation account in the amount of $20.7 million was established in conjunction with our 2006 mutual to stock conversion.

As a result, each eligible account holder or supplemental account holder is entitled to a proportionate share of this account in the unlikely event of a complete liquidation of the Bank, and only in such event. This share will be reduced if the eligible account holder’s or supplemental account holder’s deposit balance falls below the amounts on the date of record and will cease to exist if the account is closed. The liquidation account will never be increased despite any increase after conversion in the related deposit balance. The Bank may not declare, pay a dividend on, or repurchase any of its capital stock of the Bank, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements. Due to various natural events, such as death, relocation, and general attrition of accounts, the balance in the liquidation account has been reduced to $3.8 million at December 31, 2010.

F-38

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 19. Condensed Financial Statements of Parent Company

Financial information pertaining only to First Clover Leaf Financial Corp. is as follows:

Balance Sheets

December 31, 2010 and 2009

	2010			2009
Assets
Cash and cash equivalents	$	7,309,622		$	9,359,004
Investment securities available for sale		-			404,916
Loans, net		272,990			-
ESOP note receivable		653,999			693,938
Investment in common stock of subsidiary		72,624,930			69,591,683
Other assets		545,144			921,592
Total assets	$	81,406,685		$	80,971,133
Liabilities and Stockholders' Equity
Subordinated debentures	$	3,974,272		$	3,930,208
Accrued interest payable		7,362			39,210
Other liabilities		91,612			73,438
Total liabilities		4,073,246			4,042,856
Stockholders' Equity
Common stock		788,770			796,052
Additional paid-in-capital		62,116,845			62,569,654
Retained earnings		14,384,059			12,451,069
Accumulated other comprehensive income		614,774			1,726,434
Unearned ESOP shares		(571,009	)		(614,932	)
		77,333,439			76,928,277
Total liabilities and stockholders' equity	$	81,406,685		$	80,971,133

F-39

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 19. Condensed Financial Statements of Parent Company (Continued)

Condensed Statements of Operations

For the Years Ended December 31, 2010 and 2009

	2010			2009
Interest income	$	36,551		$	66,919
Interest expense		(185,075	)		(298,286	)
Other income		6,260			11,361
Other expenses		(314,324	)		(437,552	)
Loss before income tax benefit and equity in
undistributed net income of subsidiary		(456,588	)		(657,558	)
Income tax benefit		173,650			250,200
Loss before equity in undistributed net income (loss) of subsidiary		(282,938	)		(407,358	)
Equity in undistributed net income (loss) of subsidiary		4,088,810			(8,415,319	)
Net income (loss)	$	3,805,872		$	(8,822,677	)

F-40

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 19. Condensed Financial Statements of Parent Company (Continued)

Condensed Statements of Cash Flows

For the Years Ended December 31, 2010 and 2009

	2010			2009
Cash Flows from Operating Activities
Net income (loss)	$	3,805,872		$	(8,822,677	)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Equity in undistributed (net income) loss of subsidiary		(4,088,810	)		8,415,319
Amortization of premiums and discounts on securities		(526	)		(2,318	)
Premiums and discounts on subordinated debentures		44,064			44,064
Decrease (increase) in other assets		376,448			(249,125	)
Increase (decrease) in accrued interest payable		(31,848	)		3,483
Increase (decrease) in other liabilities		20,285			(8,281	)
Net cash provided by (used in) operating activities		125,485			(619,535	)
Cash Flows from Investing Activities
Purchases of available for sale securities		(7,000,000	)		-
Proceeds from calls and maturities of available for sale securities		7,400,000			800,000
Loans purchased		(272,990	)		-
Net cash flows provided by investing activities		127,010			800,000
Cash Flows from Financing Activities
Repayment of ESOP loan		39,939			38,682
Repurchase of common stock		(468,934	)		(6,544,229	)
Dividends		(1,872,882	)		(1,957,065	)
Net cash flows used in financing activities		(2,301,877	)		(8,462,612	)
Net decrease in cash and cash equivalents		(2,049,382	)		(8,282,147	)
Cash and cash equivalents:
Beginning of year		9,359,004			17,641,151
End of year	$	7,309,622		$	9,359,004

F-41

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 20. Selected Quarterly Financial Data (Unaudited)

The results of operations by quarter for the years ended December 31, 2010 and 2009 were as follows:

	Year Ended December 31, 2010
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Interest income	$	6,560,439	$	6,376,279	$	6,412,937	$	6,091,063
Interest expense		2,462,749		2,264,647		2,204,645		2,003,416
		4,097,690		4,111,632		4,208,292		4,087,647
Provisions for loan losses		423,000		400,000		650,000		1,100,000
		3,674,690		3,711,632		3,558,292		2,987,647
Other income		298,859		809,681		698,255		438,975
Other expenses		2,502,008		2,536,657		2,646,896		2,714,513
Income before
income taxes		1,471,541		1,984,656		1,609,651		712,109
Income taxes		511,029		705,264		554,717		201,075
Net income	$	960,512	$	1,279,392	$	1,054,934	$	511,034
Basic earnings per share	$	0.12	$	0.16	$	0.14	$	0.07
Diluted earnings per share	$	0.12	$	0.16	$	0.14	$	0.07

