UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)


ý     QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30,
2008





OR





o     TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _________ to __________








Commission
file number 000-50820





FIRST CLOVER LEAF FINANCIAL
CORP.


(Exact
name of registrant as specified in its charter)





Maryland
            
            20-4797391(State
      or other jurisdiction of
            
            (I.R.S.
      Employer Identification No.)incorporation
      or organization)6814
      Goshen Road, Edwardsville, IL
            
            62025(Address
      of principal executive office)
            
            (Zip
      Code)





Registrant's
telephone number, including area code (618)
656-6122





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 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 such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes ý.  No o.





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 ýNon-accelerated
      filer o (do
      not check if smaller reporting company)
            Smaller
      reporting company o











Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o.  No ý.





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.





Class
            
            Outstanding
      August 7, 2008Common
      Stock, par value $.10 per share
            
            8,176,731








FIRST
CLOVER LEAF FINANCIAL CORP.




FORM
10-Q





FOR THE
QUARTER ENDED JUNE 30, 2008





INDEX





PAGE
      NO.PART I - Financial InformationItem 1.  Financial
      Statements     (Unaudited)Consolidated Balance Sheets
            3Consolidated Statements of Income
            4Consolidated Statements of Comprehensive
    Income
            5Consolidated Statements of Cash Flows
            6Notes to Consolidated Financial Statements
            8Item 2.  Management's Discussion and Analysis of
      Financial Condition and Results of Operations
            16Item 3.  Quantitative and Qualitative Disclosures
      about Market Risk
            25Item 4.  Controls and Procedures
            27PART II - Other InformationItem 1.  Legal Proceedings
            28Item 1A.  Risk Factors
            28Item 2.  Unregistered Sales of Equity Securities and
      Use of Proceeds
            28Item 3.  Defaults Upon Senior
      Securities
            28Item 4. Submission of Matters to a Vote of Security
      Holders
            28Item 5.  Other Information
            29Item 6.  Exhibits
            29Signatures
            30








Index


FIRST
CLOVER LEAF FINANCIAL CORP.


ConsolidatedBalance Sheets


(Unaudited)




June
      30,
              
              
              December
      31,Assets
              
              2008
              
              
              2007Cash
      and due from banks
              
              $
              16,877,105
              
              
              $
              8,927,314Interest-earning
      deposits
              
              
              3,898,202
              
              
              
              2,431,724Federal
      funds sold
              
              
              2,726,162
              
              
              
              25,725,537Total
      cash and cash equivalents
              
              
              23,501,469
              
              
              
              37,084,575Interest-earning
      time deposits
              
              
              7,793,776
              
              
              
              10,048,058Securities
      available for sale
              
              
              52,203,808
              
              
              
              54,150,008Federal
      Home Loan Bank stock
              
              
              5,603,773
              
              
              
              5,603,773Loans,
      net of allowance for loan lossesof
      $2,236,684 and $1,897,945, respectively
              
              
              320,067,628
              
              
              
              284,919,446Loans
      held for sale
              
              
              517,100
              
              
              
              -Property
      and equipment, net
              
              
              10,007,944
              
              
              
              7,396,104Accrued
      interest receivable
              
              
              1,689,928
              
              
              
              1,756,954Mortgage
      servicing rights
              
              
              429,769
              
              
              
              404,441Goodwill
              
              
              9,402,608
              
              
              
              9,402,608Core
      deposit intangible
              
              
              1,296,001
              
              
              
              1,528,001Other
      assets
              
              
              1,222,587
              
              
              
              957,858Total
      assets
              
              $
              433,736,391
              
              
              $
              413,251,826Liabilities
      and Stockholders' EquityLiabilities:Deposits:Non-interest
      bearing deposits
              
              $
              24,745,715
              
              
              $
              14,799,051Interest
      bearing deposits
              
              
              271,668,298
              
              
              
              276,395,967Total
      deposits
              
              
              296,414,013
              
              
              
              291,195,018Federal
      Home Loan Bank advances
              
              
              17,445,919
              
              
              
              10,431,919Securities
      sold under agreements to repurchase
              
              
              28,128,711
              
              
              
              15,893,350Subordinated
      debentures
              
              
              3,864,112
              
              
              
              3,842,080Accrued
      interest payable
              
              
              887,072
              
              
              
              1,107,781Other
      liabilities
              
              
              2,254,916
              
              
              
              2,100,275Total
      liabilities
              
              
              348,994,743
              
              
              
              324,570,423Stockholders'
      Equity:Preferred
      stock, $.10 par value; 10,000,000 sharesauthorized;
      no shares issued
              
              
              -
              
              
              
              -Common
      stock, $.10 par value; 20,000,000 shares authorized;9,074,031
      shares issued; 8,176,731 and 8,582,831 shares outstandingat
      June 30, 2008 and December 31, 2007, respectively
              
              
              907,403
              
              
              
              907,403Additional
      paid-in capital
              
              
              71,116,592
              
              
              
              71,039,791Retained
      earnings
              
              
              22,725,694
              
              
              
              22,522,223Accumulated
      other comprehensive income
              
              
              251,052
              
              
              
              242,750Unearned
      Employee Stock Ownership Plan shares
              
              
              (680,817
              )
              
              
              (645,318
              )Treasury
      Stock, at cost; 897,300 and 491,200 shares at June 30,
2008and
      December 31, 2007, respectively
              
              
              (9,578,276
              )
              
              
              (5,385,446
              )Total
      stockholders' equity
              
              
              84,741,648
              
              
              
              88,681,403Total
      liabilities and stockholders' equity
              
              $
              433,736,391
              
              
              $
              413,251,826See
      Accompanying Notes to Consolidated Financial Statements.




3
 Index


FIRST
CLOVER LEAF FINANCIAL CORP.


Consolidated
Statements of Income


(Unaudited)




Three
      Months Ended
              
              
              Six
      Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Interest
      and dividend income:Interest
      and fees on loans
              
              $
              4,864,113
              
              
              $
              4,364,418
              
              
              $
              9,682,128
              
              
              $
              8,543,465Securities:Taxable
      interest income
              
              
              601,159
              
              
              
              645,417
              
              
              
              1,278,023
              
              
              
              1,251,387Non-taxable
      interest income
              
              
              48,994
              
              
              
              38,672
              
              
              
              96,979
              
              
              
              76,444Federal
      Home Loan Bank dividends
              
              
              -
              
              
              
              38,689
              
              
              
              -
              
              
              
              90,039Interest-earning
      deposits, federal funds sold, and other
              
              
              136,897
              
              
              
              450,312
              
              
              
              451,336
              
              
              
              1,081,789Total
      interest and dividend income
              
              
              5,651,163
              
              
              
              5,537,508
              
              
              
              11,508,466
              
              
              
              11,043,124Interest
      Expense:Deposits
              
              
              2,568,864
              
              
              
              2,441,951
              
              
              
              5,370,843
              
              
              
              4,907,452Federal
      Home Loan Bank advances
              
              
              151,656
              
              
              
              134,870
              
              
              
              331,085
              
              
              
              281,124Securities
      sold under agreements to repurchase
              
              
              99,458
              
              
              
              237,704
              
              
              
              206,712
              
              
              
              424,453Subordinated
      debentures
              
              
              74,398
              
              
              
              74,397
              
              
              
              148,795
              
              
              
              147,841Total
      interest expense
              
              
              2,894,376
              
              
              
              2,888,922
              
              
              
              6,057,435
              
              
              
              5,760,870Net
      interest income
              
              
              2,756,787
              
              
              
              2,648,586
              
              
              
              5,451,031
              
              
              
              5,282,254Provision
      for loan losses
              
              
              186,033
              
              
              
              76,000
              
              
              
              356,866
              
              
              
              121,000Net
      interest income after provision for loan losses
              
              
              2,570,754
              
              
              
              2,572,586
              
              
              
              5,094,165
              
              
              
              5,161,254Noninterest
      income:Service
      fees on deposit accounts
              
              
              59,460
              
              
              
              49,155
              
              
              
              106,423
              
              
              
              88,371Other
      service charges and fees
              
              
              39,962
              
              
              
              35,717
              
              
              
              74,594
              
              
              
              69,470Loan
      servicing fees
              
              
              20,245
              
              
              
              30,163
              
              
              
              50,252
              
              
              
              57,946Gain
      on sale of loans
              
              
              92,225
              
              
              
              16,288
              
              
              
              126,605
              
              
              
              43,551Other
              
              
              2,974
              
              
              
              1,927
              
              
              
              7,258
              
              
              
              3,149Total
      noninterest income
              
              
              214,866
              
              
              
              133,250
              
              
              
              365,132
              
              
              
              262,487Noninterest
      expense:Compensation
      and employee benefits
              
              
              835,699
              
              
              
              715,319
              
              
              
              1,628,503
              
              
              
              1,414,102Occupancy
      expense
              
              
              243,215
              
              
              
              205,797
              
              
              
              483,539
              
              
              
