UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

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

For the Fiscal Year Ended December 31, 2013

OR

oTRANSITION 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 o NO x.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  YES o NO x.

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 x NO o

(2) YES x NO o

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 x NO o

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. x

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 o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(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 o NO x

As of June 30, 2013 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, 2013 ($8.02 per share) was $51.0 million.

As of March 15, 2014, there were approximately 7,007,000 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 2014 Annual Meeting of Stockholders (Parts II and III).

2.Portions of Annual Report to Stockholders for the year ended December 31, 2013 (Part II).

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 and other risks set forth herein and in other documents we file with the Securities and Exchange Commission.  These risks and uncertainties 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 state bank headquartered in Edwardsville, Illinois. The second-step conversion, stock offering and 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, 2013, we had total consolidated assets of $622.0 million, net loans of $372.6 million, total deposits of $502.5 million and stockholders’ equity of $73.1 million.  We had net income of $3.4 million for the year ended December 31, 2013.

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

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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 five branch offices located in Edwardsville, Wood River, and Highland, Illinois.  In October 2013 we converted our Loan Production Office in Highland, Illinois to a full-service branch.  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, 2013 (the latest date for which information is available), our market share of deposits was 10.3% of all FDIC-insured deposits in Madison County making us the third 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 suburban market area that has a stable population and household base.  The 2013 U.S. Census Update Report indicates that the population of Madison County decreased 0.3% to 268,517, from 2010 until 2013 while the population of the City of Edwardsville increased 0.7% to 24,457 from 2010 to 2012.  From 2010 to 2013, the number of households in Madison County increased 0.1%.  As of 2013, the median household income for Madison County was $50,952.  This compares to a median household income of $54,107 and $51,314 for the state of Illinois and the United States, respectively.

Our primary lending area is concentrated in Madison County, the southern portion of Macoupin County, and the northern portion of St. Clair 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 did not experience as severe of a downturn as certain other areas of the country since 2008, such as coastal states.  While, in general, property values in our market area have fallen in recent years, 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.

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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, and home equity loans.

Commercial real estate loans represented $120.8 million, or 31.9% of our loan portfolio at December 31, 2013.  One-to-four family residential real estate mortgage loans represented $118.9 million, or 31.3%, of our loan portfolio at December 31, 2013.  We offer commercial business loans, and these loans represented $71.9 million, or 19.0% of our loan portfolio, at December 31, 2013. Our multi-family loans represented $40.3 million, or 10.6% of our loan portfolio at December 31, 2013.  We offer construction and land loans secured by single-family properties and residential subdivisions.  Construction and land loans represented $14.0 million, or 3.7%, of our loan portfolio at December 31, 2013.  We also originate consumer loans, including home equity loans and automobile loans, which totaled $13.2 million, or 3.5% of our loan portfolio at December 31, 2013.

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

	At December 31,
	2013					2012					2011					2010					2009
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Real Estate Loans:
One-to-four family(1)	$	118,885		31.3	%	$	112,351		27.5	%	$	115,540		29.1	%	$	120,609		29.9	%	$	98,080		23.4	%
Multi-family	40,262			10.6		42,203			10.3		39,482			9.9		25,321			6.3		20,947			5.0
Commercial real estate	120,839			31.9		138,767			34.0		128,657			32.4		130,031			32.3		179,923			42.8
Construction and land	13,961			3.7		30,144			7.4		44,192			11.1		52,505			13.0		45,448			10.8
Total real estate loans	293,947			77.5		323,465			79.2		327,871			82.5		328,466			81.5		344,398			82.0
Commercial business	71,940			19.0		71,251			17.4		48,677			12.3		51,750			12.9		63,135			15.0
Consumer Loans:
Home equity	11,713			3.1		12,062			3.0		19,140			4.8		20,958			5.2		9,871			2.4
Automobile and other	1,526			0.4		1,463			0.4		1,414			0.4		1,655			0.4		2,606			0.6
Total consumer loans	13,239			3.5		13,525			3.4		20,554			5.2		22,613			5.6		12,477			3.0
Total gross loans	379,126			100.0	%	408,241			100.0	%	397,102			100.0	%	402,829			100.0	%	420,010			100.00	%
Undisursed portion of construction loans	(1,113		)			(7,377		)			(1,725		)			(9,590		)			(1,773		)
Deferred loan origination costs (fees), net	147					(50		)			47					57					(21		)
Allowance for loan losses	(5,591		)			(5,945		)			(7,789		)			(5,728		)			(6,317		)
Total loans, net	$	372,569				$	394,869				$	387,635				$	387,568				$	411,899

(1) The amount at December 31, 2009 includes loans held for sale of $1.8 million.  Loans held for sale were excluded for the other years.

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Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2013.

	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,
2014(1)	$	13,359	4.75	%	$	3,506	4.54	%	$	22,034	4.92	%	$	4,128	4.52	%
2015 to 2018	28,322		4.88		20,745		4.49		72,477		4.81		9,573		3.63
2019 and beyond	77,204		4.08		16,011		3.98		26,328		4.25		260		4.21
Total	$	118,885	4.35	%	$	40,262	4.29	%	$	120,839	4.71	%	$	13,961	3.90	%

	Commercial Business				Home Equity				Other Consumer				Total
	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,
2014(1)	$	24,429	4.23	%	$	1,845	4.82	%	$	454	6.02	%	$	69,755	4.61	%
2015 to 2018	27,290		4.45		8,267		4.41		1,012		4.47		167,686		4.63
2019 and beyond	20,221		3.51		1,601		6.88		60		4.07		141,685		4.05
Total	$	71,940	4.11	%	$	11,713	4.81	%	$	1,526	4.92	%	$	379,126	4.41	%

(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, 2013 that are contractually due after December 31, 2014.

