BANK OF CHILE

6-K 1 a18-12149_16k.htm 6-K

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*FORM 6-K*

*SECURITIES AND EXCHANGE COMMISSION*

*Washington, D.C. 20549*

*Report of Foreign Private Issuer*

*Pursuant to Rule 13a-16 or 15d-16*

*of the Securities Exchange Act of 1934*

*For the month of April, 2018*

*Commission File Number 001-15266*

*BANK OF CHILE*

(Translation of registrants name into English)

*Paseo Ahumada 251 Santiago, Chile* (Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No x

If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-

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BANCO DE CHILE REPORT ON FORM 6-K

Attached Banco de Chiles Consolidated Financial Statements with notes as of March 31, 2018.

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●
●
BANCO DE CHILE AND SUBSIDIARIES
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
For the periods ended as of
March 31, 2018 and 2017 and
December 31, 2017.

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*BANCO DE CHILE AND SUBSIDIARIES*

(Free translation of interim consolidated financial statements originally issued in Spanish)

*INDEX*

I. Interim Consolidated Statements of Financial Position

II. Interim Consolidated Statements of Income

III. Interim Consolidated Statements of Other Comprehensive Income

IV. Interim Consolidated Statements of Changes in Equity

V. Interim Consolidated Statements of Cash Flows

VI. Notes to the Interim Consolidated Financial Statements

MCh$	=	Millions of Chilean pesos
ThUS$	=	Thousands of U.S. dollars
UF or CLF	=	Unidad de Fomento
		(The UF is an inflation-indexed, Chilean peso denominated monetary unit set daily in advance on the basis of the previous months inflation rate).
Ch$ or CLP	=	Chilean pesos
US$ or USD	=	U.S. dollar
JPY	=	Japanese yen
EUR	=	Euro
HKD	=	Hong Kong dollar
CHF	=	Swiss Franc
IFRS	=	International Financial Reporting Standards
IAS	=	International Accounting Standards
RAN	=	Compilation of Standards of the Chilean
		Superintendency of Banks (SBIF)
IFRIC	=	International Financial Reporting Interpretations
		Committee
SIC	=	Standards Interpretation Committee

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*BANCO DE CHILE AND SUBSIDIARIES*

*INDEX*

Interim Consolidated Statements of Income		Page — 2
Interim Consolidated Statements of Other Comprehensive Income		3
Interim Consolidated Statement of Changes in Equity		4
Interim Consolidated Statements of Cash Flows		5
1.	Company information:	6
2.	Legal regulations, basis of preparation and other information:	7
3.	New Accounting Pronouncements:	9
4.	Changes in Accounting policies and Disclosures:	16
5.	Relevant Events:	17
6.	Business Segments:	18
7.	Cash and Cash Equivalents:	21
8.	Financial Assets Held-for-trading:	22
9.	Cash collateral on securities borrowed and reverse repurchase agreements:	23
10.	Derivative Instruments and Accounting Hedges:	25
11.	Loans and advances to Banks:	31
12.	Loans to Customers, net:	32
13.	Investment Securities:	38
14.	Investments in Other Companies:	40
15.	Intangible Assets:	42
16.	Property and equipment:	44
17.	Current Taxes and Deferred Taxes:	47
18.	Other Assets:	51
19.	Current accounts and Other Demand Deposits:	52
20.	Savings accounts and Time Deposits:	52
21.	Borrowings from Financial Institutions:	53
22.	Debt Issued:	54
23.	Other Financial Obligations:	57
24.	Provisions:	57
25.	Other Liabilities:	61
26.	Contingencies and Commitments:	62
27.	Equity:	67
28.	Interest Revenue and Expenses:	71
29.	Income and Expenses from Fees and Commissions:	73
30.	Net Financial Operating Income:	74
31.	Foreign Exchange Transactions, Net:	74
32.	Provisions for Loan Losses:	75
33.	Personnel Expenses:	76
34.	Administrative Expenses:	77
35.	Depreciation, Amortization and Impairment:	78
36.	Other Operating Income:	79
37.	Other Operating Expenses:	80
38.	Related Party Transactions:	81
39.	Fair Value of Financial Assets and Liabilities:	87
40.	Maturity of Assets and Liabilities:	100
41.	Subsequent Events:	102