              411,936Data
      processing services
              
              
              109,616
              
              
              
              103,220
              
              
              
              224,579
              
              
              
              209,810Director
      fees
              
              
              73,800
              
              
              
              60,300
              
              
              
              132,850
              
              
              
              118,600Professional
      fees
              
              
              126,141
              
              
              
              124,782
              
              
              
              243,275
              
              
              
              247,541Amortization
      of core deposit intangible
              
              
              116,000
              
              
              
              157,000
              
              
              
              232,000
              
              
              
              313,999Amortization
      of mortgage servicing rights
              
              
              20,073
              
              
              
              20,542
              
              
              
              54,877
              
              
              
              41,085Other
              
              
              359,552
              
              
              
              335,823
              
              
              
              631,797
              
              
              
              608,914Total
      noninterest expense
              
              
              1,884,096
              
              
              
              1,722,783
              
              
              
              3,631,420
              
              
              
              3,365,987Income
      before income taxes
              
              
              901,524
              
              
              
              983,053
              
              
              
              1,827,877
              
              
              
              2,057,754Income
      taxes
              
              
              307,625
              
              
              
              367,800
              
              
              
              659,525
              
              
              
              754,550Net
      income
              
              $
              593,899
              
              
              $
              615,253
              
              
              $
              1,168,352
              
              
              $
              1,303,204Basic
      and diluted income per share (see Note 6)
              
              $
              0.07
              
              
              $
              0.07
              
              
              $
              0.14
              
              
              $
              0.15Dividends
      per share
              
              $
              0.06
              
              
              $
              0.06
              
              
              $
              0.12
              
              
              $
              0.12See
      Accompanying Notes to Consolidated Financial Statements.


4
 Index


FIRST
CLOVER LEAF FINANCIAL CORP.


Consolidated
Statements of Comprehensive Income


(Unaudited)





Three
      Months Ended
              
              
              Six
      Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      income
              
              $
              593,899
              
              
              $
              615,253
              
              
              $
              1,168,352
              
              
              $
              1,303,204Other
      comprehensive income:Unrealized
      gains (losses) on securitiesarising
      during the period, net of tax
              
              
              (271,027
              )
              
              
              (162,540
              )
              
              
              8,302
              
              
              
              (135,697
              )Comprehensive
      income
              
              $
              322,872
              
              
              $
              452,713
              
              
              $
              1,176,654
              
              
              $
              1,167,507See
      Accompanying Notes to Consolidated Financial Statements.




















5
 Index


FIRST
CLOVER LEAF FINANCIAL CORP.




Consolidated
Statements of Cash Flows


(Unaudited)




Six
      Months EndedJune
      30,2008
              
              
              2007Cash
      flows from operating activities:Net
      income
              
              $
              1,168,352
              
              
              $
              1,303,204Adjustments
      to reconcile net income to netcash
      provided by operating activities:Amortization
      of:Deferred
      loan origination (fees) costs, net
              
              
              53,214
              
              
              
              (34,489
              )Premiums
      and discounts on securities
              
              
              (157,489
              )
              
              
              104,053Core
      deposit intangible
              
              
              232,000
              
              
              
              313,999Mortgage
      servicing rights
              
              
              54,877
              
              
              
              41,085Amortization
      of fair value adjustments on:Loans
              
              
              (163,000
              )
              
              
              (280,999
              )Time
      deposits
              
              
              11,000
              
              
              
              (3,000
              )Federal
      Home Loan Bank advances
              
              
              14,000
              
              
              
              73,999Subordinated
      debentures
              
              
              22,032
              
              
              
              22,032Investment
      securities
              
              
              (66,500
              )
              
              
              (126,100
              )Provision
      for loan losses
              
              
              (356,866
              )
              
              
              121,000Depreciation
      expense
              
              
              241,743
              
              
              
              206,040ESOP
      expense
              
              
              41,302
              
              
              
              47,980Gain
      on sale of loans
              
              
              (126,605
              )
              
              
              (43,551
              )Proceeds
      from sales of loans held for sale
              
              
              7,693,064
              
              
              
              1,840,342Originations
      of loans held for sale
              
              
              (8,083,559
              )
              
              
              (1,576,809
              )Change
      in assets and liabilities:Decrease
      (increase) in accrued interest receivable
              
              
              67,026
              
              
              
              (166,260
              )Increase
      in mortgage servicing rights
              
              
              (80,205
              )
              
              
              (32,753
              )Increase
      in other assets
              
              
              (264,729
              )
              
              
              (293,766
              )Increase
      (decrease) in accrued interest payable
              
              
              (220,709
              )
              
              
              108,077Increase
      (decrease) in other liabilities
              
              
              150,200
              
              
              
              (226,957
              )Net
      cash flows from operating activities
              
              
              229,148
              
              
              
              1,397,127Cash
      flows from investing activities:Proceeds
      from maturity of interest-earning time deposits
              
              
              15,049,994
              
              
              
              -Purchase
      of interest-earning time deposits
              
              
              (12,795,712
              )
              
              
              (49,994
              )Available
      for sale securities:Purchases
              
              
              (68,250,000
              )
              
              
              (11,629,559
              )Proceeds
      from calls, maturities and paydowns
              
              
              70,432,932
              
              
              
              2,650,606Loan
      originations, net of principal collected
              
              
              (34,681,530
              )
              
              
              (13,495,980
              )Purchase
      of property and equipment
              
              
              (2,853,583
              )
              
              
              (1,299,070
              )Net
      cash flows from investing activities
              
              $
              (33,097,899
              )
              
              $
              (23,823,997
              )(Continued)


6
 Index


FIRST
CLOVER LEAF FINANCIAL CORP.


Consolidated
Statements of Cash Flows


(Unaudited)





(Continued)Six
      Months EndedJune
      30,2008
              
              
              2007Cash
      flows from financing activities:Net
      increase (decrease) in deposits
              
              $
              5,207,995
              
              
              $
              (23,349,504
              )Net
      increase (decrease) in securities sold under agreements to
      repurchase
              
              
              12,235,361
              
              
              
              (10,557,913
              )Proceeds
      from Federal Home Loan Bank advances
              
              
              10,000,000
              
              
              
              -Repayment
      of Federal Home Loan Bank advances
              
              
              (3,000,000
              )
              
              
              -Repurchase
      of Common Stock
              
              
              (4,192,830
              )
              
              
              -Cash
      dividends
              
              
              (964,881
              )
              
              
              (1,071,537
              )Net
      cash flows from financing activities
              
              
              19,285,645
              
              
              
              (34,978,954
              )Net
      decrease in cash and cash equivalents
              
              
              (13,583,106
              )
              
              
              (57,405,824
              )Cash
      and cash equivalents at beginning of period
              
              
              37,084,575
              
              
              
              92,664,953Cash
      and cash equivalents at end of period
              
              $
              23,501,469
              
              
              $
              35,259,129Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Interest
              
              $
              6,231,112
              
              
              $
              5,559,762Income
      taxes, net of refunds
              
              
              735,000
              
              
              
              1,267,108
  See
      Accompanying Notes to Consolidated Financial Statements.








7
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Notes
to Consolidated Financial Statements





(1)
            Summary of Significant
      Accounting Policies:





The
information contained in the accompanying consolidated financial statements is
unaudited.  In the opinion of management, the consolidated financial
statements contain all adjustments (none of which were other than normal
recurring entries) necessary for a fair statement of the results of operations
for the interim periods.  The results of operations for the interim
periods are not necessarily indicative of the results which may be expected for
the entire fiscal year.  These consolidated financial statements
should be read in conjunction with the consolidated financial statements of
First Clover Leaf Financial Corp. (the “Company”) for the year ended December
31, 2007 contained in the 2007 Annual Report to Stockholders that is filed as an
exhibit to the Company’s Annual Report on Form 10-KSB.





First
Clover Leaf Financial Corp. (“First Clover Leaf”) is a Maryland corporation that
was incorporated on March 17, 2006 and was formed by our predecessor company,
First Federal Financial Services, Inc., in connection with the “second-step”
conversion of First Federal Financial Services, MHC and the simultaneous
acquisition of Clover Leaf Financial Corp. and its wholly owned savings bank
subsidiary, Clover Leaf Bank, a former Illinois bank headquartered in
Edwardsville, Illinois. The second-step conversion and stock offering and the
simultaneous acquisition of Clover Leaf Financial Corp. were consummated on July
10, 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. The accompanying interim
consolidated financial statements include the accounts of First Clover Leaf
Financial Corp., its wholly owned subsidiary, First Clover Leaf Bank (the
“Bank”) and its wholly owned subsidiary, Clover Leaf Financial
Services.  First Clover Leaf’s common stock is traded on the NASDAQ
Capital Market under the symbol “FCLF.”





Reclassifications
have been made to certain balances, with no effect on net income or
stockholders’ equity, as of and for the three and six months ended June 30,
2007, to be consistent with the classifications adopted as of and for the three
and six months ended June 30, 2008.





