To our shareholders, associates, customers, and communities:

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1 2015 Annual Report

Table of Contents Chairman s Message page 3 Commercial Testimonials page 8 2015 Financial Highlights page 12 Independent Auditor s Report page 13 Consolidated Balance Sheets page 14 Consolidated

2 Table of Contents Chairman s Message page 3 Commercial Testimonials page Financial Highlights page 12 Independent Auditor s Report page 13 Consolidated Balance Sheets page 14 Consolidated Statements of Income page 15 Consolidated Statements of Comprehensive Income page 16 Consolidated Statement of Changes in Stockholders Equity page 17 Consolidated Statements of Cash Flow page 18 Notes to Consolidated Financial Statements page 19 Board of Directors & Executive Team page 45

3 To our shareholders, associates, customers, and communities: In 2015, STAR enjoyed solid financial performance. We re proud that we have continually delivered upon our strategic plan to provide high-quality products, services, and technology to our existing customers, as well as to the next generation. I am grateful to our 600 STAR team members who make up the STAR Financial Group for their dedication, and I am proud to present the 2015 year in review, as it proved to be the best year in STAR s history.

4 Community Investment THE COMMON COMMUNITY THREAD Ancient Greek story teller, Aesop once said No act of kindness, no matter how small, is ever wasted. Our unwavering commitment to community started more than 73 years ago, the day we opened our first bank. As a binding thread within many central and northeast Indiana communities, our goal is to be philanthropically involved from every angle. That s why in 2015, STAR gave more than $500,000 back to the communities we serve. We provided direct financial support to over 200 nonprofit organizations and our employees have provided over 4,700 hours of their time to over 300 organizations in our communities. STAR remains the common community thread by continually engaging and enriching our neighbors through giving and community action. In fact, on Monday, October 12, 2015, STAR was honored to partner with 22 nonprofit organizations in 13 cities and towns across Northeast and Central Indiana for our 5th annual Service Day. More than 500 employees donated their time by cleaning, painting, sorting food, performing yard work and much more Economic Review Overall, Indiana s economy continued on a similar stable path as in 2014, with housing prices making modest gains and unemployment continuing a slow decline. As United States consumer spending rose slightly, so did the amount consumers are placing into their personal savings. Locally, businesses are continuing to invest in our great communities, and demand for business loans was strong throughout the year. And in 2015, STAR continued its commitment to steady, long-term growth across all of our business units - Bank, Insurance, and Private Advisory - as evidenced by our financial accomplishments: Our commercial loan portfolio realized strong growth in outstanding loans of 13% and grew by $100 million The Retail Bank generated $51 million in consumer loan production Mortgage had an outstanding year, with new production of $110 million The Private Advisory Team crossed important thresholds in 2015: + Private Banking generated $36.6 million in mortgage production (150% of goal) + Wealth Management revenues exceeded 2014, and for the first time in STAR history, the Wealth Management and Investment Services teams are managing or advising on more than $400 million in funds The Benefits Division of STAR Insurance reached $100,000 in net new growth + STAR Insurance partnered with Maxwell Health to offer an online benefits platform 2015 ANNUAL REPORT 4

5 Technology of Today...and Tomorrow Mobile technology has changed the way consumers shop and make financial decisions. And in 2015, STAR responded when we introduced the STAR Bank Mobile App and a new Online Banking interface. Both were anxiously-awaited launches of the latest technology. With the mobile app, users can make deposits, transfer money, approve transactions and keep up with account activity whenever and wherever it s convenient for them. And the makeover of our website, starfinancial. com, provides simplified navigation, refreshed content and new features. The responsive design allows for easy access to information on any device desktop, tablet, or smart phone. These investments in technology serve as an example of STAR s commitment to delivering progressive and convenient service right to our customer s door ANNUAL REPORT 5

The Future of Banking - Video Banking At STAR, we are always looking to the future to ensure we are providing our customers with the most advanced and convenient services they desire.

6 The Future of Banking - Video Banking At STAR, we are always looking to the future to ensure we are providing our customers with the most advanced and convenient services they desire. That s why in 2015, STAR added a brand new delivery channel when we invested in nine video banking machines at branches in Fort Wayne, Gas City, Gaston, and Marion. With the first launch in September 2015, STAR became the 2nd financial institution in Fort Wayne and only the 7th in the state - to introduce this new way to bank. With more than 10,000 transactions conducted as of year-end, STAR customers are experiencing a revolution in financial services and enjoying banking when it s convenient for them. Video Banking provides our customers with extended hours (7am 7pm Monday thru Saturday), personalized service, and the ability to conduct common banking center transactions: checks cashed to the penny, fund withdrawals in specific denominations, deposits, and loan payments without having to leave their car. We will continue to deploy this new banking experience throughout 2016 to all STAR locations ANNUAL REPORT 6