	Due After December 31, 2014
	Fixed		Adjustable		Total
	(Dollars in thousands)
Real Estate Loans:
One-to-four family	$	102,744	$	2,782	$	105,526
Multi-family	36,560		196		36,756
Commercial real estate	94,504		4,301		98,805
Construction and land	9,833		—		9,833
Total real estate loans	243,641		7,279		250,920
Commercial business	39,695		7,816		47,511
Consumer Loans:
Home equity	2,250		7,618		9,868
Automobile and other	1,062		10		1,072
Total consumer loans	3,312		7,628		10,940
Total loans	$	286,648	$	22,723	$	309,371

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One-to-Four Family Real Estate Loans. As of December 31, 2013, one-to-four family residential loans totaled $118.9 million, or 31.3% of our total loan portfolio. These loans are predominately collateralized by properties located in our primary 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 continuing low interest rate environment. 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, 2013, we were servicing $108.0 million in loans for others.

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

For one-to-four family first mortgage residential real estate loans, we may generally lend up to 80% of the property’s appraised value, or up to 90% 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 first 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.

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 $40.3 million, or 10.6%, of our total loan portfolio at December 31, 2013. Multi-family real estate loans generally are secured by apartment buildings and rental properties. The majority of our multi-family real estate loans are secured by properties located within our lending area. At December 31, 2013, our largest multi-family real estate loan relationship had a principal balance of $6.4 million, and the loans were secured by apartment buildings. At December 31, 2013 these loans were performing in accordance with their repayment terms. Multi-family real estate loans generally are offered with interest rates that adjust after one, three or five years. The majority of these loans either float with the prime rate or they are fixed balloon loans.

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 generally 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 independent appraisers approved by the board of directors. All multi-family real estate loans below $250,000 must either have an independent appraisal or valuation.

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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 $120.8 million, or 31.9% of our total loan portfolio as of December 31, 2013. 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 and schools. We originate commercial real estate loans generally 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, 2013 had a principal balance of $6.7 million and was secured by an educational facility located in St. Louis County, Missouri. This loan was performing in accordance with its repayment terms as of December 31, 2013.

Commercial real estate loans generally have higher interest rates than the interest rates on residential mortgage loans. In addition, commercial real estate 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. 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 generally lend up to 80% of the property’s appraised value. We require independent appraisals for all commercial real estate loans in excess of $250,000. For loans that do not exceed this amount, we utilize a valuation. 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, 2013, construction and land loans totaled $14.0 million, or 3.7%, of our total loan portfolio. This portfolio consists of construction/speculative loans, construction/permanent loans and land development loans.

Construction/speculative loans are made to area homebuilders or developers 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 either during or after the construction period. These loans have the risk that the builder will have

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to make interest and principal payments on the loan, and finance real estate taxes and other holding costs of the completed home or lot for a significant time after the completion of construction. Funds are disbursed in phases as construction is completed. All construction/speculative loans typically 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 and therefore generally observes a loan-to-value ratio of no more than 80% of the lower of cost or the estimated value of the completed property. In addition, we generally limit the number of our construction/speculative loans per borrower based on their available liquidity.

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 with loan-to-value ratios of up to 80% (or up to 90% 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.

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 80% of the lower of cost or appraised value of the property. At December 31, 2013, the largest construction and land loan relationship consisted of lots and undeveloped land for future development phases located in our primary market area. The loans had an aggregate balance of $6.7 million and were secured by land, receivables and a commercial property. The loans were performing in accordance with the repayment terms.

Commercial Business Loans. We offer commercial business loans to 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, 2013, we had commercial business loans outstanding with an aggregate balance of $71.9 million, or 19.0%, of the total loan portfolio. As of December 31, 2013, our largest commercial business loan customer had a principal balance of $6.0 million. The loans were secured primarily by a floor plan for new and used vehicles located in our primary market area. The loans were performing in accordance with their repayment terms as of December 31, 2013.

We have continued our emphasis on the origination of commercial business lending. These loans tend to have higher rates of interest and are more sensitive than other loan categories to changes in market

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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, loans secured by deposits and securities, and unsecured personal loans. As of December 31, 2013, consumer loans totaled $13.2 million, or 3.5%, of our total loan portfolio.

At December 31, 2013, home equity lines of credit totaled $11.7 million, or 3.1%, 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 adjustable rates that are tied to the prime lending rate. To date, we are seeing minimal stress in our home equity portfolio or signs of material default risks. We 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 72 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 policy insurance coverage. Our automobile loan portfolio totaled $1.5 million, or 0.4%, of total loans at December 31, 2013.

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

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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 either an independent appraisal or valuation for all consumer loans in excess of $50,000 if secured by real estate.

Loan Originations, Purchases, Sales and Servicing. Although we originate fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon borrower demand, market interest rates, 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 seller/servicer guidelines, and are currently originated primarily on a fixed interest rate basis. We generally sell most of our conforming, fixed-rate, one-to-four family loans that we originate with servicing rights retained, 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 $108.0 million of loans for others. In 2013, we originated $22.5 million in one-to-four family residential mortgage loans and received proceeds of $24.9 million from the sale of residential 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. Authorized officers have predetermined approval levels, and 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 $5.0 million. In addition, a list of all preauthorized loans is presented to the board of directors’ loan committee on a monthly basis.

Loans to One Borrower. At December 31, 2013, 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 $10.3 million. At that date, the largest lending relationship with First Clover Leaf Bank totaled $9.8 million and consisted of a floor plan for new and used vehicles, a real estate loan for a commercial building, a separate commercial loan and a residential mortgage. These loans were performing in accordance with their repayment terms as of December 31, 2013.

Appraisal Policies. We obtain appraisals on property for the majority of 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 or the market has had significant changes and we do not feel that we can properly assess the value from our own resources. We also subscribe 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

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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 60 days of a delinquency, we will send a demand letter to the borrower. If a satisfactory payment plan has not been arranged within 90 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.