On July
22, 2008, the Board of Directors of the Company declared a cash dividend on the
Company’s common stock of $.06 per share for the quarter ended June 30,
2008.  The dividend will be payable to stockholders of record as of
August 15, 2008 and is expected to be paid on August 22, 2008.








8
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.




Notes
to Consolidated Financial Statements





(2)
            Intangible
      Assets:





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





June
      30,
              
              
              December
      31,2008
              
              
              2007Core
      deposit intangible
              
              $
              2,391,000
              
              
              $
              2,391,000Accumulated
      amortization
              
              
              (1,094,999
              )
              
              
              (862,999
              )Total
              
              $
              1,296,001
              
              
              $
              1,528,001





Amortization
expense on core deposit intangible for the three and six months ended June 30,
2008 was $116,000 and $232,000, respectively and $157,000 and $314,000 for the
comparable periods in 2007.





Estimated
amortization expense on core deposit intangible for the six months ending
December 31, 2008 and each of the five succeeding fiscal years is as
follows:





IntangibleSix
      months ending December 31, 2008
              
              $
              170,000Year
      ending December 31, 2009
              
              
              297,000Year
      ending December 31, 2010
              
              
              224,000Year
      ending December 31, 2011
              
              
              196,000Year
      ending December 31, 2012
              
              
              196,000Year
      ending December 31, 2013
              
              
              196,000





(3)
            Investment
      Securities:





The
following table sets forth the composition of our available-for-sale securities
portfolio at the dates indicated:





June
      30,
              
              
              December
      31,2008
              
              
              2007Amortized
              
              
              Fair
              
              
              Amortized
              
              
              FairCost
              
              
              Value
              
              
              Cost
              
              
              ValueInvestment
      Securities:Federal
      agency obligations
              
              $
              38,374,989
              
              
              $
              38,731,869
              
              
              $
              40,466,021
              
              
              $
              40,882,870Corporate
              
              
              3,593,906
              
              
              
              3,440,866
              
              
              
              3,594,044
              
              
              
              3,491,186State
      and municipal securities
              
              
              4,013,467
              
              
              
              4,045,022
              
              
              
              3,132,417
              
              
              
              3,143,041Mortgage-backed
      securities
              
              
              5,822,730
              
              
              
              5,986,051
              
              
              
              6,571,557
              
              
              
              6,632,911Total
      Investment Securites available for sale
              
              $
              51,805,092
              
              
              $
              52,203,808
              
              
              $
              53,764,039
              
              
              $
              54,150,008


9
 Index








FIRST
CLOVER LEAF FINANCIAL CORP.




Notes
to Consolidated Financial Statements





(3)
            Investment Securities
      (Continued):





Unrealized
losses and fair value, aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position,
as of June 30, 2008, are summarized as follows:





Less
      than 12 Months
              
              
              12
      Months or More
              
              
              TotalFair
              
              
              Unrealized
              
              
              Fair
              
              
              Unrealized
              
              
              Fair
              
              
              UnrealizedValue
              
              
              loss
              
              
              Value
              
              
              loss
              
              
              Value
              
              
              lossFederal
      agency obligations
              
              $
              10,020,186
              
              
              $
              46,551
              
              
              $
              -
              
              
              $
              -
              
              
              $
              10,020,186
              
              
              $
              46,551Corporate
      bonds
              
              
              2,201,303
              
              
              
              44,380
              
              
              
              837,975
              
              
              
              109,055
              
              
              
              3,039,278
              
              
              
              153,435Mortgage-backed
      securities
              
              
              8,242
              
              
              
              26
              
              
              
              -
              
              
              
              -
              
              
              
              8,242
              
              
              
              26$
              12,229,731
              
              
              $
              90,957
              
              
              $
              837,975
              
              
              $
              109,055
              
              
              $
              13,067,706
              
              
              $
              200,012





For all
of the above securities, the unrealized losses are primarily due to changes in
interest rates and, as such, are considered to be temporary by the
Company.





(4)
            Loans:





The
following table sets forth the composition of our loan portfolio by type of loan
at the dates indicated:





At
      June 30,
              
              
              At
      December 31,2008
              
              
              2007Amount
              
              
              Percent
              
              
              Amount
              
              
              PercentReal
      Estate LoansOne-
      to four-family residential loans(1)
              
              $
              111,787,082
              
              
              
              34.4
              %
              
              $
              112,764,226
              
              
              
              39.2
              %Multi-family
              
              
              17,612,876
              
              
              
              5.4
              
              
              
              13,930,737
              
              
              
              4.8Commercial
              
              
              112,555,489
              
              
              
              34.7
              
              
              
              97,809,933
              
              
              
              34.0Construction
      and land
              
              
              35,120,119
              
              
              
              10.8
              
              
              
              20,775,576
              
              
              
              7.2Total
      real estate loans
              
              
              277,075,566
              
              
              
              85.3
              
              
              
              245,280,472
              
              
              
              85.2Commercial
      business
              
              
              39,591,354
              
              
              
              12.2
              
              
              
              34,782,808
              
              
              
              12.1Consumer
      Loans
              
              
              8,127,347
              
              
              
              2.5
              
              
              
              7,770,555
              
              
              
              2.7Total
      loans and loans held for sale
              
              
              324,794,267
              
              
              
              100.0
              %
              
              
              287,833,835
              
              
              
              100.0
              %Less:Undisbursed
      portion of construction loans
              
              
              1,869,114
              
              
              
              
              
              
              
              859,504Deferred
      loan origination fees, net
              
              
              103,741
              
              
              
              
              
              
              
              156,940Allowance
      for loan losses
              
              
              2,236,684
              
              
              
              
              
              
              
              1,897,945Total
      loans and loans held for sale, net
              
              $
              320,584,728
              
              
              
              
              
              
              $
              284,919,446(1)
      Includes loans held for sale of approximately $500,000 and $0 at June 30,
      2008 and December 31, 2007, respectively.





10
 Index


FIRST
CLOVER LEAF FINANCIAL CORP.


Notes
to Consolidated Financial Statements





(5)
            Asset
      Quality:





The
following table sets forth information with respect to the Company’s
nonperforming and impaired loans at the dates indicated:





June
      30,
              
              
              December
      31,2008
              
              
              2007Loans
      90 days or more past due and still accruing
              
              $
              199,769
              
              
              $
              285,459Nonaccrual
      loans
              
              
              3,672,553
              
              
              
              2,669,455Other
      impaired loans
              
              
              1,250,046
              
              
              
              1,331,979Total
      nonperforming and impaired loans
              
              $
              5,122,368
              
              
              $
              4,286,893Allowance
      for losses on nonperforming and impaired loans
              
              $
              388,774
              
              
              $
              306,589Nonperforming
      and impaired loans with no allowance for losses
              
              $
              48,999
              
              
              $
              -





Asset
Quality Ratios:





Non-performing
      assets and impaired loans to total assets
              
              
              1.18
              %
              
              
              1.04
              %Non-performing
      and impaired loans to total loans
              
              
              1.60
              
              
              
              1.50Net
      charge-offs to average loans outstanding(1)
              
              
              0.01
              
              
              
              0.06Allowance
      for loan losses to non-performing and impaired loans
              
              
              43.67
              
              
              
              44.29Allowance
      for loan losses to total loans
              
              
              0.70
              
              
              
              0.67(1)
      For the period ending June 30, 2008, the net charge-offs have been
      annualized.





Following
is a summary of activity in the allowance for loan losses:





Six
      Months EndedJune
      30,2008
              
              
              2007Balance
      at beginning of period
              
              $
              1,897,945
              
              
              $
              1,710,247Charge-offs
              
              
              (33,644
              )
              
              
              -Recoveries
              
              
              15,517
              
              
              
              3,624Provision
      charged to expense
              
              
              356,866
              
              
              
              121,000Balance
      at end of period
              
              $
              2,236,684
              
              
              $
              1,834,871


11
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Notes
to Consolidated Financial Statements





(6)
            Earnings Per
      Share:





Basic and
diluted income per share (EPS) represents income available to common
stockholders divided by the weighted average number of common shares
outstanding.  Employee stock ownership plan shares which are committed
to be released are considered outstanding for basic and diluted income per
share.





