7.4% growth in net earnings to NIS 160 million and core capital ratio of 10% ROE of 9.7%

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1 Press Release The First International Bank's financial statements for the second quarter of 2014: 7.4% growth in net earnings to NIS 160 million and core capital ratio of 10% ROE of 9.7% Net earnings of the First International Bank Group for the second quarter of 2014 amounted to NIS 160 million, a year-on-year increase of 7.4%. Return on for the quarter reached 9.7% annualized compared with 9.2% in 2013/Q2. For the first half of the year, net earnings reached NIS 280 million and return on 8.3%. Smadar Barber-Tsadik, CEO of the First International Bank, said that: The First International Bank Group continues to present expansion in banking activity, with an emphasis on capital market and investment advice activity, in which the Bank specializes. In the past year, the assets of the Bank's customers increased by NIS 40 billion to NIS 330 billion. We recently announced a special organizational change that is intended to create an overall view of the customer's requirements. Under this change, all customer activities in the area of investments and the capital, foreign currency and money markets have been placed under the responsibility of the Customer Assets Division. This makes it possible to provide overall, professional and optimal service within the confines of a single division. The change is also contributing to increased efficiency, a strategic objective that is expressed by the tight hold kept on expenses. Concurrently, the Group is notable for its stability, as reflected primarily by a high core capital ratio and high liquidity ratios". Income after expenses on credit losses totaled NIS 971 million, an increase of 1.6% compared with 2013/Q2. For the first half of the year, income totaled NIS 1,895 million, similar to the amount recorded in the first half of Net interest income and non-interest financing income totaled NIS 595 million in the second quarter of the year, 3% less than in 2013/Q2. The decrease derived from the effect of an NIS 18 million reduction in reconciliations to fair value of derivative instruments and from the decline in the Bank of Israel interest rate. Commission income (exclusive of the effect of the initial application of the accounting standard governing the measurement of interest income) rose by 2.9% to NIS 360 million. For the second half of the year, commission income exclusive of the said effect totaled NIS 731 million, an increase of 5.9%. income amounted to NIS 34 million compared with NIS 5 million in 2013 first half. The growth in other income is attributed to earnings from the sale of FIBI London. 1

2 Expenses on credit losses amounted to NIS 7 million in the second quarter compared with NIS 12 million in 2013/Q2. Expenses on credit losses in the first half of the year amounted to NIS 3 million compared with NIS 44 million in 2013 first half. The allowance for credit losses in the first half of 2013 included an NIS 24 million increase in the group provision in respect of the application of the Supervisor of Banks' directive on "revision of guidelines concerning residential real estate". The ratio of expenses on credit losses to total credit to the public amounted to 0.01% in the first half of the year, compared with 0.13% in 2013 first half and 0.14% in the whole of Operating and other expenses fell by 1.5% to NIS 705 million in the second quarter. The efficiency ratio (operating expenses to income) improved and reached 73.1% in the second quarter. In the first half of the year, operating expenses totaled NIS 1,426 million, an increase of 0.4% compared with 2013 first half. The Bank Group's assets totaled NIS 112,085 million on, 2014, an increase of 7.3% compared with the end of June Credit to the public, net, expanded by 0.6% to NIS 67,835 million, of which retail credit (households, private banking and mortgages) increased by 5.3% to NIS 34,189 million. Deposits from the public grew by 9.9% to NIS 90,686 million. The ratio of core (Tier 1) capital to risk assets (Basel 3) amounted to 10% on, 2014, compared with 10.11% at the end of This was after the distribution of dividend to investors in the amount of NIS 230 million. 2

3 PRINCIPAL DATA Earnings and profitability For the six months ended June Change NIS million in % Net interest income 1,084 1,095 (1.0) Non-interest income (3.6) income 1,898 1,939 (2.1) Of which: Commission fees (1.2) Allowance for credit losses 3 44 Operating and other expenses 1,426 1, Earnings before taxes (1.3) Net earnings attributed to shareholders (1.8) Change Balance Sheet Highlights NIS million in % assets 112, , , Net credit to the public 67,835 67,461 68, (1.3) Securities 11,982 12,878 10,799 (7.0) 11.0 Deposits from the public 90,686 82,533 89, Bonds and subordinated notes 5,570 5,871 5,702 (5.1) (2.3) Capital attributed to shareholders 6,941 6,590 6, For the six months ended For the year ended December 31 Principal financial ratios Capital attributed to shareholders of the bank to total assets 6.2% 6.3% 6.2% Expenses from credit losses to the public, net* 0.01% 0.13% 0.14% Ratio of capital to risk components (Basel 3) 10.00% 10.11% Ratio of total capital to risk (Basel 3) 14.78% 14.78% Credit to the public, net to total assets 60.5% 64.6% 61.8% Deposits from the public to total assets 80.9% 79.0% 80.2% Deposits from the public to credit to the public, net 133.7% 122.3% 129.7% Operating and other expenses to total income 75.1% 73.2% 73.0% Net return on attributed to shareholders of the bank* 8.3% 8.8% 8.6% 3