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*BANCO DE CHILE AND SUBSIDIARIES*

*INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION*

For the periods ended March 31, 2018 and December 31, 2017

(Free translation of interim financial statements originally issued in Spanish)

( Expressed in million of Chilean pesos)

	Notes	March — 2018		December — 2017
		MCh$		MCh$
ASSETS
Cash and due from banks	7	920,445		1,057,393
Transactions in the course of collection	7	741,774		521,809
Financial assets held-for-trading	8	1,586,858		1,616,647
Cash collateral on securities borrowed and reverse repurchase agreements	9	119,114		91,641
Derivative instruments	10	1,229,401		1,247,829
Loans and advances to banks	11	788,477		759,702
Loans to customers, net	12	25,295,029		24,881,353
Financial assets available-for-sale	13	1,420,340		1,516,063
Financial assets held-to-maturity	13
Investments in other companies	14	38,974		38,041
Intangible assets	15	41,766		39,045
Property and equipment	16	212,159		216,259
Current tax assets	17	37,907		23,032
Deferred tax assets	17	265,571		267,400
Other assets	18	545,926		547,974
TOTAL ASSETS		33,243,741		32,824,188
LIABILITIES
Current accounts and other demand deposits	19	8,800,358		8,915,706
Transactions in the course of payment	7	467,064		295,712
Cash collateral on securities lent and repurchase agreements	9	260,162		195,392
Savings accounts and time deposits	20	10,371,047		10,067,778
Derivative instruments	10	1,389,117		1,414,237
Borrowings from financial institutions	21	1,012,954		1,195,028
Debt issued	22	6,911,859		6,488,975
Other financial obligations	23	150,676		137,163
Current tax liabilities	17	4,002		3,453
Deferred tax liabilities	17	44
Provisions	24	430,793		695,868
Other liabilities	25	342,650		309,161
TOTAL LIABILITIES		30,140,726		29,718,473
EQUITY	27
Attributable to Banks Owners:
Capital		2,418,833		2,271,401
Reserves		617,689		563,188
Other comprehensive income		(19,706	)	(8,040	)
Retained earnings:
Retained earnings from previous years		16,060		16,060
Income for the period		142,651		576,012
Less:
Provision for minimum dividends		(72,513	)	(312,907	)
Subtotal		3,103,014		3,105,714
Non-controlling interests		1		1
TOTAL EQUITY		3,103,015		3,105,715
TOTAL LIABILITIES AND EQUITY		33,243,741		32,824,188

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

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*BANCO DE CHILE AND SUBSIDIARIES*

*INTERIM CONSOLIDATED STATEMENTS OF INCOME*

For the three-month ended March 31, 2018 and 2017

(Free translation of interim financial statements originally issued in Spanish)

( Expressed in million of Chilean pesos)

	Notes	March — 2018		March — 2017
		MCh$		MCh$
Interest revenue	28	469,878		456,767
Interest expense	28	(153,361	)	(153,227	)
Net interest income		316,517		303,540
Income from fees and commissions	29	122,505		113,812
Expenses from fees and commissions	29	(33,344	)	(26,591	)
Net fees and commission income		89,161		87,221
Net financial operating income	30	2,106		11,734
Foreign exchange transactions, net	31	25,483		13,888
Other operating income	36	11,652		6,336
Total operating revenues		444,919		422,719
Provisions for loan losses	32	(70,945	)	(63,115	)
OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES		373,974		359,604
Personnel expenses	33	(107,766	)	(100,918	)
Administrative expenses	34	(79,348	)	(79,206	)
Depreciation and amortization	35	(9,171	)	(8,559	)
Impairment	35	(11	)	(1	)
Other operating expenses	37	(7,951	)	(3,509	)
TOTAL OPERATING EXPENSES		(204,247	)	(192,193	)
NET OPERATING INCOME		169,727		167,411
Income attributable to associates	14	1,157		991
Income before income tax		170,884		168,402
Income tax	17	(28,233	)	(28,409	)
NET INCOME FOR THE PERIOD		142,651		139,993
Attributable to:
Banks Owners	27	142,651		139,993
Non-controlling interests
		Ch$		Ch$
Net income per share attributable to Banks Owners:
Basic net income per share	27	1.43		1.41
Diluted net income per share	27	1.43		1.41