June
      30,
              
              
              June
      30,2008
              
              2007
              
              
              2008
              
              2007Net
      income available to common stockholders
              
              $
              593,899
              
              
              $
              615,253
              
              
              $
              1,168,352
              
              
              $
              1,303,204Basic
      potential common shares:Weighted
      average shares outstanding
              
              
              8,176,731
              
              
              
              9,074,031
              
              
              
              8,255,589
              
              
              
              9,074,031Weighted
      average unallocated Employee StockOwnership
      Plan shares
              
              
              (133,910
              )
              
              
              (141,374
              )
              
              
              (134,973
              )
              
              
              (142,437
              )Basic
      weighted average shares outstanding
              
              
              8,042,821
              
              
              
              8,932,657
              
              
              
              8,120,616
              
              
              
              8,931,594Dilutive
      potential common shares
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Dilutive
      weighted average shares outstanding
              
              
              8,042,821
              
              
              
              8,932,657
              
              
              
              8,120,616
              
              
              
              8,931,594Basic
      and diluted income per share
              
              $
              0.07
              
              
              $
              0.07
              
              
              $
              0.14
              
              
              $
              0.15





(7)
            Employee Stock Ownership
      Plan:





The
Company has an employee stock ownership plan (ESOP) which covers substantially
all employees who have attained the age of 21 and completed one year of
service.  In connection with the stock offering in 2004, the Company
loaned funds to the ESOP for the purchase of the Company’s common stock at the
initial public offering price.  The loan is being repaid with level
annual payments of $70,318 over 20 years beginning December 31,
2004.  All shares are held in a suspense account for allocation among
the participants as the loan is repaid.  Shares are released for
allocation to participants based upon the ratio of the current year’s debt
service to the sum of total principal and interest payments over the life of the
note.  Shares released from the suspense account are allocated among
the participants based upon their pro rata annual compensation.  The
purchase of shares by the ESOP was recorded by the Company as unearned ESOP
shares in a contra equity account.  As ESOP shares are committed to be
released to compensate employees, the contra equity account is reduced and the
Company recognizes compensation expense equal to the average fair market value
of the shares committed to be released.  Compensation expense of
$20,063 and $41,302 was incurred for the three and six months ended June 30,
2008, respectively and $27,160 and $48,160 for the comparable periods in
2007.








12
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Notes
to Consolidated Financial Statements





(7)
            Employee Stock Ownership Plan
      (Continued):





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





The
following table reflects the shares held by the plan at June 30, 2008 and
December 31, 2007:





June
      30,
              
              
              December
      31,2008
              
              
              2007Unallocated
      shares (fair value at June 30, 2008 andDecember
      31, 2007 of $1,153,311 and $1,380,999, respectively)
              
              
              131,807
              
              
              
              136,059Allocated
      Shares
              
              
              38,952
              
              
              
              34,700Total
      ESOP Shares
              
              
              170,759
              
              
              
              170,759








(8)
            Recent Accounting
      Pronouncements:





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





Effective
January 1, 2008, the Company partially adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements,which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements.  It
clarifies that fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants in the market in which the reporting entity
transacts.  This Statement does not require any new fair value
measurements, but rather, it provides enhanced guidance to other pronouncements
that require or permit assets or liabilities to be measured at fair
value.  The standard describes three levels of inputs that may be used
to measure fair value.  Delayed application of this statement is
permitted for nonfinancial assets and nonfinancial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually), until fiscal years beginning after November
15, 2008, and interim periods within those fiscal years.  Refer to
Note 9 of the unaudited consolidated financial statements for additional
disclosures.





Effective
January 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of the Financial
Accounting Standards Board (FASB) Statement No. 115, which provides all
entities with an option to report selected financial assets and liabilities at
fair value.  The objective of the Statement is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
earnings caused by measuring related assets and liabilities differently without
having to apply the complex provisions of hedge accounting.  Certain
specified items are eligible for the irrevocable fair value measurement option
as established by Statement No. 159. Adoption of Statement No. 159 did not have
a significant impact on the Company’s financial
statements.





13
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Notes
to Consolidated Financial Statements





(8)
            Recent Accounting
      Pronouncements (Continued):





In
December 2007, FASB issued SFAS No. 141(revised), Business Combinations. 
The Statement establishes principles and requirements for how an acquirer
recognizes and measures tangible assets acquired, liabilities assumed, goodwill
and any noncontrolling interests and identifies related disclosure requirements
for business combinations.  Measurement requirements will result in all
assets, liabilities, contingencies and contingent consideration being recorded
at fair value on the acquisition date, with limited exceptions. 
Acquisition costs and restructuring costs will generally be expensed as
incurred.  This Statement is effective for business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.





(9)
            Fair Value
      Disclosures





Effective
January 1, 2008, the Company determines the fair market values of its financial
instruments based on the fair value hierarchy established in SFAS No. 157, which
requires an entity to maximize the use of observable inputs and minimizes the
use of unobservable inputs when measuring fair value.  The standard
describes three levels of inputs that may be used to measure fair
value.  The Company carries its available-for-sale securities and its
loans held-for-sale at fair value.





Level 1
inputs are unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement
date.  Level 2 inputs are inputs other than quoted prices included
with Level 1 that are observable for the asset or liability either directly or
indirectly.  These might include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active, inputs other than quoted prices that
are observable for the asset or liability (such as interest rates, volatilities,
prepayment speeds, credit risks, etc.) or inputs that are derived from or
corroborated by market data by correlation or other means.  Level 3
inputs are unobservable inputs for determining the fair value of assets or
liabilities that reflect an entity’s own assumptions about the assumptions that
market participants would use in pricing the assets or liabilities.





Assets
and liabilities measured at fair value on a recurring basis segregated by fair
value hierarchy level are summarized below:





Quoted
      Prices in Active Markets for Identical Assets
              
              
              Significant
      OtherObservable Inputs
              
              
              Significant
      Unobservable InputsAssets:
              
              (Level
      1)
              
              
              (Level
      2)
              
              
              (Level
      3)
              
              TotalSecurities
      available-for-sale
              
              $
              -
              
              
              $
              52,203,808
              
              
              $
              -
              
              $
              52,203,808Loans
      held-for-sale
              
              $
              -
              
              
              $
              517,100
              
              
              $
              -
              
              $
              517,100


14
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Notes
to Consolidated Financial Statements





(9)
            Fair Value
      Disclosures(Continued):





Assets
and liabilities measured at fair value on a nonrecurring basis by fair value
hierarchy during the period ended June 30, 2008 are summarized
below:





Quoted
      Prices in Active Markets for Identical Assets(Level
      1)
              
              
              Significant
      OtherObservable Inputs(Level 2)
              
              
              Significant
      Unobservable
                  Inputs(Level
      3)
              
              
              TotalImpaired
      loans
              
              $
              -
              
              
              $
              5,120,788
              
              
              $
              1,550
              
              
              $
              5,122,338





Impaired
loans that are collateral dependent have been written down to their fair value,
less costs to sell, of $5.1 million through the establishment of specific
reserves or by recording charge-offs when the carrying value exceeds the fair
value.  Valuation techniques consistent with the market approach,
income approach, and/or cost approach were used to measure fair value and
primarily included observable inputs for the individual impaired loans being
evaluated such as recent sales of similar assets or observable market data for
operational or carrying costs.  In cases where such inputs were
unobservable, the loan balance is reflected within the Level 3
hierarchy.





(10)
            Other
    Event:




On April
30, 2008, the Company entered into a definitive merger agreement to acquire
Partners Financial Holdings, Inc. (“Partners”), the holding company of Partners
Bank, an Illinois-chartered bank headquartered in Glen Carbon,
Illinois.





The
aggregate purchase price for the acquisition of Partners is approximately $20.7
million, comprised of shares of First Clover Leaf common stock and cash, plus
approximately $1.5 million in cash payments for outstanding Partners options and
warrants.  Under the terms of the merger agreement, each share of
Partners common stock will be converted into either 5.7971 shares of First
Clover Leaf stock or cash of $56. Shareholders of Partners may elect to receive
First Clover Leaf common stock, cash, or a combination of stock and cash, for
their shares of Partners common stock, subject to possible re-allocation of
their elections in order to ensure that the total mix of consideration in the
transaction is 50% stock and 50% cash.





The
merger has been approved by the Boards of Directors of Partners and First Clover
Leaf, and is subject to approval of the stockholders of Partners and the receipt
of required regulatory approvals.  The closing of the merger is
expected to occur early in the fourth quarter of 2008.  Following
completion of the merger, the combined institution is expected to serve
customers from the current locations of both banks under the name “First Clover
Leaf Bank”.


15
 Index


FIRST CLOVER LEAF FINANCIAL CORP.




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





Forward-Looking
Statements





When used
in this Form 10-Q, the words or phrases “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “estimate,” “project” or similar expressions
are intended to identify “forward-looking statements” within the meaning of the
Private Securities Litigation Act of 1995.  Such statements are
subject to certain risks and uncertainties including changes in economic
conditions in our market area, changes in policies by regulatory agencies,
fluctuations in interest rates, demand for loans in our market area, and
competition that could cause actual results to differ materially from historical
earnings and those presently anticipated or projected.  The Company
wishes to caution you not to place undue reliance on any such forward-looking
statements, which only speak as of the date made.  The Company wishes
to advise you that the factors listed above could affect the Company’s financial
performance and could cause the Company’s actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.





The
Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.








Critical Accounting
Policies





We
consider accounting policies involving significant judgments and assumptions by
management that have, or could have, a material impact on the carrying value of
certain assets or on income to be critical accounting
policies.  Management makes significant estimates and has identified
the allowance for loan losses as the most critical.