4 CONSOLIDATED BALANCE SHEET Assets Note (Unaudited) (Unaudited) (Audited) Cash and deposits with banks 26,836 18,939 26,100 Securities 2 11,982 12,878 10,799 Securities which were borrowed 894 1, Credit to the public 3 68,678 68,289 69,533 Provision for Credit losses 3 (843) (828) (827) Credit to the public, net 67,835 67,461 68,706 Credit to the government Investments in investee companies Premises and equipment 1,209 1,169 1,180 Intangible assets Assets in respect of derivative instruments ,107 1,462 assets (2) Assets held for sale assets 112, , ,103 Liabilities and holders' Equity Deposits from the public 11 90,686 82,533 89,122 Deposits from banks 1,171 1,493 1,335 Deposits from the Government Bonds and subordinated capital notes 5,570 5,871 5,702 Liabilities in respect of derivative instruments 7 1,277 1,427 1,789 liabilities (1)(3) 5,334 5,687 5,374 Liabilities held for sale liabilities 104,905 97, ,983 Capital attributed to the shareholders of the Bank 6,941 6,590 6,892 Noncontrolling ,180 6,807 7,120 liabilities and shareholders' 112, , ,103 (1) Of which: provision for credit losses for off-balance sheet instruments in the amount of NIS 120 million, NIS 115 million and NIS 116 million at , , and , respectively. (2) Of which: other assets measured at fair value in the amount of NIS 61 million, NIS 26 million and NIS 66 million at , and , respectively. (3) Of which other liabilities measured at fair value in the amount of NIS 831 million, NIS 1,052 million and NIS 769 million at , and , respectively. The notes to the financial statements are an integral part thereof. Rony Hizkiaho Smadar Barber-Zadik Nachman Nitzan Chairman of the Board of Directors Chief Executive Officer Executive Vice President, Chief Accountant Tel Aviv August 19,

5 STATEMENTS OF INCOME Three months ended Six months ended for the year Ended December 31 Note (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) Interest Income ,383 1,672 3,322 Interest Expenses ,135 Interest Income, net ,084 1,095 2,187 Expenses from credit losses 3 (7) Net Interest Income after expenses from credit losses ,081 1,051 2,090 Non Interest Income Non Interest Financing income Commissions ,418 income non Interest income ,682 Operating and other expenses Salaries and related expenses ,687 Maintenance and depreciation of premises and equipment Amortizations and impairment of intangible assets and goodwill expenses operating and other expenses ,426 1,420 2,825 Profit before taxes Provision for taxes on profit Profit after taxes The bank's share in profit of -basis investees, after taxes Net profit: Before attribution to noncontrolling Attributed to noncontrolling (5) (5) (10) (10) (21) Attributed to shareholders of the Bank Primary earnings per share attributed to the shareholders of the Bank Net earnings per share of NIS 0.05 par value The notes to the financial statements are an integral part thereof. 5

6 STATEMENT OF COMPREHENSIVE INCOME Three months ended Six months ended for the year Ended December (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) Net income before attribution to minority Net income attributed to minority (5) (5) (10) (10) (21) Net income attributed to the shareholders of the Bank : Adjustments of available for sale securities to fair value, net (12) (63) - (94) (64) Adjustments from translation of financial ststements (1) net after the effect of hedges (2) 4 (1) sive loss before taxes (8) (64) 2 (85) (59) Related tax effect - 22 (2) sive loss before attribution to minority, after taxes (8) (42) - (60) (41) Less other sive (income) loss attributed to minority - 1 (1) 2 2 sive loss attributed to the shareholders of the Bank, after taxes (8) (41) (1) (58) (39) Comprehen before attribution to minority Comprehen attributed to minority (5) (4) (11) (8) (19) Comprehen attributed to the shareholders of the Bank (1) Adjustments from translation of financial statements of foreign operations which their currency of operations is different from the currency of operation of the Bank, including investee companies. (2) Hedges-gains (losses) regarding the hedging of investment in foreign currency. The notes to the financial statements are an integral part thereof. 6

7 STATEMENT OF CHANGES IN EQUITY For the three months ended, 2014 (unaudited) Balance as of March 31, ,806 6, ,023 Net earnings in the period sive loss, net, after tax effect - (8) - (8) - (8) Balance as of, ,966 6, ,180 For the three months ended, 2013 (unaudited) Balance as of March 31, ,684 6, ,895 Net earnings in the period Dividend - - (200) (200) - (200) sive loss, net, after tax effect - (41) - (41) (1) (42) Balance as of, ,633 6, ,807 For the six months ended, 2014 (unaudited) Balance at the beginning of the year (audited) ,916 6, ,120 Net earnings in the period Dividend paid - - (230) (230) - (230) sive loss, net, after tax effect - (1) - (1) 1 - Balance as of, ,966 6, ,180 For the six months ended, 2013 (unaudited) Balance at the beginning of the year (audited) ,548 6, ,772 Net earnings in the period Dividend - - (200) (200) - (200) sive loss, net, after tax effect - (58) - (58) (2) (60) Balance as of, ,633 6, ,807 7

8 STATEMENT OF CHANGES IN EQUITY (CONT'D) For the year ended December 31, 2013 (audited) Balance at the beginning of the year ,548 6, ,772 Net earnings in the period Dividend - - (200) (200) - (200) sive loss, net, after tax effect - (39) - (39) (2) (41) Dividend paid to minority - - (2) (2) - (2) Balance as of December 31, ,916 6, ,120 (1) Including share premium in the amount of NIS 313 million (since 1992 onwards). (2) Including the amount of NIS 2,391 million that can not be distributed as dividend. The notes to the financial statements are an integral part thereof. 8