During 2013, the Company experienced a decline in our non-performing and impaired loans along with a decrease in our foreclosed 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 loans. 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.

Non-Accrual Loan Procedures. 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 applied to the outstanding principal balance. Loans are charged-off no later than 120 days following their delinquency, unless the loans are well-collateralized or in the process of collection.

Non-Performing and Impaired Loans and Other Non-Performing Assets. At December 31, 2013, our total non-performing and impaired loans and other non-performing assets were $12.8 million compared to $18.2 million at December 31, 2012. At December 31, 2013, the Company’s non-accrual loans decreased $5.1 million to $6.4 million from $11.5 million at December 31, 2012.

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At December 31, 2013, First Clover Leaf Bank had one relationship classified as non-accrual with a balance in excess of $1.0 million, and two non-accrual relationships each with balances slightly below $1.0 million. The largest non-accrual relationship is a $1.9 million credit to a real estate investor. This credit was placed on non-accrual status during the three months ended June 30, 2012. The investor is experiencing cash flow difficulties due to higher vacancy rates and the need for property repairs. A $600,000 payment was received on this relationship during the third quarter of 2012, and a charge-off of $483,000 was recorded during the second quarter of 2013, all of which was previously reserved. A $300,000 payment was received during the fourth quarter of 2013 due to a sale of one of the properties. A property manager is overseeing the daily operations, and all non-rented properties have been listed for sale. The borrower has signed a forbearance agreement with the Company to aid in selling some of the properties to further reduce the debt, and rents from the existing properties are being directly deposited at the bank. We believe the collateral on this loan is sufficient to cover the majority of the outstanding balance and that sufficient allowances have been set aside for the remaining outstanding balance. The second non-accrual loan is a $970,000 credit to a real estate investor. The collateral for this credit is primarily a mobile-home park along with several small commercial buildings. Currently, the mobile-home park is struggling with vacancies and cash flow is limited. The Company has recently restructured this loan into a two-note structure with the requirement that all rents from the mobile-home park are deposited directly into an account at the Company. There are two commercial buildings making up the remainder of the collateral that are currently listed for sale. A third credit is a $928,000 credit secured by a subdivision development. The credit was placed on non-accrual status during the three months ended March 31, 2013. The development was experiencing very limited lot sales, and the cash flow was not sufficient to cover the principal and interest payments. Currently, we believe the collateral is sufficient to cover the outstanding loan balance.

In addition to the non-accrual loans discussed above, we may have loans that are still accruing interest that we categorize as impaired due to observed credit deterioration. This allows us to individually evaluate them for our allowance for loan losses. At December 31, 2013 there were four credits in this classification with a total balance of $788,000. There were no loans that met this classification at December 31, 2012. The largest loan in this classification at December 31, 2013 was a $590,000 commercial real estate loan secured by land and specific single-use buildings. The borrower is experiencing cash flow difficulties due to higher vacancy rates in these buildings. The Company has recently restructured this loan and entered into a forbearance agreement with the borrower which allows for a rate reduction and interest only payments for six months.

The following table presents a summary of our past-due loans as of December 31, 2013 and December 31, 2012:

	December 31,		December 31,
	2013		2012
Loans 30-59 Days Past Due	$	692,010	$	1,222,565
Loans 60-89 Days Past Due	116,090		616,832
Loans 90 or more Days Past Due	733,740		3,063,148
Total Past Due Loans	$	1,541,840	$	4,902,545

Past due balances have decreased $3.4 million from $4.9 million at December 31, 2012 to $1.5 million at December 31, 2013. The category with the highest decline is 90 or more days past due, with a decline of $2.3 million. This decline is due to the Company receiving the proceeds from the sale of a home that was the collateral for one of the past due loans, and the commercial property securing another loan being transferred into foreclosed property. In addition to the decline in the 90 or more days past due

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category, the Company also reported a decline in the 30 to 59 days and 60 to 89 days past due categories.  In the 30 to 59 days category this is a result of a one-to-four family home that was no longer considered past due.  In the 60 to 89 days past due category, the decline is due to several one-to-four family homes that are no longer considered past due.

The allowance for loan losses to non-performing and impaired loans ratio increased to 77.28% at December 31, 2013 compared to 50.89% at December 31, 2012.  The increase in this ratio is primarily the result of a decline of $4.5 million of non-performing and impaired loans to $7.2 million at December 31, 2013 compared to $11.7 million at December 31, 2012.  The allowance for loan losses to total loans decreased to 1.50% at December 31, 2013 compared to 1.51% at December 31, 2012.

At December 31, 2013, First Clover Leaf Bank had 11 properties classified as foreclosed assets.  The collateral on these properties consisted of a commercial mobile-home site, a commercial building, farmland, a multi-family complex, two residential lot developments, a commercial development, and four single-family residences.  All of these properties were transferred into foreclosed assets at cost or the property’s fair value, less estimated costs of disposal, at the date of foreclosure.  Initial valuation adjustments, if any, are charged against the allowance for loan losses.  The properties are evaluated regularly to ensure the recorded amount is supported by its current fair value.

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The table below sets forth the amount and categories of our non-performing and impaired loans and other non-performing assets at the dates indicated.  At December 31, 2013, 2012, 2011 and 2010, we had loans of approximately $6.2 million, $8.9 million, $9.3 million and $250,000, respectively, that were classified as 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, 2009, we had an immaterial amount of troubled debt restructurings.