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





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





The
allowance consists of specific, general and unallocated components. The specific
component relates to loans that are classified as doubtful, substandard or
special mention. For such loans that are also classified as impaired, an
allowance is established when the discounted cash flows (or collateral value or
observable market price) of the impaired loan is lower than the carrying value
of that loan. The general component covers non-classified loans and is based on
historical loss experience adjusted for qualitative factors. An unallocated
component is maintained to cover uncertainties that could affect management’s
estimate of probable losses. The unallocated component of the allowance reflects
the margin of imprecision inherent in the underlying assumptions used in the
methodologies for estimating specific and general losses in the
portfolio.


16
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





A loan is
considered impaired when, based on current information and events, it is
probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower’s prior payment record, and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan by loan basis for commercial and construction loans by either
the present value of expected future cash flows discounted at the loan’s
effective interest rate, the loan’s obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.





Large
groups of smaller balance homogeneous loans are collectively evaluated for
impairment. Accordingly, the Company does not separately identify individual
consumer and residential loans for impairment disclosures, unless such loans are
the subject of a restructuring agreement.





Overview





Net
income decreased to $594,000 for the three months ended June 30, 2008 from
$615,000 for the same period last year.  Net income decreased $135,000
to $1.2 million for the six months ended June 30, 2008 from $1.3 million for the
same period last year.  The decrease in net income was due primarily
to an increase in provision for loan losses of $110,000 and $236,000 for the
three and six months ended June 30, 2008, respectively.  Basic and
diluted income per share was $.07 for each of the three months ended June 30,
2008 and 2007, respectively and $.14 and $.15 for the six months ended June 30,
2008 and 2007, respectively.





Financial
Condition





Total
Assets.  Total assets increased to $433.7 million at June 30,
2008 from $413.3 million at December 31, 2007.  Total cash and cash
equivalents decreased to $23.5 million at June 30, 2008 from $37.1 million at
December 31, 2007.  The decrease in cash was due to a decrease in
interest-earning deposits and an increase in loan
funding.  Interest-earning time deposits decreased to $7.8 million at
June 30, 2008 from $10.0 million at December 31, 2007.  Securities
available for sale decreased to $52.2 million at June 30, 2008 from $54.2
million at December 31, 2007.  The decrease was due primarily to
calls, maturities and pay-downs of $70.4 million partially offset by purchases
of $68.3 million.  Loans, net amounted to $320.1 million at June 30,
2008, compared to $284.9 million at December 31, 2007.  The increase
was due primarily to new loan originations in excess of loan collections of
$34.7 million.  Loans held for sale increased to $517,000 at June 30,
2008.  There were no loans held for sale at December 31,
2007.  Property and equipment, net increased to $10.0 million at June
30, 2008 from $7.4 million at December 31, 2007 primarily due to the purchase of
three lots and construction of a new branch facility in Wood River,
Illinois.





17
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





Total
Liabilities.  Deposits increased to $296.4 million at June 30,
2008 from $291.2 million at December 31, 2007.  Securities sold under
agreements to repurchase increased to $28.1 million at June 30, 2008 from $15.9
million at December 31, 2007.  The change in the deposit accounts and
securities sold under agreements to repurchase accounts were due primarily to
fluctuations by one significant customer.  Federal Home Loan Bank
advances at June 30, 2008 were $17.4 million compared to $10.4 million at
December 31, 2007.  The increase was primarily due to the increase in
loan fundings.  Other liabilities increased to $2.3 million at June
30, 2008 from $2.1 million at December 31, 2007.





Stockholders’
Equity.  Stockholders’ equity decreased to $84.7 million at
June 30, 2008 from $88.7 million at December 31, 2007, principally as a result
of the repurchase of $4.2 million of the Company’s common stock, and the payment
of cash dividends of $1.0 million.  The decrease in equity was
partially offset by $1.2 million in net income.








Asset
Quality





At June
30, 2008, the Company’s nonaccrual loans increased $1.0 million from December
31, 2007, while other impaired loans declined $82,000 from December 31,
2007.  The increase in nonaccrual loans is due to one relationship
whose financial condition caused the Company to reclassify their loans to a
nonaccrual status.





Under the
Company’s internal review policy, loans classified as substandard totaled $5.1
million at June 30, 2008 and $4.7 million at December 31, 2007.





At June
30, 2008, the Company had no loans where known information about possible credit
problems of borrowers caused management to have serious concerns as to the
ability of the borrowers to comply with present loan repayment terms and which
may result in disclosure as nonaccrual, 90 days past due or restructured which
were not currently classified as nonaccrual, 90 days or more past due or
restructured.





Results of
Operations





General.  Net
income decreased by $21,000 to $594,000 for the three months ended June 30, 2008
from $615,000 for the same period last year.  Net income decreased by
$135,000 to $1.2 million for the six months ended June 30, 2008 from $1.3
million for the same period last year.  The decrease in net income was
due primarily to an increase of $110,000 and $236,000 for the three and six
months ended June 30, 2008, respectively in provision for loan losses due
primarily to the continued growth of the loan portfolio.





Net interest
income.  Net interest income before provision for loan losses
increased to $2.8 million for the three months ended June 30, 2008 from $2.6
million for the comparable period in 2007.  Net interest income before
provision for loan losses increased to $5.5 million from $5.3 million for the
six months ended June 30, 2008 and 2007, respectively.  Net average
interest-earning assets were $77.3 million for the six months ended June 30,
2008, compared to $84.7 million for the same period in 2007. The ratio of
interest-earning assets to interest-bearing liabilities decreased to 124.55% for
the six months ended June 30, 2008 from 131.93% for the same period in
2007.  For the six months ended June 30, 2008, the average rate on
interest-earning assets decreased by 46 basis points from 6.36% to 5.90%, and
the average rate on interest-bearing liabilities decreased by 51 basis points
from 4.38% to 3.87%.








18
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





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




Three
      Months Ended June 30,
              
              
              Three
      Months Ended June 30,
              
              
              Six
      Months Ended June 30,
              
              
              Six
      Months Ended June 30,2008
              
              
              2007
              
              
              2008
              
              
              2007Average
      Outstanding Balance
              
              
              Interest
      (4)
              
              
              Yield/
      Rate
              
              
              AverageOutstanding
      Balance
              
              
              Interest(4)
              
              
              Yield/
      Rate
              
              
              Average
      OutstandingBalance
              
              
              Interest
      (4)
              
              
              Yield/Rate
              
              
              Average
      OutstandingBalance
              
              
              Interest(4)
              
              
              Yield/Rate(Dollars
      in thousands)
              
              
              (Dollars
      in thousands)Interest-earning
      assets:Loans,
      gross
              
              $
              316,030
              
              
              $
              4,864
              
              
              
              6.19
              %
              
              $
              256,796
              
              
              $
              4,364
              
              
              
              6.89
              %
              
              $
              306,487
              
              
              $
              9,682
              
              
              
              6.35
              %
              
              $
              250,825
              
              
              $
              8,543
              
              
              
              6.81
              %Securities
              
              
              54,306
              
              
              
              650
              
              
              
              4.81
              
              
              
              53,080
              
              
              
              684
              
              
              
              5.23
              
              
              
              53,724
              
              
              
              1,375
              
              
              
              5.15
              
              
              
              51,502
              
              
              
              1,328
              
              
              
              5.16Federal
      Home Loan Bank stock
              
              
              5,604
              
              
              
              -
              
              
              
              -
              
              
              
              5,601
              
              
              
              39
              
              
              
              2.82
              
              
              
              5,604
              
              
              
              -
              
              
              
              -
              
              
              
              5,598
              
              
              
              90
              
              
              
              3.22Interest-earning
      balances from depository institutions
              
              
              20,973
              
              
              
              137
              
              
              
              2.63
              
              
              
              33,884
              
              
              
              450
              
              
              
              5.39
              
              
              
              26,289
              
              
              
              451
              
              
              
              3.45
              
              
              
              42,130
              
              
              
              1,082
              
              
              
              5.14Total
      interest-earning assets
              
              
              396,913
              
              
              
              5,651
              
              
              
              5.73
              
              
              
              349,361
              
              
              
              5,537
              
              
              
              6.43
              
              
              
              392,104
              
              
              
              11,508
              
              
              
              5.90
              
              
              
              350,055
              
              
              
              11,043
              
              
              
              6.31Non-interest-earning
      assets
              
              
              28,139
              
              
              
              
              
              
              
              
              
              
              
              25,180
              
              
              
              
              
              
              
              
              
              
              
              27,419
              
              
              
              
              
              
              
              
              
              
              
              25,491Total
      assets
              
              $
              425,052
              
              
              
              
              
              
              
              
              
              
              $
              374,541
              
              
              
              
              
              
              
              
              
              
              $
              419,523
              
              
              
              
              
              
              
              
              
              
              $
              375,546Interest-bearing
      liabilities:Interest-bearing
      transaction
              