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

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*BANCO DE CHILE AND SUBSIDIARIES*

*INTERIM CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME*

For the three-month ended March 31, 2018 and 2017

(Free translation of interim financial statements originally issued in Spanish)

( Expressed in million of Chilean pesos)

	Notes	March — 2018		March — 2017
		MCh$		MCh$
NET INCOME FOR THE PERIOD		142,651		139,993
OTHER COMPREHENSIVE INCOME THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Net gains (losses) on available-for-sale instruments valuation	13	(1,206	)	3,768
Net gains (losses) on derivatives held as cash flow hedges	10	(15,249	)	(4,855	)
Subtotal Other comprehensive income before income taxes		(16,455	)	(1,087	)
Income tax relating to the components of other comprehensive income that are reclassified in income for the period		4,789		279
Total other comprehensive income items that will be reclassified subsequently to profit or loss		(11,666	)	(808	)
OTHER COMPREHENSIVE INCOME THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Adjustment for defined benefit plans
Subtotal other comprehensive income before income taxes
Income tax relating to the components of other comprehensive income that will not be reclassified to income for the period
Total other comprehensive income items that will not be reclassified subsequently to profit or loss
CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD		130,985		139,185
Attributable to:
Banks Owners		130,985		139,185
Non-controlling interests

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

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*BANCO DE CHILE AND SUBSIDIARIES*

*INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY*

For the three-month ended March 31, 2018 and 2017

(Free translation of interim financial statements originally issued in Spanish)

( Expressed in millions of Chilean pesos)

	Notes	Paid-in Capital	Reserves — Other reserves	Reserves from earnings	Other comprehensive income — Unrealized gains (losses) on available- for-sale		Derivatives cash flow hedge		Income Tax		Retained earnings — Retained earnings from previous periods	Income (losses) for the period		Provision for minimum dividends		Attributable to equity holders of the parent		Non- controlling interest	Total equity
		MCh$	MCh$	MCh$	MCh$		MCh$				MCh$	MCh$		MCh$		MCh$		MCh$	MCh$
Balances as of December 31, 2016		2,138,047	31,934	454,274	847		(27,530	)	6,762		16,060	552,249		(285,233	)	2,887,410		1	2,887,411
Capitalization of retained earnings		133,354										(133,354	)
Retention (release) of profits according to bylaws	27			76,861								(76,861	)
Dividends distributions and paid	27											(342,034	)	285,233		(56,801	)		(56,801	)
Other comprehensive income:
Derivatives cash flow hedge, net	27						(4,855	)	1,238							(3,617	)		(3,617	)
Valuation adjustment on available-for-sale instruments (net)	27				3,768				(959	)						2,809			2,809
Income for the period 2017												139,993				139,993			139,993
Provision for minimum dividends														(73,529	)	(73,529	)		(73,529	)
Balances as of March 31, 2017		2,271,401	31,934	531,135	4,615		(32,385	)	7,041		16,060	139,993		(73,529	)	2,896,265		1	2,896,266
Defined benefit plans adjustment			119													119			119
Other comprehensive income:
Derivatives cash flow hedge, net							19,834		(5.058	)						14,776			14,776
Valuation adjustment on available-for-sale instruments (net)					(2,764	)			677							(2,087	)		(2,087	)
Income for the period 2017												436,019				436,019			436,019
Provision for minimum dividends														(239,378	)	(239,378	)		(239,378	)
Balances as of December 31, 2017		2,271,401	32,053	531,135	1,851		(12,551	)	2,660		16,060	576,012		(312,907	)	3,105,714		1	3,105,715
Capitalization of retained earnings		147,432										(147,432	)
Retention (release) of profits according to bylaws	27			54,501								(54,501	)
Dividends distributions and paid	27											(374,079	)	312,907		(61,172	)		(61,172	)
Other comprehensive income:
Derivatives cash flow hedge, net	27						(15,249	)	4,117							(11,132	)		(11,132	)
Valuation adjustment on available-for-sale instruments (net)	27				(1,206	)			672							(534	)		(534	)
Income for the period 2018												142,651				142,651			142,651
Provision for minimum dividends	27													(72,513	)	(72,513	)		(72,513	)
Balances as of March 31, 2018		2,418,833	32,053	585,636	645		(27,800	)	7,449		16,060	142,651		(72,513	)	3,103,014		1	3,103,015