	At December 31,
	2013			2012			2011			2010			2009
	(Dollars in thousands)
Non-accrual loans:
One-to-four family	$	1,671		$	2,087		$	1,203		$	2,951		$	2,260
Multi-family	2,100			3,006			1,120			506			2,324
Commercial real estate	1,389			3,466			762			1,698			1,346
Construction and land	1,141			2,456			7,690			6,612			5,410
Commercial business	—			260			250			31			293
Consumer	145			196			142			451			100
Total non-accrual loans	6,446			11,471			11,167			12,249			11,733
Accruing loans delinquent 90 days or more:
One-to-four family	—			183			405			81			107
Construction and land	—			—			—			—			1,600
Commercial business	—			26			—			12			873
Consumer	—			—			—			—			—
Total accruing loans delinquent 90 days or more	—			209			405			93			2,580
Total non-performing loans	6,446			11,680			11,572			12,342			14,313
Other impaired loans:
One-to-four family	49			—			923			1,016			—
Multi-family	—			—			2,521			1,359			6,122
Commercial real estate	589			—			2,595			3,410			4,932
Construction and land	—			—			155			371			2,407
Commercial business	132			—			1,314			604			1,357
Consumer	18			—			509			519			—
Total other impaired loans	788			—			8,017			7,279			14,818
Total non-performing and impaired loans	7,234			11,680			19,589			19,621			29,131
Foreclosed assets:
One-to-four family	635			782			1,157			440			200
Multi-family	118			—			—			—			—
Commercial real estate	692			826			755			854			230
Construction and land	4,132			4,898			3,911			2,550			655
Total foreclosed assets	$	5,577		$	6,506		$	5,823		$	3,844		$	1,085
Total non-performing and impaired assets	$	12,811		$	18,186		$	25,412		$	23,465		$	30,216
Ratios:
Non-performing and impaired loans to total loans	1.94		%	2.96		%	5.05		%	5.06		%	7.07		%
Non-performing and impaired assets to total assets	2.06		%	3.03		%	4.52		%	4.08		%	5.16		%

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For the year ended December 31, 2013, $329,480 of gross interest income would have been recorded had our non-accruing loans (including those identified as troubled debt restructurings) been current in accordance with their original terms. We recorded $20,545 of income on such loans for the year ended December 31, 2013.

For the year ended December 31, 2013, $269,677 of gross interest income would have been recorded had our troubled debt restructured loans been current in accordance with their original terms. We recorded $54,322 of income on such loans for the year ended December 31, 2013.

At December 31, 2013, we had no loans which were not already classified as non-accrual, 90 days past due, or impaired, with known information about possible credit problems of the borrower causing management to have serious concerns and would result in disclosure as non-accrual, 90 days past due, or impaired.

Foreclosed Assets.  Foreclosed assets 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, 2013, we held 11 properties as foreclosed assets with a total value of $5.6 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 incurred 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.  Loans classified as substandard may also be classified as impaired if it is probable the borrower will not be able to meet the contracted terms.  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, 2013, we had classified $9.5 million of our assets as substandard, of which $7.2 million was also impaired, and $412,000 as doubtful.

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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, 2013
One-to-four family	2	$	116	7	$	674	9	$	790
Multi-family	—	—		—	—		—	—
Commercial real estate	—	—		1	30		1	30
Construction and land	—	—		—	—		—	—
Commercial business	—	—		—	—		—	—
Consumer	—	—		1	30		1	30
Total	2	$	116	9	$	734	11	$	850
At December 31, 2012
One-to-four family	7	$	578	16	$	1,811	23	$	2,389
Multi-family	—	—		—	—		—	—
Commercial real estate	—	—		2	535		2	535
Construction and land	—	—		2	375		2	375
Commercial business	—	—		4	287		4	287
Consumer	3	39		3	55		6	94
Total	10	$	617	27	$	3,063	37	$	3,680
At December 31, 2011
One-to-four family	1	$	50	18	$	947	19	$	997
Multi-family	—	—		1	236		1	236
Commercial real estate	1	1,746		4	762		5	2,508
Construction and land	1	229		5	7,130		6	7,359
Commercial business	1	127		3	194		4	321
Consumer	3	124		2	142		5	266
Total	7	$	2,276	33	$	9,411	40	$	11,687
At December 31, 2010
One-to-four family	4	$	281	12	$	1,567	16	$	1,848
Multi-family	—	—		3	506		3	506
Commercial real estate	4	217		4	1,201		8	1,418
Construction and land	—	—		9	6,147		9	6,147
Commercial business	—	—		2	43		2	43
Consumer	2	56		3	367		5	423
Total	10	$	554	33	$	9,831	43	$	10,385
At December 31, 2009
One-to-four family	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

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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,
	2013			2012			2011			2010			2009
	(Dollars in thousands)
Balance at beginning of year	$	5,945		$	7,789		$	5,728		$	6,317		$	3,895
Charge -offs:
One-to-four family	(550		)	(263		)	(421		)	(268		)	(244		)
Multi-family	(482		)	—			(228		)	(429		)	—
Commercial real estate	(217		)	(576		)	(379		)	(870		)	(832		)
Construction and land	—			(2,123		)	(1,754		)	(637		)	(1,644		)
Commercial business	(141		)	(650		)	(483		)	(1,020		)	(414		)
Consumer	(38		)	(94		)	(105		)	(86		)	—
Total charge-offs	(1,428		)	(3,706		)	(3,370		)	(3,310		)	(3,134		)
Recoveries:
One-to-four family	17			2			37			—			—
Multi-family	—			34			—			—			—
Commercial real estate	205			235			8			148			—
Construction and land	302			22			72			—			—
Commercial business	59			18			22			—			2
Consumer	6			1			—			—			—
Total recoveries	589			312			139			148			2
Net (charge-offs)	(839		)	(3,394		)	(3,231		)	(3,162		)	(3,132		)
Provision for loan losses	485			1,550			5,292			2,573			5,554
Balance at end of year	$	5,591		$	5,945		$	7,789		$	5,728		$	6,317
Ratios:
Net charge-offs to average loans outstanding	0.22		%	0.85		%	0.82		%	0.78		%	0.74		%
Allowance for loan losses to non-performing and impaired loans	77.28		%	50.89		%	39.76		%	29.19		%	21.68		%
Allowance for loan losses to total loans	1.50		%	1.51		%	2.01		%	1.48		%	1.53		%

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The allowance for loan losses is a valuation account that reflects our evaluation of the probable incurred credit losses in our loan portfolio.  We maintain the allowance through provisions for loan losses that we charge against 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 probable incurred losses 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 incurred 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.