              $
              90,592
              
              
              
              618
              
              
              
              2.74
              
              
              $
              51,147
              
              
              
              476
              
              
              
              3.77
              
              
              $
              84,114
              
              
              
              1,203
              
              
              
              2.88
              
              
              $
              55,976
              
              
              
              1,054
              
              
              
              3.77Savings
      deposits
              
              
              18,533
              
              
              
              102
              
              
              
              2.21
              
              
              
              21,583
              
              
              
              137
              
              
              
              2.57
              
              
              
              18,508
              
              
              
              215
              
              
              
              2.34
              
              
              
              22,072
              
              
              
              275
              
              
              
              2.49Time
      deposits
              
              
              159,609
              
              
              
              1,849
              
              
              
              4.66
              
              
              
              152,296
              
              
              
              1,829
              
              
              
              4.87
              
              
              
              166,274
              
              
              
              3,952
              
              
              
              4.78
              
              
              
              151,734
              
              
              
              3,579
              
              
              
              4.72Securities
      sold under agreements to repurchase
              
              
              30,211
              
              
              
              99
              
              
              
              1.32
              
              
              
              24,395
              
              
              
              238
              
              
              
              3.96
              
              
              
              25,960
              
              
              
              207
              
              
              
              1.60
              
              
              
              21,377
              
              
              
              424
              
              
              
              3.97Federal
      Home Loan Bank advances
              
              
              17,445
              
              
              
              152
              
              
              
              3.50
              
              
              
              10,455
              
              
              
              135
              
              
              
              5.24
              
              
              
              16,122
              
              
              
              331
              
              
              
              4.13
              
              
              
              10,455
              
              
              
              281
              
              
              
              5.38Subordinated
      debentures
              
              
              3,856
              
              
              
              74
              
              
              
              7.72
              
              
              
              3,734
              
              
              
              74
              
              
              
              8.04
              
              
              
              3,851
              
              
              
              149
              
              
              
              7.78
              
              
              
              3,710
              
              
              
              148
              
              
              
              7.98Total
      interest-bearing liabilities
              
              
              320,246
              
              
              
              2,894
              
              
              
              3.63
              
              
              
              263,610
              
              
              
              2,889
              
              
              
              4.44
              
              
              
              314,829
              
              
              
              6,057
              
              
              
              3.87
              
              
              
              265,324
              
              
              
              5,761
              
              
              
              4.34Non-interest-bearing
      liabilities
              
              
              19,755
              
              
              
              
              
              
              
              
              
              
              
              17,090
              
              
              
              
              
              
              
              
              
              
              
              18,907
              
              
              
              
              
              
              
              
              
              
              
              16,611Total
      liabilities
              
              
              340,001
              
              
              
              
              
              
              
              
              
              
              
              280,700
              
              
              
              
              
              
              
              
              
              
              
              333,736
              
              
              
              
              
              
              
              
              
              
              
              281,935Stockholders’
      equity
              
              
              85,051
              
              
              
              
              
              
              
              
              
              
              
              93,841
              
              
              
              
              
              
              
              
              
              
              
              85,787
              
              
              
              
              
              
              
              
              
              
              
              93,611Total
      liabilities and stockholders’ equity
              
              $
              425,052
              
              
              
              
              
              
              
              
              
              
              $
              374,541
              
              
              
              
              
              
              
              
              
              
              $
              419,523
              
              
              
              
              
              
              
              
              
              
              $
              375,546Net
      interest income
              
              
              
              
              
              $
              2,757
              
              
              
              
              
              
              
              
              
              
              $
              2,648
              
              
              
              
              
              
              
              
              
              
              $
              5,451
              
              
              
              
              
              
              
              
              
              
              $
              5,282Net
      interest rate spread (1)
              
              
              
              
              
              
              
              
              
              
              2.09
              %
              
              
              
              
              
              
              
              
              
              
              1.98
              %
              
              
              
              
              
              
              
              
              
              
              2.03
              %
              
              
              
              
              
              
              
              
              
              
              1.97
              %Net
      interest-earning assets (2)
              
              $
              76,667
              
              
              
              
              
              
              
              
              
              
              $
              85,751
              
              
              
              
              
              
              
              
              
              
              $
              77,275
              
              
              
              
              
              
              
              
              
              
              $
              84,731Net
      interest margin (3)
              
              
              
              
              
              
              
              
              
              
              2.79
              %
              
              
              
              
              
              
              
              
              
              
              3.07
              %
              
              
              
              
              
              
              
              
              
              
              2.80
              %
              
              
              
              
              
              
              
              
              
              
              3.02
              %Ratio
      of interest-earning assets tointerest-bearing
    liabilities
              
              
              
              123.94
              %
              
              
              
              
              
              
              
              
              
              
              132.53
              %
              
              
              
              
              
              
              
              
              
              
              124.55
              %
              
              
              
              
              
              
              
              
              
              
              131.93
              %
  (1)
      Net interest rate spread represents the difference between the yield on
      average interest-earning assets and the cost of average interest-bearing
      liabilities.(2)
      Net interest-earning assets represents total interest-earning assets less
      total interest-bearing liabilities.(3)
      Net interest margin represents net interest income divided by average
      total interest-earning assets.(4)
      Interest on loans includes loan fees collected in the amount of $62,467
      and $27,494 for the three months ended June 30, 2008 and 2007,
      respectively and $115,496 and $81,884 for the six months ended June 30,
      2008 and 2007, respectively.




19
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.


Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





Interest
income.  Interest and fee income on loans increased to $4.9
million for the three months ended June 30, 2008 from $4.4 million for the
comparable period in 2007.  Interest income on loans increased
primarily as a result of a higher average balance offset by a lower
yield.  Interest and fee income on loans increased $1.2 million to
$9.7 million for the six months ended June 30, 2008 from $8.5 million for the
comparable period in 2007.  Interest income on loans increased
primarily as a result of a higher average balance offset by a lower
yield.  The average balance of loans was $306.5 million and $250.8
million for the six months ended June 30, 2008 and 2007, respectively. The
average yield on loans decreased to 6.35% for the six months ended June 30, 2008
from 6.81% for the comparable period in 2007.





Interest
income on securities decreased to $650,000 for the three months ended June 30,
2008 from $684,000 for the comparable period in 2007.  The decrease
was due primarily to a decline in yield.  The average yield on
securities decreased to 4.81% from 5.23% for the three months ended June 30,
2008 and 2007, respectively.  Interest income on securities increased
by $47,000 to $1.4 million for the six months ended June 30, 2008 from $1.3
million for the comparable period in 2007.  The increase was due to a
higher average balance of securities totaling $53.7 million and $51.5 million
for the six months ended June 30, 2008 and 2007, respectively.





Interest
income on other interest-earning deposits decreased to $137,000 for the three
months ended June 30, 2008 from $450,000 for the comparable period in
2007.  The average balance of other interest-earning deposits
decreased to $21.0 million from $33.9 million for the three months ended June
30, 2008 and 2007, respectively.  The average yield on other
interest-earning deposits decreased to 2.63% from 5.37% for the three months
ended June 30, 2008 and 2007, respectively.  Interest income on other
interest-earning deposits decreased to $451,000 for the six months ended June
30, 2008 from $1.1 million for the same comparable period in
2007.  The average balance of other interest-earning deposits was
$26.3 million and $42.1 million for the six months ended June 30, 2008 and 2007,
respectively.  The average yield on other interest-earning deposits
decreased to 3.45% for the six months ended June 30, 2008 compared to 5.18% for
the six months ended June 30, 2007.  Components of interest income
vary from time to time based on the availability and interest rates of loans,
securities, and other interest-earning assets.





Interest
expense.  Interest expense on deposits increased to $2.6
million for the three months ended June 30, 2008 from $2.4 million for the
comparable period in 2007.  Interest expense on deposits increased by
$463,000 to $5.4 million for the six months ended June 30, 2008 from $4.9
million for the comparable period in 2007.  These increases were due
primarily to an increase in average-interest bearing deposits.  The
average balance of interest-bearing deposits was $268.7 million and $225.0
million for the three months ended June 30, 2008 and 2007,
respectively.  The average balance of interest-bearing deposits was
$268.9 million and $229.8 million for the six months ended June 30, 2008 and
2007, respectively.





Interest
expense on securities sold under agreements to repurchase decreased to $99,000
for the three months ended June 30, 2008 from $238,000 for the three months
ended June 30, 2007.  Although the average balance of securities
increased to $30.2 million from $24.4 million for the three months ended June
30, 2008 and 2007, respectively, the yield decreased to 1.32% for the three
months ended June 30, 2008 from 3.96% for the comparable period in
2007.  Interest expense on securities sold under agreements to
repurchase decreased by $217,000 to $207,000 for the six months ended June 30,
2008 from $424,000 for the comparable period in 2007 despite a higher average
balance.  The interest rate for securities sold under agreements to
repurchase is tied to the three-month treasury bill index and declined to 1.60%
for the six months ended June 30, 2008 compared to 3.97% for the six months
ended June 30, 2007.