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

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*BANCO DE CHILE AND SUBSIDIARIES*

*INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS*

For the three-month ended March 31, 2018 and 2017

(Free translation of interim financial statements originally issued in Spanish)

( Expressed in million of Chilean pesos)

	Notes	March — 2018		March — 2017
		MCh$		MCh$
OPERATING ACTIVITIES:
Net income for the period		142,651		139,993
Items that do not represent cash flows:
Depreciation and amortization	35	9,171		8,559
Impairment	35	11		1
Provision for loans and accounts receivable from customers and owed by banks	32	82,902		70,947
Provision of contingent loans	32	630		2,803
Fair value adjustment of financial assets held-for-trading		(1,289	)	(2,758	)
Changes in assets and liabilities by deferred taxes	17	2,545		12,063
(Gain) loss attributable to investments in companies with significant influence, net	14	(1,144	)	(977	)
(Gain) loss from sales of assets received in lieu of payment,net	36	(1,537	)	(475	)
(Gain) loss on sales of property and equipment, net	36	(3,536	)	(76	)
Charge-offs of assets received in lieu of payment	37	776		664
Other charges (credits) to income that do not represent cash flows		2,275		247
Change in the exchange rate of assets and liabilities		8,065		13,071
Net interest variation, readjustment and accrued fees on assets and liabilities		24,575		21,970
Changes in assets and liabilities that affect operating cash flows:
(Increase) decrease in loans and advances to banks, net		(28,609	)	161,270
(Increase) decrease in loans to customers		(484,553	)	(107,899	)
(Increase) decrease in financial assets held-for-trading, net		129,256		(74,248	)
(Increase) decrease in other assets and liabilities		(18,549	)	(5,590	)
Increase (decrease) in current account and other demand deposits		(115,279	)	1,068
Increase (decrease) in payables from repurchase agreements and security lending		55,324		18,769
Increase (decrease) in savings accounts and time deposits		297,479		(139,178	)
Sale of assets received in lieu of payment or adjudicated		5,103		1,554
Total cash flows from operating activities		106,267		121,778
INVESTING ACTIVITIES:
(Increase) decrease in financial assets available-for-sale, net		94,170		(105,582	)
Purchases of property and equipment	16	(2,522	)	(4,566	)
Sales of property and equipment		67		76
Acquisition of intangible assets	15	(5,187	)	(2,816	)
Acquisition of investments in companies	14
Dividends received from investments in companies		13		14
Total cash flows from investing activities		86,541		(112,874	)
FINANCING ACTIVITIES:
Redemption of letters of credit		(1,255	)	(1,303	)
Issuance of bonds	22	557,947		603,451
Redemption of bonds		(169,570	)	(150,579	)
Dividends paid	27	(374,079	)	(342,034	)
Increase (decrease) in borrowings from foreign financial institutions		(182,188	)	(10,286	)
Increase (decrease) in other financial obligations		14,372		(35,636	)
Increase (decrease) in other obligations with Central Bank of Chile		(1	)	(1	)
Other long-term borrowings		15		35,916
Payment of other long-term borrowings		(847	)	(36,746	)
Total cash flows from financing activities		(155,606	)	62,782
TOTAL NET POSITIVE (NEGATIVE) CASH FLOWS FOR THE PERIOD		37,202		71,686
Effect of exchange rate changes		(8,065	)	(13,071	)
Cash and cash equivalents at beginning of period		2,079,398		2,096,980
Cash and cash equivalents at end of period	7	2,108,535		2,155,595

