First Clover Leaf Financial Corp.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” The standard is the final guidance on the new current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held to maturity (“HTM”) debt securities. The update amends the accounting for credit losses on available-for-sale securities (“AFS”), whereby credit losses will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Lastly, the amendment requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The guidance allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). The new guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on our consolidated financial statements.

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On April 26, 2016, the Company and First Mid, entered into an Agreement and Plan of Merger (as amended by the First Amendment to Agreement and Plan of Merger entered into as of June 6, 2016, and as may be further amended, the “Merger Agreement”), pursuant to which First Mid will acquire the Company and First Clover Leaf Bank (the “Merger”). Until the consummation of the Merger, we anticipate continuing to focus on our loan and deposit growth strategies. We expect to also incur higher non-interest expenses in the upcoming quarters as we work toward closing the transaction. Specifically, we have incurred increased professional fees as well as other costs necessary in connection with the transaction. For the six months ended June 30, 2016, we continued our emphasis on growth, specifically on earning assets. As of June 30, 2016, our loan balance grew $19.9 million to $440.4 million compared to $420.5 million at December 31, 2015. Our growth in deposits continued as our core deposits, excluding broker deposits, grew $23.2 million to $496.7 million at June 30, 2016 compared to $473.5 million at December 31, 2015.

General.  We recorded net income of $651,401 and $1.2 million for the three months ended June 30, 2016 and 2015, respectively. The decrease in net income for the three months ended June 30, 2016 resulted primarily from merger related expenses in compensation and employee benefits and in professional fees, along with a provision for loan losses, partially offset by higher net interest income and by lower income taxes. We recorded net income of $1.7 million and $2.7 million for the six months ended June 30, 2016 and 2015, respectively. The decrease in net income for the six months ended June 30, 2016 resulted primarily from increases in compensation and employee benefits and in professional fees due to merger related expenses, and an increase in provision for loan losses compared to a $500,000 credit for loan losses in the previous year, partially offset by higher net interest income and by lower income taxes.

Provision for loan losses.  For the three months ended June 30, 2016, the Bank recorded provision expense of $70,000 compared to no provision expense for the three months ended June 30, 2015. For the six months ended June 30, 2016, the Bank recorded provision expense of $320,000 compared to a $500,000 credit provision for the six months ended June 30, 2015. The credit provision was recorded in June 2015 as management determined it was appropriate due to improvements in credit quality trends and recoveries received on previously charged off loans. The provision expense recorded for the six months ended June 30, 2016 was due primarily to a downgrade on a $2.5 million commercial real estate loan that was tested for impairment as well as an overall increase in non-performing loans. Non-performing and

First Clover Leaf, certain executive officers of First Clover Leaf, certain members of First Clover Leaf’s board of directors, and First Mid are named as defendants in one purported class action lawsuit brought by an alleged individual First Clover Leaf stockholder challenging the Merger (the “Lawsuit”). The Lawsuit is captioned Raul v. Highlander, et al, Case No. 16-L-703, and was filed on May 20, 2016, in the Circuit Court of Madison County, Illinois, Third Judicial District. The Lawsuit alleges breaches of fiduciary duty by the individual officers and directors of First Clover Leaf relating to the process leading to the proposed Merger of First Clover Leaf and First Mid. The Lawsuit alleges that the Merger consideration is inadequate and that the joint proxy statement/prospectus does not contain sufficient disclosures and detail. The Lawsuit also alleges that First Clover Leaf and First Mid aided and abetted the alleged breaches of fiduciary duty by the individual defendants. The relief sought includes class certification, declaratory relief, an injunction enjoining consummation of the Merger, rescission of the Merger should it be consummated, interest on any monetary judgment, costs, and attorneys’ fees.