In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, periodically reviews our loan portfolio and the related allowance for loan losses.  The Office of the Comptroller of the Currency 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.

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Allocation of Allowance for Loan Losses.  The following table sets 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,
	2013						2012						2011
	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	$	1,425	$	118,885	31.3	%	$	847	$	112,351	27.5	%	$	777	$	115,540	29.1	%
Multi-family	661		40,262		10.6		959		42,203		10.3		780		39,482		9.9
Commercial	1,455		120,839		31.9		1,268		138,767		34.0		1,157		128,657		32.4
Construction and land	668		13,961		3.7		1,413		30,144		7.4		3,934		44,192		11.1
Commercial business	1,219		71,940		19.0		1,296		71,251		17.4		970		48,677		12.3
Consumer	163		13,239		3.5		162		13,525		3.4		171		20,554		5.2
Total	$	5,591	$	379,126	100.0	%	$	5,945	$	408,241	100.0	%	$	7,789	$	397,102	100.0	%

	At December 31,
	2010						2009
	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	$	1,162	$	120,609	29.9	%	$	1,517	$	98,080	23.4	%
Multi-family	300		25,321		6.3		745		20,947		5.0
Commercial	1,043		130,031		32.3		2,402		179,923		42.8
Construction and land	2,152		52,505		13.0		883		45,448		10.8
Commercial business	868		51,750		12.9		760		63,135		15.0
Consumer	203		22,613		5.6		10		12,477		3.0
Total	$	5,728	$	402,829	100.0	%	$	6,317	$	420,010	100.0	%

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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, 2013.

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), state and local municipalities, although from time to time we make other investments as permitted by applicable laws and regulations.

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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, 2013, we had no securities considered to be other-than-temporarily impaired.

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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,
	2013				2012				2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Investment Securities:
U.S. government agency obligations	$	41,983	$	40,915	$	19,596	$	19,793	$	31,226	$	31,744
U.S. treasury securities	5,000		5,000		—		—		—		—
Corporate bonds	—		—		—		—		1,950		1,838
State and municipal securities	39,827		38,745		35,068		36,404		25,064		26,376
Other securities	249		249		249		249		4		4
Mortgage-backed: residential	33,404		32,868		31,468		31,834		25,280		25,613
Total investment securities available for sale	$	120,463	$	117,777	$	86,381	$	88,280	$	83,524	$	85,575

At December 31, 2013, we held 83 available-for-sale securities that had been in a loss position for less than twelve months, and 14 available-for-sale securities that had been in a loss position for twelve months or more.  Included in the 83 securities in the less-than-twelve month position are (a) 17 agency securities, seven of which have been in a loss position for one month, three have been in a loss position for five months, three have been in a loss position for six months, and four have been in a loss position for ten months (b) 49 state and municipal securities, seven of which have been in a loss position for one month, two have been in a loss position for three months, two have been in a loss position for four months, two have been in a loss position for five  months, 17 have been in a loss position for six months, eight have been in a loss position for seven months, one has been in a loss position for eight months, and 10 have been in a loss position for 10 months (c) 17 mortgage-backed securities, two of which have been in a loss position for five months, three have been in a loss position for six months, nine have been in a loss position for seven months, one has been in a loss position for eight  months, and two have been in a loss position for eleven months.  Included in the 14 securities in the twelve-months-or-more position is one agency security, seven state and municipal securities, and six mortgage-backed securities.

As of December 31, 2013, 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, 2013, represents an other-than-temporary impairment.

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Portfolio Maturities and Yields.  The composition and maturities of the investment securities portfolio and the mortgage-backed securities portfolio at December 31, 2013 are summarized in the following table.  Maturities are based on the final contractual payment dates except for mortgage-backed securities which are based on accounting speed to reflect the impact of prepayments.  State and municipal securities yields have 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	$	17,627	0.70	%	$	10,334	1.16	%	$	14,022	1.66	%	$	—	0.00	%	$	41,983	$	40,915	1.13	%
U.S. treasury securities	5,000		0.00		—		0.00		—		0.00		—		0.00		5,000		5,000		0.00
State and municipal securities	245		6.21		4,134		4.56		16,967		4.05		18,481		4.63		39,827		38,745		4.39
Other securities	4		0.00		245		1.35		—		0.00		—		0.00		249		249		1.33
Mortgage-backed: residential	65		1.84		26,420		1.86		6,919		2.15		—		0.00		33,404		32,868		1.92
Total investment securities available for sale	$	22,941	0.61	%	$	41,133	1.95	%	$	37,908	2.82	%	$	18,481	4.63	%	$	120,463	$	117,777	2.38	%

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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, 2013 we had $124.5 million in brokered deposits, which includes $91.1 million of interest-bearing transaction deposit accounts and $18.0 million of time deposits generated from our local customer base that utilize these brokered deposit products 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.  The 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, 2013 and 2012 were $55.3 million and $60.3 million, respectively.

Interest-Bearing Deposits.  The balances of our interest-bearing deposits at December 31, 2013 and 2012 were $447.3 million and $400.0 million, respectively.