	Year Ended December 31, 2009
	First		Second			Third		Fourth
	Quarter		Quarter			Quarter		Quarter
Interest income	$	7,268,416	$	6,991,928		$	6,943,636	$	6,804,215
Interest expense		3,156,372		3,256,008			3,020,210		2,827,738
		4,112,044		3,735,920			3,923,426		3,976,477
Provisions for loan losses		240,270		428,720			1,000,000		3,885,000
		3,871,774		3,307,200			2,923,426		91,477
Other income		402,934		347,751			332,324		334,676
Other expenses		2,609,317		12,155,615			2,974,161		2,787,323
Income (loss) before
income taxes		1,665,391		(8,500,664	)		281,589		(2,361,170	)
Income tax expense (benefit)		611,496		292,900			70,100		(1,066,673	)
Net income (loss)	$	1,053,895	$	(8,793,564	)	$	211,489	$	(1,294,497	)
Basic earnings (losses) per share	$	0.12	$	(1.08	)	$	0.03	$	(0.16	)
Diluted earnings (losses) per share	$	0.12	$	(1.08	)	$	0.03	$	(0.16	)

F-42

First Clover Leaf Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Note 21. Subsequent Events

Events occurring subsequent to December 31, 2010, have been evaluated as to their potential impact to the financial statements through the date of issuance of this report.

On January 25, 2011, the Board of Directors of the Company declared a cash dividend on the Company’s common stock of $0.06 per share for the quarter ended December 31, 2010. The dividend was payable to stockholders of record as of February 14, 2011 and was paid on February 22, 2011.

F-43

Report of Independent Registered Public Accounting Firm

on the Supplementary Information

To the Board of Directors

First Clover Leaf Financial Corp. and Subsidiary

Edwardsville, Illinois

Our audit as of and for the year ended December 31, 2010 was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The consolidating information is presented for additional analysis of the basic consolidated financial statements rather than to present the financial position and results of operations of the individual entities. Such information has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

/s/ McGLADREY & PULLEN, LLP

Champaign, Illinois

March 31, 2011

F-44

First Clover Leaf Financial Corp. and Subsidiary

Consolidating Balance Sheet Information

December 31, 2010

										Consolidated
										First Clover Leaf
	First Clover Leaf			First Clover Leaf						Financial Corp.
	Bank			Financial Corp.			Eliminations			and Subsidiary
Assets
Cash and due from banks	$	11,294,266		$	7,309,622		$	(7,309,622	)	$	11,294,266
Interest-earning deposits		12,773,854			-			-			12,773,854
Federal funds sold		42,184,927			-			-			42,184,927
Total cash and cash equivalents		66,253,047			7,309,622			(7,309,622	)		66,253,047
Interest-earning time deposits		1,718,651			-			-			1,718,651
Securities available for sale		78,474,908			-			-			78,474,908
Federal Home Loan Bank stock		6,306,273			-			-			6,306,273
Loans, net of allowance for loan losses		387,294,648			272,990			-			387,567,638
Note receivable - ESOP		-			653,999			(653,999	)		-
Investment in subsidiary		-			72,624,930			(72,624,930	)		-
Property and equipment, net		10,562,321			-			-			10,562,321
Accrued interest receivable		1,866,511			-			-			1,866,511
Prepaid Federal Deposit Insurance Corporation					-
insurance premiums		2,301,408			-						2,301,408
Goodwill		11,385,323			-			-			11,385,323
Core deposit intangible		1,120,000			-			-			1,120,000
Foreclosed assets		3,844,347			-			-			3,844,347
Mortgage servicing rights		601,325			-			-			601,325
Other assets		2,423,088			545,144			-			2,968,232
Total assets	$	574,151,850		$	81,406,685		$	(80,588,551	)	$	574,969,984
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest bearing	$	41,482,056		$	-		$	(7,309,622	)	$	34,172,434
Interest bearing		413,310,775			-			-			413,310,775
Total deposits		454,792,831			-			(7,309,622	)		447,483,209
Federal Home Loan Bank advances		21,924,000			-			-			21,924,000
Securities sold under agreements to repurchase		21,457,075			-			-			21,457,075
Subordinated debentures		-			3,974,272			-			3,974,272
Accrued interest payable		554,325			7,362			-			561,687
Note payable ESOP		653,999			-			(653,999	)		-
Other liabilities		2,144,690			91,612			-			2,236,302
Total liabilities		501,526,920			4,073,246			(7,963,621	)		497,636,545
Stockholders' Equity
Preferred stock		-			-			-			-
Common stock		10			788,770			(10	)		788,770
Additional paid-in capital		55,780,930			62,116,845			(55,780,930	)		62,116,845
Retained earnings		16,800,225			14,384,059			(16,800,225	)		14,384,059
Accumulated other comprehensive income		614,774			614,774			(614,774	)		614,774
Unearned Employee Stock Ownership
Plan shares		(571,009	)		(571,009	)		571,009			(571,009	)
Total stockholders' equity		72,624,930			77,333,439			(72,624,930	)		77,333,439
Total liabilities and
stockholders' equity	$	574,151,850		$	81,406,685		$	(80,588,551	)	$	574,969,984