Branch Network Optimization In 2015, after careful analysis and review of transactions shifting to online and mobile solutions, we made the difficult decision to close three branches, consolidating

7 Branch Network Optimization In 2015, after careful analysis and review of transactions shifting to online and mobile solutions, we made the difficult decision to close three branches, consolidating them into other nearby banking centers. This consolidation allows us to better position ourselves for future technology advancements, increased financial strength and the future success of both our customers and employees. In 2016, we will embark on one of our most significant capital investments in years when we begin a branch network optimization and renovation plan. As technology increasingly drives how our customers manage their finances, we must align our networks and delivery channels with those behaviors. The new STAR branch will provide the 21st century customers with what they want: access to all financial services, the latest technology, and complete and accurate information, all in a more contemporary setting. customers through personalized service and the latest technology. We know that STAR s continued investment in our team members, customers and our communities, will yield prosperity for all. We invite you to attend our Annual Meeting of Shareholders to be held at 10:00 a.m. on May 25, 2016, in the 2nd floor board room of our downtown Fort Wayne headquarters at 127 West Berry Street, Fort Wayne, Indiana On behalf of the STAR family, THOMAS M. MARCUCCILLI Chairman, STAR Financial Group, Inc Economic Forecast Indiana s 2016 outlook could be viewed similarly to that of As a state, we anticipate moving through the upcoming year with tepid optimism toward an improving economy, due to recovering housing markets and an uptick in automobile sales. In 2016, STAR will continue to look for sound and profitable business opportunities, and innovative ways to continue to build relationships with 2015 ANNUAL REPORT 7

Supportive Keeping your business on top through economic ups and downs takes a banking partner committed to standing by your side with the support you need.

8 Supportive Keeping your business on top through economic ups and downs takes a banking partner committed to standing by your side with the support you need. Led by second-generation owners Jeff and Dan Jackson, Hoosier Gasket supplies gaskets and seals all around the world. To keep pace with demand, they built a new facility in 2007, just as the market took a downturn. Fortunately, they had just switched to a family-owned bank. STAR Bank had the long-term vision to help get them through the tough times. As their competition fell by the wayside, Hoosier Gasket picked up more market share and today continues to run like a well-oiled machine. JEFF & DAN JACKSON Owners, Hoosier Gasket 2015 ANNUAL REPORT 8

9 Confidence Coordinating the finances of a university with more than 360 employees and 2,300 students can be challenging, to say the least. So Sister Elise Kriss and her staff went looking for a bank that would take the time to understand their needs, build a relationship with the university community and customize solutions to their unique challenges. They re great to work with. We have confidence in the bank and in the people, said Sister Elise. SISTER M. ELISE KRISS, OSF President, University of Saint Francis 2015 ANNUAL REPORT 9

ROB TOWN, Partner JAY STUTZ, President & CEO JON TOWN, Partner THOMAS ALEXANDER, Partner Intrametco Attentive When you have your sights set on the world, you need a bank that s willing to stay

10 ROB TOWN, Partner JAY STUTZ, President & CEO JON TOWN, Partner THOMAS ALEXANDER, Partner Intrametco Attentive When you have your sights set on the world, you need a bank that s willing to stay focused on you. So after a 30- year relationship with a national bank, Intrametco decided to take a different route. They sought out a regional, family-owned bank that could provide better service and be more responsive to their needs as well as to those of the community. They chose STAR Bank. When it was time for the switch, it was easy. It was amazing how quickly they were able to get things done, Jon said ANNUAL REPORT 10

JUDY ROY, EVP Indiana Tech Accommodating When Judy Roy and her team at Indiana Tech began looking for a new banking partner, the choice was obvious.

11 JUDY ROY, EVP Indiana Tech Accommodating When Judy Roy and her team at Indiana Tech began looking for a new banking partner, the choice was obvious. Only one bank passed the test for being locally owned, involved in the community and committed to making banking easy. The local decision-making was huge. Other banks claimed to have local decisionmaking but they really didn t, said Judy. That put STAR Bank at the head of the class when it came to taking care of their financial needs ANNUAL REPORT 11