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

	Years Ended December 31,
	2013						2012						2011
	Average Balance		Percent		Weighted Average Rate		Average Balance		Percent		Weighted Average Rate		Average Balance		Percent		Weighted Average Rate
	(Dollars in Thousands)
Noninterest-bearing transaction	$	57,082	11.9	%	0.00	%	$	46,895	11.3	%	0.00	%	$	35,661	8.1	%	0.00	%
Interest-bearing transaction	258,136		53.8		0.39		194,916		46.8		0.62		202,391		46.3		0.90
Savings deposits	27,029		5.6		0.29		24,115		5.8		0.48		21,422		4.9		0.71
	342,247		71.3				265,926		63.9				259,474		59.3
Time deposits	138,024		28.7		1.21		150,524		36.1		1.67		178,266		40.7		2.16
Total average deposits	$	480,271	100.0	%	0.57	%	$	416,450	100.0	%	0.92	%	$	437,740	100.0	%	1.33	%

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Time Deposit Balances and Maturities.  The following table sets forth certificates of deposit by time remaining until maturity as of December 31, 2013.

	Maturity
	3 Months or Less		Over 3 to 6 Months		Over 6 to 12 months		Over 12 Months		Total
	(Dollars in thousands)
Certificates of deposit less than $100,000	$	7,162	$	8,655	$	12,907	$	43,267	$	71,991
Certificates of deposit of $100,000 or more (1)	10,116		6,549		14,163		24,740		55,568
Total certificates of deposit	$	17,278	$	15,204	$	27,070	$	68,007	$	127,559

(1)The weighted average interest rates for these accounts, by maturity period, were: 0.66% for 3 months or less; 0.68% for over 3 to 6 months; 0.70% for over 6 to 12 months; and 1.55% for over 12 months.  The overall weighted average interest rate for accounts of $100,000 or more was 1.07%.

Borrowings.  Our borrowings consist of Federal Home Loan Bank advances, repurchase agreements and subordinated debentures. At December 31, 2013, we had $14.0 million in advances and access to additional Federal Home Loan Bank advances of up to $59.0 million, and we had $26.8 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 or for the periods shown:

	At or For the Years Ended December 31,
	2013			2012			2011
	(Dollars in thousands)
Balance at end of year	$	44,746		$	60,461		$	67,818
Average balance during year	52,607			55,822			50,039
Maximum outstanding at any month end	56,933			62,025			67,818
Weighted average interest rate at end of year	0.65		%	0.64		%	0.57		%
Average interest rate during year	1.04		%	1.14		%	1.28		%

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, 2013, we had 85 full-time employees and 18 part-time employees.  Our employees are not represented by any collective bargaining group.  Management believes that we have good working relations with our employees.

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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 Comptroller of the Currency 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 Comptroller of the Currency 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 Comptroller of the Currency, 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 Board of Governors of the Federal Reserve System (“Federal Reserve Board”) and to file certain reports with and is subject to examination by the Federal Reserve Board.  First Clover Leaf Financial Corp. is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

New Federal Legislation

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act’) significantly changed the bank regulatory structure and affected the lending, investment, trading and operating activities of financial institutions and their holding companies.  The Dodd-Frank Act eliminated our former primary federal regulator, the Office of Thrift Supervision, and requires 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 Federal Reserve Board to supervise and regulate all savings and loan holding companies like First Clover Leaf Financial Corp., in addition to bank holding companies which it regulates.  As a result, the Federal Reserve Board’s regulations applicable to bank holding companies, including holding company capital requirements, 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

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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 authorizes the payment of interest on commercial checking accounts, effective July 21, 2011.

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 are now 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, 2013.  Lastly, the Dodd-Frank Act increases 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.  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 contained the so-called “Volcker Rule,” which generally prohibits banking organizations from engaging in proprietary trading and from investing in, sponsoring or having certain relationships with hedge or private equity funds (“covered funds”).  On December 13, 2013, federal agencies issued a final rule implementing the Volcker Rule which, among other things, requires banking organizations to restructure and limit certain of their investments in and relationships with covered funds.

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 Comptroller of the Currency.  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.

Capital Requirements.  Federal 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

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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 Comptroller of the Currency 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.  Additionally, a savings bank that retains credit risk in connection with an asset sale may be required to maintain additional regulatory capital because of the recourse back to the savings bank.

In July 2013, the Office of the Comptroller of the Currency and the other federal bank regulatory agencies issued a final rule that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.  Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.  The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised.  First Clover Leaf Bank has elected to exercise its one-time option to opt-out of the requirement under the final rule to include certain “available-for-sale” securities holdings for purposes of calculating its regulatory capital requirements.  The rule limits a banking organization’s capital distributions and certain discretionary bonus payments to executive officers if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.  The final rule also implements the Dodd-Frank Act’s directive to apply to savings and loan holding companies consolidated capital requirements that are not less stringent than those applicable to their subsidiary institutions.  The final rule is effective January 1, 2015.  The “capital conservation buffer” will be phased in from January 1, 2016 to January 1, 2019, when the full capital conservation buffer will be effective.

The Company and the Bank have adopted a capital plan that requires the Bank to maintain a Tier 1 leverage ratio of at least 7% and a total risk-based capital ratio of at least 12%.  The minimum capital ratios set forth in the capital plan will be increased and other minimum capital requirements will be established if and as necessary to comply with the Basel III requirements as such requirements become applicable to the Company and the Bank.  In accordance with the capital plan, the Company will not declare a dividend unless all target capital ratio minimums have been exceeded after paying the dividend;

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and the quarterly dividend amount to be paid, plus the dividends of the prior three quarters must be no greater than 75% of the prior year’s net income.

At December 31, 2013, 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, 2013, 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 $10.3 million.  At that date, the largest lending relationship with First Clover Leaf Bank totaled $9.8 million and consisted of a floor plan for new and used vehicles, a real estate loan for a commercial building, a separate commercial loan and a residential mortgage.  This borrower was performing in accordance with the repayment terms as of December 31, 2013.