F-45

First Clover Leaf Financial Corp. and Subsidiary

Consolidating Statement of Income Information

For the Year Ended December 31, 2010

									Consolidated
									First Clover Leaf
	First Clover Leaf		First Clover Leaf						Financial Corp.
	Bank		Financial Corp.			Eliminations			and Subsidiary
Interest and dividend income:
Interest and fees on loans	$	22,560,189	$	24,447		$	(22,553	)	$	22,562,083
Securities:
Taxable interest income		2,158,722		12,052			-			2,170,774
Nontaxable interest income		595,869		-			-			595,869
Interest-earning deposits, federal funds sold, and
other		111,940		52			-			111,992
Total interest and dividend income		25,426,720		36,551			(22,553	)		25,440,718
Interest expense:
Deposits		7,729,676		-			-			7,729,676
Federal Home Loan Bank advances		993,646		-			-			993,646
Securities sold under agreements to repurchase		49,613		-			(22,553	)		27,060
Subordinated debentures		-		185,075			-			185,075
Total interest expense		8,772,935		185,075			(22,553	)		8,935,457
Net interest income (loss)		16,653,785		(148,524	)		-			16,505,261
Provision for loan losses		2,573,000		-			-			2,573,000
Net interest income (loss) after
provision for loan losses		14,080,785		(148,524	)		-			13,932,261
Other income:
Service fees on deposit accounts		395,460		-			-			395,460
Other service charges and fees		343,993		-			-			343,993
Loan servicing fees		203,929		-			-			203,929
Gain on sale of securities		663,814								663,814
Gain on sale of loans		554,575		-			-			554,575
Other		77,739		6,260			-			83,999
		2,239,510		6,260			-			2,245,770
Other expenses:
Compensation and employee benefits		4,645,259		54,134			-			4,699,393
Occupancy expense		1,367,504		-			-			1,367,504
Data processing services		664,073		-			-			664,073
Director fees		186,500		-			-			186,500
Professional fees		153,095		187,060			-			340,155
Federal Deposit Insurance Corporation insurance
premiums		751,589		-			-			751,589
Amortization of core deposit intangible		360,001		-			-			360,001
Amortization of mortgage servicing rights		273,499		-			-			273,499
Other		1,684,230		73,130			-			1,757,360
		10,085,750		314,324			-			10,400,074
Income (loss) before income taxes		6,234,545		(456,588	)		-			5,777,957
Income tax expense (benefit)		2,145,735		(173,650	)		-			1,972,085
Net income (loss)	$	4,088,810	$	(282,938	)	$	-		$	3,805,872

F-46

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

SUBSIDIARIES OF THE REGISTRANT

Subsidiary	Ownership	State of Incorporation
First Clover Leaf Bank	100%	Federal
First Clover Leaf Statutory Trust I	100%	Maryland

SUBSIDIARIES OF FIRST CLOVER LEAF BANK

Subsidiary	Ownership	State of Incorporation
Clover Leaf Financial Services	100%	Illinois

EX-31.1

EXHIBITS 31.1 AND 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis M. Terry, certify that:

1. I have reviewed this annual report on Form 10-K of First Clover Leaf Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2011	/s/ Dennis M. Terry
	Dennis M. Terry
	President and Chief Executive Officer

EX-31.2

EXHIBITS 31.1 AND 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION

302 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Darlene F. McDonald, certify that:

1. I have reviewed this annual report on Form 10-K of First Clover Leaf Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f))for the registrant and have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2011	/s/ Darlene F. McDonald
	Darlene F. McDonald
	Senior Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATE PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32

Certification pursuant to

18 U.S.C. Section 1350,

as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Dennis M. Terry, President and Chief Executive Officer and Darlene F. McDonald, Senior Vice President and Chief Financial Officer of First Clover Leaf Financial Corp. (the “Company”) each certify in their capacity as officers of the Company that they have reviewed the annual report of the Company on Form 10-K for the year ended December 31, 2010 and that to the best of their knowledge:

1. the report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company at and for the year ended December 31, 2010.

The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.

Date: March 31, 2011	/s/ Dennis M. Terry
	Dennis M. Terry
	President and Chief Executive Officer
Date: March 31, 2011	/s/ Darlene F. McDonald
	Darlene F. McDonald
	Senior Vice President and Chief Financial Officer