CEO Statement

Dear Investor

The results of the Bank for the quarter reflect the continuation of a trend we have seen over a long period: the trend of growth in activities and in income, while maintaining the financial stability of the Bank. In the quarter, the Board of Directors decided to fully integrate Otzar Hachayal Bank, while maintaining its strong and long-standing brand, with all its values and content, and maintaining its network of branches. The Bank also successfully carried out a voluntary retirement program. The cost of these initiatives, which we recognized in the current quarter, is in effect investment for the future, of which its benefits will be enjoyed in the future."

Financial Highlights

Net earnings of NIS 212 million in the third quarter of 2018, a year over year increase of 4.4%*

Return on equity for the quarter of 11.1%, excluding certain non recuring items (see tables below)- 9.2%*

Net earnings of NIS 568 million in the first nine months of the year, an incresae of 9.2%*

*Return on equity of 9.8% in the first nine month of the year

12.2% year-over-year growth in interest income from ongoing operation in the third quarter*

3.1% *growth in credit to the public in the third quarter of the year, and 6.5% grwoth compared with the same period last  year

Efficiency ratio improved to 67.7% compared with 69.1% in the same period last year*

Ratio of Tier I equity capital to risk weighted assets: 10.39%*

The comprehensive capital ratio amounted to 13.80%*

Summary of the Results

Profitability

Net earnings of the First International Bank Group in the first nine months of the year amounted to NIS 568 million, a growth of 9.2% in comparison with the corresponding period last year. Return on equity reached 9.8% in the period.

With the elimination of certain items (refer to the table below), net earnings in the nine-month period would have totaled NIS 510 million, showing growth of 10.9% with return on equity of 8.8%.

In the third quarter, net earnings totaled NIS 212 million, a growth of 4.4% in comparison with the corresponding quarter last year. Return on equity for the quarter reached 11.1%. With the elimination of certain items (refer to the table below), net earnings in the period would have totaled NIS 178 million, showing growth of 4.1%

with return on equity of 9.2%

Growth

Financing income from current operations (net interest income and non-interest financing income) in the third quarter of the year, increased by 12.2% year-over-year, and reached NIS 662 million. The growth was primarily due to the growth in the volume of operations.

Credit to the public as of September 30, 2018 totaled NIS 85,484 million, a growth of 6.5% in relation to September 30, 2017.

The growth in credit is marked by the continuing distribution in credit and is mainly noted in growth in the following credit segments:

Households and private banking - 7.4%

Small and middle market businesses - 5.1%

Large businesses - 2.8%

In the third quarter (compared with that of June 30, 2018) credit to the public grew by 3.1%.

Customer asset portfolio (average balances of deposits and securities) amounted to NIS 445 billion as of September 30,

2018 an increase of 12% in relation to that of September 30, 2017.

Efficiency and Financial Stability

The efficiency ratio improved reaching 67.7% in the first nine months of the year, compared with 69.1% in the corresponding period last year. In the third quarter of the year, the efficiency ratio was 66%

In the first nine months of the year, the Bank provided the full provision- in the amount of NIS 82 million, in respect of merger expenses with Otzar Hachayal Bank (of which NIS 48 million were provided for in the third quarter). An additional amount of NIS 82 million was provided in respect of awards to employees, mainly in connection with early retirement plans. This expenditure is expected to contribute to the efficiency of the Bank in the future.

The increasing trend related to the capital attributed to the shareholders of the Bank continues, and amounted to NIS 8,096 million, growing by 4.4% in comparison to that at the end of 2017.

The ratio of the Tier I equity capital reached 10.39% and the comprehensive capital ratio reached 13.80%

Dividend Distribution to Shareholders

The Board of Directors of the Bank decided on a dividend distribution of NIS 100 million

Smadar Berber-Tsadik