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 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, 2013, 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.  Comptroller of the Currency 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 Comptroller of the Currency—imposed condition; or

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

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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 Comptroller of the Currency 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 Comptroller of the Currency 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 Comptroller of the Currency, 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.

Transactions with Related Parties.  A federal savings association’s authority to engage in transactions with its “affiliates” is limited by Comptroller of the Currency 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. is 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, Comptroller of the Currency 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 Comptroller of the Currency 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

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day.  The Federal Deposit Insurance Corporation also has the authority to recommend to the Comptroller of the Currency 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.

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 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 Comptroller of the Currency 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 Comptroller of the Currency 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 Comptroller of the Currency 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, 2013, First Clover Leaf Bank met the criteria for being considered “well-capitalized.”

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In connection with the final capital rule described earlier, the federal banking agencies have adopted revisions, effective January 1, 2015, to the prompt corrective action framework.  Under the revised prompt corrective action requirements, insured depository institutions would be required to meet the following in order to qualify as “well capitalized:”  (1) a common equity Tier 1 risk-based capital ratio of 6.5%; (2) a Tier 1 risk-based capital ratio of 8% (increased from 6%); (3) a total risk-based capital ratio of 10% (unchanged from current rules) and (4) a Tier 1 leverage ratio of 5% (unchanged from the current rules).

Insurance of Deposit Accounts.  The Dodd-Frank Act permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008.  Also, under the Dodd-Frank Act, noninterest-bearing checking accounts have unlimited deposit insurance through December 31, 2013.

On November 12, 2009, the FDIC approved a final rule requiring insured depository institutions to prepay, on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012.   Estimated assessments for the fourth quarter of 2009 and for all of 2010 were based upon the assessment rate in effect on September 30, 2009, with three basis points added for the 2011 and 2012 assessment rates.  In addition, a 5% annual growth in the assessment base was assumed.  Prepaid assessments are to be applied against the actual quarterly assessments until exhausted, and may not be applied to any special assessments that may occur in the future.  Any unused prepayments will be returned to the institution on June 30, 2013.  We recorded the pre-payment as a prepaid expense, which was amortized to expense over three years. Based on our deposit and assessment rate as of September 30, 2009, our prepayment amount was $2.8 million.  There was no prepayment amount remaining as of December 31, 2013.

Effective April 1, 2011, the FDIC implemented a requirement of the Dodd-Frank Act to revise its assessment system to base it on each institution’s total assets less tangible capital of each institution instead of deposits.  The FDIC also revised its assessment schedule so that it ranges from 2.5 basis points for the least risky institutions to 45 basis points for the riskiest.

Insurance of deposits may be terminated by the FDIC upon a finding that an 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 condition imposed by the FDIC. The Bank does not believe that it is taking or is subject to any action, condition or violation that could lead to termination of its deposit insurance.

All FDIC-insured institutions are required to pay a pro rata portion of the interest due on obligations issued by the Financing Corporation (“FICO”) for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation.  The bonds issued by the FICO are due to mature in 2017 through 2019.  For the quarter ended December 31, 2013, the annualized Financing Corporation assessment was equal to 0.62 basis points of total assets less tangible capital.  For the year ended December 31, 2013, the Bank paid $33,547 related to the FICO bonds and $443,184 pertaining to deposit insurance assessments.

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.

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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, 2013, First Clover Leaf Bank was in compliance with this requirement and held $911,000 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, 2013, 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 Comptroller of the Currency.

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

Pursuant to the Dodd-Frank Act, as of July 21, 2011, the Federal Reserve Board succeeded the Office of Thrift Supervision as the regulator for savings and loan holding companies, such as First Clover Leaf Financial Corp.

General.  First Clover Leaf Financial Corp. is a non-diversified unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act.  As such, First Clover Leaf Financial Corp. is registered with the Federal Reserve Board and subject to examination and supervision by the Federal Reserve Bank of St. Louis.  First Clover Leaf Financial Corp. is subject to the Federal Reserve Board regulations (including applicable regulations of the former Office of Thrift Supervision), and reporting requirements.  In addition, the Federal Reserve Board has enforcement authority over First Clover Leaf Financial Corp. and its non-insured subsidiaries.  Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

Savings and loan holding companies are not currently subject to specific regulatory capital requirements.  The Dodd-Frank Act, however, required the Federal Reserve Board to promulgate

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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, subject to certain grandfathering.  The previously discussed final rule regarding regulatory capital requirements implements the Dodd-Frank Act as to savings and loan holding companies.  Consolidated regulatory capital requirements identical to those applicable to the subsidiary depository institutions will apply to savings and loan holding companies as of January 1, 2015.  As is the case with institutions themselves, the capital conservation buffer will be phased in between 2016 and 2019.

The Federal Reserve Board has issued a policy guidance regarding the payment of dividends by bank holding companies that it has made applicable to savings and loan holding companies as well.  In general, the Federal Reserve Board’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition.  Federal Reserve Board guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition.  The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.  These regulatory policies could affect our ability to pay dividends or otherwise engage in capital distributions.

The Dodd-Frank Act also extends the “source of strength” doctrine to savings and loan holding companies.  The Federal Reserve Board has issued 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.

Permissible Activities. Under present law, the business activities of First Clover Leaf Financial Corp. are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, 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 as well as activities that are incidental to financial activities or complementary to a financial activity.  The Dodd-Frank Act specifies that a savings and loan holding company may only engage in financial holding company activities if it meets the qualitative criteria necessary for a bank holding company to engage in such activities.  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 Federal Reserve Board, and certain additional activities authorized by Federal Reserve Board regulations.

Federal law prohibits a savings and loan holding company, including First Clover Leaf Financial Corp., directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior written approval of the Federal Reserve Bank of St. Louis.  It also prohibits the acquisition or retention of, with certain exceptions, the acquisition or retention of more than 5% of a non-subsidiary 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 Federal Reserve Bank of St. Louis must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

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The Federal Reserve Bank of St. Louis is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

(i)the approval of interstate supervisory acquisitions by savings and loan holding companies; and

(ii)the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

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 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

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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, 2013, 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, 2013, 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.