20
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.Management’s Discussion and Analysis of
Financial Condition and Results of Operations





Provision for
loan losses.  Provision for loan losses was $186,000 and
$76,000 for the three months ended June 30, 2008 and 2007,
respectively.  Provision for loan losses was $357,000 and $121,000 for
the six months ended June 30, 2008 and 2007, respectively.  Provision
for loan losses is based upon management’s consideration of current economic
conditions, the Company’s loan portfolio composition and historical loss
experience used to estimate probable losses as well as the level of
nonperforming assets and classified assets.  Management also reviews
individual loans for which full collectibility may not be reasonably assured and
considers, among other matters, the estimated fair value of the underlying
collateral.  This evaluation is ongoing and results in variations in
the Company’s provision for loan losses.  The large increase for the
three and six months ended June 30, 2008 compared to the same periods in 2007
was primarily due to the overall increase in the loan portfolio as well as the
change in the composition of the portfolio that now includes a larger share of
commercial business and commercial real estate loans.  The Company is
subject to periodic examination by the Office of Thrift Supervision, which may
require the Company to record increases in the allowance based on its evaluation
of available information.  There can be no assurance that the Office
of Thrift Supervision will not require further increases to the
allowance.





Noninterest
income.  Noninterest income increased to $215,000 for the three
months ended June 30, 2008 from $133,000 for the comparable period in
2007.  Noninterest income increased to $365,000 for the six months
ended June 30, 2008 from $262,000 for the comparable period in
2007.  The increase was due primarily to (i) gains on the sale of
loans that we sold but for which we retained the servicing rights and (ii)
service charge income on deposit accounts.





Noninterest
expense.  Noninterest expense totaled $1.9 million for the
three months ended June 30, 2008 and $1.7 million for the same period in
2007.  Noninterest expense increased to $3.6 million for the six
months ended June 30, 2008 from $3.4 million for the comparable period in
2007.  Compensation and employee benefits, the largest component of
noninterest expense, increased to $836,000 for the three months ended June 30,
2008 from $715,000 for the comparable period in 2007 and increased by $214,000
to $1.6 million for the six months ended June 30, 2008 from $1.4 million for the
comparable period in 2007.  Compensation and employee benefits
increased primarily from a higher number of personnel.  The number of
full-time equivalent employees increased to 66 at June 30, 2008 from 53 at June
30, 2007.





Occupancy
expense rose to $243,000 for the three months ended June 30, 2008 compared to
$206,000 for the comparable period in 2007.  Occupancy expense
increased by $72,000 to $484,000 for the six months ended June 30, 2008 from
$412,000 for the comparable period in 2007.  Occupancy expense
increased primarily due to depreciation on the renovation of one of our branch
offices that was completed in June 2007 and expenses related to a new branch
office that opened during the second quarter of 2008.





Income
taxes.  Income taxes decreased to $308,000 for the three months
ended June 30, 2008 from $368,000 for the comparable period in
2007.  Income taxes decreased to $660,000 for the six months ended
June 30, 2008 from $755,000 for the comparable period in 2007.  The
primary reason for the change in income taxes was the level of pre-tax
income.


21
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.Management’s Discussion and Analysis of
Financial Condition and Results of Operations





Liquidity and Capital
Resources


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




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




A portion
of our liquidity consists of cash and cash equivalents, which are a product of
our operating, investing and financing activities.  At June 30, 2008
and December 31, 2007, $23.5 million and $37.1 million, respectively, were
invested in cash and cash equivalents.  The primary sources of cash
are principal repayments on loans, proceeds from the calls and maturities of
investment securities, increases in deposit accounts and advances from the
Federal Home Loan Bank of Chicago.




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




Our
primary investing activities are the origination of loans and the purchase of
investment securities.  During the six months ended June 30, 2008 and
2007, our loan originations, net of collected principal, totaled $34.7 million
and $13.5 million, respectively.  Cash received from calls,
maturities, and paydowns of available-for-sale investment securities totaled
$70.4 million and $2.7 million for the six months ended June 30, 2008 and 2007,
respectively.  We purchased $68.3 million and $11.6 million in
available-for-sale investment securities during the six months ended June 30,
2008 and 2007, respectively.  We received proceeds of $15.0 million
from the maturities of interest-earning time deposits during the six months
ended June 30, 2008.  There were no proceeds from the maturities of
interest-earning time deposits for the comparable period in 2007.  We
purchased $12.8 million and $50,000 of interest-earning time deposits for the
six months ended June 30, 2008 and 2007, respectively.





Purchases
of premises and equipment, primarily related to the purchase of three lots and
the construction of a new branch facility in Wood River, Illinois were $2.9
million during the six months ended June 30, 2008.  Purchases of
premises and equipment were $1.3 million for the comparable period in
2007.




Deposit
flows are generally affected by the level of interest rates, the interest rates
and products offered by local competitors, and other factors.  Net
deposits increased by $5.2 million for the six months ended June 30,
2008.  During the comparable period in 2007 the net decrease in
deposits was $23.3 million.  Securities sold under agreements to
repurchase had a net increase of $12.2 million and a net decrease of $10.6
million for the six months ended June 30, 2008 and 2007,
respectively.  Proceeds from Federal Home Loan Bank advances of $10.0
million for the six months ended June 30, 2008 were offset by $3.0 million for
the repayment of such advances.  There were no advances or repayments
of advances to Federal Home Loan Bank for the comparable period in
2007.  Repurchases of the Company’s common stock were $4.2 million for
the six months ended June 30, 2008.  There were no repurchases of the
Company’s common stock for the comparable period in 2007.


22
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.Management’s Discussion and Analysis of
Financial Condition and Results of Operations





Liquidity
management is both a daily and long-term function of business
management.  If we require funds beyond our ability to generate them
internally, borrowing agreements exist with the Federal Home Loan Bank of
Chicago, which provides an additional source of funds.  At June 30,
2008, we had $17.4 million of advances from the Federal Home Loan Bank of
Chicago and additional available credit of approximately $44.3
million.





The Bank
is required to maintain certain minimum capital requirements under Office of
Thrift Supervision regulations.  Failure by a savings institution to
meet minimum capital requirements can result in certain mandatory and possible
discretionary actions by regulators, which, if undertaken, could have a direct
material effect on the Bank’s financial statements.  The Bank was
considered “well-capitalized” at June 30, 2008.  Under the capital
adequacy guidelines and regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines that involve quantitative measures of
the Bank’s assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices.




The
Bank’s actual and required capital amounts and ratios at June 30, 2008 were as
follows:





Minimum
      Requiredfor
      Capital
              
              
              to
      be "WellActual
              
              
              
              
              
              Adequacy
              
              
              Capitalized"Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio
              
              
              Amount
              
              
              Ratio(Dollars
      in Thousands)Stockholders'
      equity
              
              $
              79,401Goodwill
      and core deposit intangible
              
              
              (10,699
              )Disallowed
      servicing assets
              
              
              (430
              )Unrealized
      gain (loss) on securities AFS, net
              
              
              (246
              )Tangible
      capital to adjusted total assets
              
              $
              68,026
              
              
              
              16.6
              %
              
              $
              6,136
              
              
              
              1.5
              %
              
              
              N/A
              
              
              
              -General
      valuation allowance
              
              
              2,237Deduction
      for low-level recourse
              
              
              (1,181
              )Total
      capital to risk-weighted assets
              
              $
              69,082
              
              
              
              21.6
              %
              
              $
              25,606
              
              
              
              8.0
              %
              
              $
              32,008
              
              
              
              10.0
              %Tier
      1 capital to risk-weighted assets
              
              $
              68,026
              
              
              
              21.3
              %
              
              $
              N/A
              
              
              
              -
              
              
              $
              19,205
              
              
              
              6.0
              %Tier
      1 capital to total assets
              
              $
              68,026
              
              
              
              16.6
              %
              
              $
              16,362
              
              
              
              4.0
              %
              
              $
              20,453
              
              
              
              5.0
              %




Off-Balance Sheet
Arrangements




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




23
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.Management’s Discussion and Analysis of
Financial Condition and Results of Operations





Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract.  Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. The commitments for equity lines of credit may expire
without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral
obtained, if it is deemed necessary by the Company, is based on management’s
credit evaluation of the customer.  Unfunded commitments under
construction lines of credit for residential and multi-family properties are
commitments for possible future extensions of credit to existing customers.
These lines of credit are uncollateralized and usually do not contain a
specified maturity date and may not be drawn upon to the total extent to which
the Company is committed.




Standby
letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party.