12 2015 Financial Highlights December 31, 2015, 2014, and 2013 (Table Dollars in Thousands Except Share Data) FOR THE YEAR Net income $ 14,708 $ 14,025 $ 11,722 Dividends declared 3,606 3,457 Weighted average shares 3,856,644 3,865,833 3,871,927 Per Basic Common Share Net income $ 3.81 $ 3.63 $ 3.03 Dividends declared Book value at December AT DECEMBER 31 Total assets $ 1,864,984 $ 1,765,336 $ 1,680,761 Earning assets 1,583,072 1,483,828 1,440,837 Loans and leases 1,270,612 1,201,360 1,198,160 Deposits 1,525,736 1,462,759 1,410,896 Stockholder s equity 191, , ,307 CAPITAL RATIOS Risk-based capital ratios Tier I 12.51% 13.27% 12.72% Total (Tier I plus Tier II) Leverage ratio Common Equity Tier I ANNUAL REPORT 12

13 Independent Auditor s Report Board of Directors and Stockholders STAR Financial Group, Inc. Fort Wayne, Indiana Report on the Financial Statements We have audited the accompanying consolidated financial statements of STAR Financial Group, Inc. (Company) and subsidiaries, which comprise the consolidated balance sheets as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in stockholders equity and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of STAR Financial Group, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Report on Other Legal and Regulatory Requirements We also have examined, in accordance with attestation standards established by the American Institute of Certified Public Accountants, STAR Financial Group, Inc. s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 16, 2016, expressed an unqualified opinion on the effectiveness of the Company s internal control over financial reporting. Fort Wayne, Indiana March 16, ANNUAL REPORT 13

14 STAR Financial Group, Inc. CONSOLIDATED BALANCE SHEETS December 31, 2015 and 2014 (In Thousands Except Share Data) See Notes to Consolidated Financial Statements 2015 ANNUAL REPORT 14

15 STAR Financial Group, Inc. CONSOLIDATED STATEMENTS OF INCOME December 31, 2015 and 2014 (In Thousands Except Share Data) See Notes to Consolidated Financial Statements 2015 ANNUAL REPORT 15

16 STAR Financial Group, Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME December 31, 2015 and 2014 (In Thousands) See Notes to Consolidated Financial Statements 2015 ANNUAL REPORT 16

17 STAR Financial Group, Inc. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY December 31, 2015 and 2014 (In Thousands Except Share Data) See Notes to Consolidated Financial Statements 2015 ANNUAL REPORT 17

18 STAR Financial Group, Inc. CONSOLIDATED STATEMENTS OF CASH FLOW December 31, 2015 and 2014 (In Thousands) See Notes to Consolidated Financial Statements 2015 ANNUAL REPORT 18

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45 Board of Directors & Executive Team STAR FINANCIAL GROUP BOARD OF DIRECTORS James C. Marcuccilli Thomas M. Marcuccilli, Chairman Kenneth A. Wright Robert L. Wright Thomas W. Wright EXECUTIVE OFFICERS Thomas M. Marcuccilli, Chairman - President Robert L. Wright, Vice Chairman James C. Marcuccilli, Executive Vice President Karen F. Gregerson, CFO, Investment Officer David D. Cornwell, General Counsel, Secretary/Treasurer STAR INSURANCE AGENCY BOARD OF DIRECTORS Joe Martin, Chairman John W. Lefever, President James C. Marcuccilli Thomas W. Wright EXECUTIVE OFFICERS David D. Cornwell 2016 ANNUAL MEETING The Annual Meeting of the Shareholders of STAR Financial Group occurs on Wednesday, May 25, 2016 at 10 a.m. at STAR Financial Group s Corporate Office at 127 West Berry Street, 2nd floor, Fort Wayne, Indiana. STAR FINANCIAL BANK BOARD OF DIRECTORS Ryan H. Drook Dr. Jerry L. House Michael W. Langellier John W. Lefever James C. Marcuccilli, President & CEO Thomas M. Marcuccilli Owen B. Melton, Jr. Melissa Proffitt Schmidt Steven F. Walker Bernadine L. Wallace C. Robin Wright Thomas W. Wright, Chairman EXECUTIVE OFFICERS J. Benjamin Campbell, EVP, Commercial Banking David D. Cornwell, General Counsel Angela M. Dane, VP, Human Resource Director Keith E. Davis, President, STAR Wealth Management Karen F. Gregerson, SVP, Chief Financial Officer James C. Marcuccilli, President & CEO Kristin M. Marcuccilli, SVP, Chief Operating Officer Thomas M. Marcuccilli, President, STAR Financial Group Joe Martin, President, North Region William R. Wingrove, EVP, Chief Credit Officer Thomas W. Wright, Chairman, President of Community Banking REGION PRESIDENTS Joe Martin, North John. L. McCreary, South Thomas R. Miller, East 2015 ANNUAL REPORT 45

46 STAR Financial Group, Inc. CORPORATE OFFICE 127 W. Berry Street Fort Wayne, Indiana (260) starfinancial.com MEMBER FDIC EQUAL HOUSING LENDER 2016 STAR FINANCIAL GROUP 0416 AR

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