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, 2013, 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 9.5% for 2013, 2012, and 2011 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.

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Availability of Annual Report on Form 10-K

This Annual Report on Form 10-K is available on our website at www.firstcloverleafbank.com.  Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K.

ITEM 1A.RISK FACTORS

Not Required.

ITEM 1B.UNRESOLVED STAFF COMMENTS

None

ITEM 2.PROPERTIES

The following table provides certain information with respect to our offices as of December 31, 2013:

Location	Leased or Owned	Year Acquired	Net Book Value of Real Property
			(In thousands)
Main Office 6814 Goshen Road Edwardsville, Illinois 62025	Owned	2006	$	3,401
2143 Route 157 Edwardsville, Illinois 62025	Owned	2006	867
300 St. Louis Street Edwardsville, Illinois 62025	Owned	1964	1,437
1046 E. Madison St Wood River, Illinois 62095	Owned	2008	1,693
12551 St. Route 143 Highland, Illinois 62249	Leased	2011	25
Operations Data Center 27 Glen-Ed Professional Park Glen Carbon, Illinois 62034	Owned	2008	318

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The net book value of our premises, land and equipment was approximately $9.9 million at December 31, 2013.  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, 2013, 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.MINE SAFETY DISCLOSURES

Not Applicable.

PARTII

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, portions of which are attached as Exhibit 13 hereto. No equity securities were sold during the year ended December 31, 2013 that were not registered under the Securities Act.

(b)Not applicable.

(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, 2013 through October 31, 2013	—	$	—	—	45,034
November 1, 2013 through November 30, 2013	—	$	—	—	45,034
December 1, 2013 through December 31, 2013	—	$	—	—	45,034
Total	—			—

(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 12, 2008, it increased the number of shares that may be repurchased pursuant to that plan by an additional 382,641 shares. Additional increases of 25,000 shares to the Plan were made on April 27, 2010, August 24, 2010, November 23, 2010, June 28, 2011, and November 27, 2012.  Additional increases of 100,000 shares to the Plan were made on September 25, 2012 and January 22, 2013.  Additional increases of 150,000 shares were made on August 23, 2011 and February 26, 2013.  An additional increase of 250,000 shares was made on July 23, 2013. 

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The Plan has no expiration date.

ITEM 6.SELECTED FINANCIAL DATA

Incorporated by reference to our Annual Report to Stockholders, portions of which are 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, portions of which are included as Exhibit 13 to this Form 10-K.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Incorporated by reference to our Annual Report to Stockholders, portions of which are included as Exhibit 13 to this Form 10-K.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference to our Annual Report to Stockholders, portions of which are included as Exhibit 13 to this Form 10-K.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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.

There were no changes in our internal controls over financial reporting during the period ended December 31, 2013 or, to our knowledge, in other factors that have materially affected, or are reasonably likely to materially 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.

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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, 2013, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 1992 “Internal Control-Integrated Framework.”  Based on the assessment, management determined that, as of December 31, 2013, 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.

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.”

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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 Holders 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:

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

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

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

10.1[Reserved]

10.2[Reserved]

10.3[Reserved]

10.4[Reserved]

10.5[Reserved]

10.6[Reserved]

10.7[Reserved]

10.8[Reserved]

10.9[Reserved]

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10.10Employment Agreement of William D. Barlow (4)

10.11Employment Agreement of P. David Kuhl (5)

10.12Employment Agreement of Dennis M. Terry (5)

10.13First Amendment to Employment Agreement with William D. Barlow (5)

13Portions of Annual Report to Stockholders

14Code of Conduct (2)

21Subsidiaries of the Registrant(3)

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

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

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

101The following financial statements for the year ended December 31, 2013, formatted in XBRL:(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

(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 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.

(3)Incorporated by reference to the Annual Report on Form 10-K of First Clover Leaf Financial Corp. for the year ended December 31, 2010, filed with the Commission on March 31, 2011.

(4)Incorporated by reference to the Annual Report on Form 10-K of First Clover Leaf Financial Corp. for the year ended December 31, 2012, filed with the Commission on March 29, 2013.

(5)Incorporated by reference to the Current Report on Form 8-K of First Clover Leaf Financial Corp., filed with the Commission on September 24, 2013.

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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, 2014	By:	/s/ P. David Kuhl
		P. David Kuhl, 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/ P. David Kuhl	By:	/s/ Gerard Schuetzenhofer
	P. David Kuhl, President, and Chief		Gerard Schuetzenhofer
	Executive Officer and Director		Chairman of the Board
	(Principal Executive Officer)
Date: March 31, 2014		Date: March 31, 2014
By:	/s/ Darlene F. McDonald	By:	/s/ Joseph J. Gugger
	Darlene F. McDonald, Executive Vice		Joseph J. Gugger
	President and Chief Financial Officer		Director
	(Principal Financial and Accounting Officer)
Date: March 31, 2014		Date: March 31, 2014
By:	/s/ Mona Haberer	By:	/s/ Joseph Helms
	Mona Haberer		Joseph Helms
	Director		Director
Date: March 31, 2014		Date: March 31, 2014
By:	/s/ Kenneth Highlander	By:	/s/ Gary Niebur
	Kenneth Highlander		Gary Niebur
	Director		Director
Date: March 31, 2014		Date: March 31, 2014

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By:	/s/ Joseph Stevens	By:	/s/ Dennis M. Terry
	Joseph Stevens		Dennis M. Terry
	Director		Director
Date: March 31, 2014		Date: March 31, 2014
By:	/s/ Mary Westerhold
	Mary Westerhold
	Director
Date: March 31, 2014

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