A summary
of the notional or contractual amounts of financial instruments, with
off-balance-sheet risk at June 30, 2008 follows:





Range
      ofVariable
              
              
              Fixed
              
              
              
              
              
              Rates
      onRate
              
              
              Rate
              
              
              Total
              
              
              Fixed
      RateCommitments
              
              
              Commitments
              
              
              Commitments
              
              
              Commitments($
      in thousands)Commitments
      to extend credit
              
              $
              29,939
              
              
              $
              14,793
              
              
              $
              44,732
              
              
              
              3.75%-18.00
              %Standby
      letters of credit
              
              $
              3,384
              
              
              $
              2,480
              
              
              $
              5,864
              
              
              
              5.00%-9.25
              %





Loans
sold to the Federal Home Loan Bank (“FHLB”) of Chicago under the Mortgage
Partnership Finance program are sold with recourse.  The Bank has an
agreement to sell residential loans up to $70.0 million to the FHLB of
Chicago.  Approximately $58.3 million has been sold through June 30,
2008.  Under the agreement, the Bank has a maximum credit enhancement
of $1.2 million at June 30, 2008.  Based upon a favorable payment
history, the Bank does not anticipate recognizing any losses on these
residential loans.





The FHLB
announced in April that it will no longer enter into new master commitments or
renew existing master commitments to purchase mortgage loans from participating
financial institutions under the Mortgage Partnership Finance
Program.  The FHLB originally announced that they would work closely
with members that currently participate in the Mortgage Partnership Finance
Program to fund loans through July 31, 2008.  It has since extended
the program to fund loans through October 31, 2008.  The Company
intends to continue originating mortgage loans and selling them while retaining
the servicing.  The Company currently has a relationship with Fannie
Mae to purchase loans and is currently reviewing other vendors who purchase
mortgage loans.






24
 Index






FIRST CLOVER LEAF FINANCIAL
CORP.


Item
3.   Quantitative and Qualitative Disclosures
about Market Risk





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





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





The
Office of Thrift Supervision requires the computation of amounts by which the
net present value of an institution’s cash flow from assets, liabilities and
off-balance sheet items (the institution’s net portfolio value or “NPV”) would
change in the event of a range of assumed changes in market interest
rates.  The Office of Thrift Supervision provides all institutions
that file a Consolidated Maturity/Rate Schedule as a part of their quarterly
Thrift Financial Report with an interest rate sensitivity report of net
portfolio value.  The Office of Thrift Supervision simulation model
uses a discounted cash flow analysis and an option-based pricing approach to
measure the interest rate sensitivity of net portfolio
value.  Historically, the Office of Thrift Supervision model estimated
the economic value of each type of asset, liability and off-balance-sheet
contract under the assumption that the United States Treasury yield curve
increases or decreases instantaneously by 100 to 300 basis points in 100 basis
point increments.  However, due to the low interest rate environment,
the Quarterly Interest Rate Risk Exposure Report, provided by the Office of
Thrift Supervision, will not display results for scenarios of minus 200 basis
points or below until further notice.  A basis point equals
one-hundredth of one percent, and 100 basis points equals one
percent.  An increase in interest rates from 3% to 4% would mean, for
example, a 100 basis point increase in the “Change in Interest Rates” column
below.


25
 Index


FIRST CLOVER LEAF FINANCIAL CORP.





Item
3.   Quantitative and Qualitative Disclosures about Market Risk
(Continued)





The table
below sets forth, as of March 31, 2008 the estimated changes in the NPV that
would result from the designated instantaneous changes in the U.S. Treasury
yield curve. Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions including relative levels of market
interest rates, loan prepayments and deposit decay, and should not be relied
upon as indicative of actual results.





March
      31, 2008NPV
                  
                  
                  Net
      Portfolio Value as a Percentage of Present Value of
      AssetsChange
      in Interest Rates
                  
                  Estimated
                  
                  
                  Estimated
      Increase(Decrease) in NPV
                  
                  
                  
                  
                  
                  Change
      in(basis
      points)
                  
                  NPV
                  
                  
                  Amount
                  
                  
                  Percent
                  
                  
                  NPV
      Ratio
                  
                  
                  (basis
      points)(Dollars
      in thousands)+300
                  
                  
                  $
                  64,718
                  
                  
                  $
                  (9,779
                  )
                  
                  
                  (13
                  )%
                  
                  
                  17.12
                  %
                  
                  
                  (161
                  )+200
                  
                  
                  
                  68,535
                  
                  
                  
                  (5,962
                  )
                  
                  
                  (8
                  )
                  
                  
                  17.62
                  
                  
                  
                  (111
                  )+100
                  
                  
                  
                  71,846
                  
                  
                  
                  (2,641
                  )
                  
                  
                  (4
                  )
                  
                  
                  18.30
                  
                  
                  
                  (44
                  )—
                  
                  
                  
                  74,497
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  18.73
                  
                  
                  
                  —-50
                  
                  
                  
                  74,643
                  
                  
                  
                  146
                  
                  
                  
                  —
                  
                  
                  
                  18.73
                  
                  
                  
                  —-100
                  
                  
                  
                  74,679
                  
                  
                  
                  182
                  
                  
                  
                  —
                  
                  
                  
                  18.54
                  
                  
                  
                  (19
                  )


The table
above indicates that at March 31, 2008, in the event of a 100 basis point
decrease in interest rates, we would experience a minor change in the net
portfolio value.  In the event of a 300 basis point increase in
interest rates, we would experience a 13% decrease in net portfolio
value.  Management does not believe that the Company’s primary market
risk exposures and how those exposures were managed during the three months
ended June 30, 2008 have changed significantly when compared to the immediately
preceding quarter ended March 31, 2008.  However, the Company’s
primary market risk exposure has not yet been quantified at June 30, 2008 as the
Office of Thrift Supervision Net Portfolio Value Model is not yet available and
the complexity of the model makes it difficult to accurately predict
results.





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











26
 Index




FIRST CLOVER
LEAF FINANCIAL CORP.





Item
4.  Controls andProcedures





As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures. Based
on this evaluation, the Company’s principal executive officer and principal
financial officer concluded that the Company’s disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in the Company’s periodic SEC reports.





In
addition, there have been no changes in the Company’s internal control over
financial reporting during the most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.















27
 Index





FIRST
CLOVER LEAF FINANCIAL CORP.PART II - Other
Information





Item
1 - Legal Proceedings.





There are no material legal
proceedings to which the Company or its subsidiaries is a party or of which any
of its property is subject.  From time to time, the Company is a party
to various legal proceedings incident to its business.








Item
1A – Risk Factors





The Company was previously a “Small
Business Issuer,” and, therefore, filed its most recent annual report with the
Securities and Exchange Commission on Form 10-KSB.  In accordance with
the rules and regulations of the Securities and Exchange Commission, such report
did not include risk factors separate and apart from those otherwise described
in the annual report.  The Company included risk factors in its
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2008.  There have been no material changes to risk factors applicable
to the Company.








Item
2 – Unregistered Sales of Equity Securities and Use of
Proceeds.





(a)
            No
      equity securities were sold during the quarter that were not registered
      under the Securities Exchange Act.


(b)
            Not
      applicable.


(c)
            There
      were no purchases made by or on behalf of the Company of shares of its
      common stock during the quarter ended June 30,
  2008.








Item
3 - Defaults upon Senior Securities.





Not
      applicable.








Item
4 - Submission of Matters to a Vote of Security
Holders.





(a) On May 28, 2008 the Company held
its Annual Meeting of Stockholders.





(b) At
the meeting, Nina Baird, Joseph Helms, Donald Engelke, and Robert Schwartz were
elected, each to serve a three year term.





The following directors continue in
office:


Robert Richards


Larry W. Mosby


Joseph Stevens


Dennis E. Ulrich


Harry Gallatin


Dean Pletcher


Joseph J. Gugger










28
 Index


FIRST CLOVER LEAF FINANCIAL CORP.





Item
4 - Submission of Matters to a Vote of Security Holders
(Continued).





(c) Stockholders voted on the following
matters:





(i)       
 The election of the following directors of the Company:





DIRECTOR:
            FOR
            WITHHELDNina
      Baird
            6,089,210
            169,953Joseph
      Helms
            6,080,069
            179,094Donald
      Engelke
            6,139,478
            119,685Robert
      Schwartz
            6,136,751
            122,412





(ii)   
 The ratification of the appointment of McGladrey & Pullen, LLP as
independent registered public accounting firm for the Company for the year
ending December 31, 2008:





VOTES
            FOR
            AGAINST
            ABSTENTIONS
            BROKER
      NON-VOTES6,259,163
            5,903,811
            46,887
            308,465
            0








Item
5 - Other Information.





None








Item
6 – Exhibits.





(a)  Exhibits.


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


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


32:
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.


29
 Index


FIRST CLOVER LEAF FINANCIAL CORP.





SIGNATURES








Pursuant
to the requirements 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.(Registrant)DATE:
      August 11,
      2008
            BY:
            /s/
      Dennis M. TerryDennis
      M. Terry, President and Chief Executive OfficerBY:
            /s/
      Darlene F. McDonaldDarlene
      F. McDonald, Senior Vice-President and Chief Financial
    Officer





30