	March — 2018		March — 2017
	MCh$		MCh$
Operational Cash flow interest:
Interest received	452,877		455,383
Interest paid	(111,785	)	(129,873	)

The accompanying notes 1 to 41 are an integral part of these interim consolidated financial statements

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*BANCO DE CHILE AND SUBSIDIARIES*

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS*

(Free translation of interim financial statements originally issued in Spanish)

*1. Company information:*

Banco de Chile is authorized to operate as a commercial bank since September 17, 1996, being, in conformity with the stipulations of article 25 of Law No. 19,396, the legal continuation of Banco de Chile resulting from the merger of the Banco Nacional de Chile, Banco Agrícola and Banco de Valparaiso, which was constituted by public deed dated October 28, 1893, granted before the Notary Public of Santiago, Mr. Eduardo Reyes Lavalle, authorized by Supreme Decree of November 28, 1893.

Banco de Chile (or the Bank) is a Corporation organized under the laws of the Republic of Chile, regulated by the Superintendency of Banks and Financial Institutions (SBIF or Superintendency). Since 2001, it is subject to the supervision of the Securities and Exchange Commission of the United States of America (SEC), in consideration of the fact that the Bank is registered on the New York Stock Exchange (NYSE), through a program of American Depositary Receipt (ADR).

Banco de Chile offers a broad range of banking services to its customers, ranging from individuals to large corporations. The services are managed in the areas of corporations and large companies, medium and small companies and personal and consumer banking. Additionally, the Bank offers international as well as treasury banking services, in addition to those offered by subsidiaries that include securities brokerage, mutual fund and investment management, insurance brokerage, financial advisory services and securitization.

Banco de Chiles legal address is Paseo Ahumada 251, Santiago, Chile and its website is www.bancochile.cl.

The Interim Consolidated Financial Statements of Banco de Chile, for the period ended March 31, 2018 were approved by the Directors on April 26, 2018.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*2. Legal regulations, basis of preparation and other information:*

*(a) Legal regulations:*

The General Banking Law in its Article No. 15 empowers the Chilean Superintendency of Banks and Financial Institutions (SBIF) to issue accounting standards of general application for entities it supervises. The Corporations Law, in turn, requires following the generally accepted accounting principles.

Based on the aforementioned laws, banks should use the criteria provided by the Superintendency in accordance with the Compendium of Accounting Standards (Compendium), and any matter not addressed therein, as long as it does not contradict its instructions, should adhere to generally accepted accounting principles in technical standards issued by the Chilean Association of Accountants, that coincide with international accounting standards and international financial reporting standards agreed upon by the International Accounting Standards Board (IASB). Should there be discrepancies between these generally accepted accounting principles and the accounting criteria issued by the SBIF, the latter shall prevail.

*(b) Basis of preparation:*

(b.1) These Interim Consolidated Financial Statements are presented according to Chapter C-2 of the Compendium of Accounting Standards, issued by the Superintendency of Banks and Financial Institutions (SBIF).

(b.2) The following table details the entities in which the Bank has control and are part of this consolidated financial statements:

RUT	Subsidiaries	Country	Functional — Currency	Interest Owned — Direct		Indirect		Total
				March	December	March	December	March	December
				2018	2017	2018	2017	2018	2017
				%	%	%	%	%	%
96,767,630-6	Banchile Administradora General de Fondos S.A.	Chile	Ch$	99.98	99.98	0.02	0.02	100.00	100.00
96,543,250-7	Banchile Asesoría Financiera S.A.	Chile	Ch$	99.96	99.96			99.96	99.96
77,191,070-K	Banchile Corredores de Seguros Ltda.	Chile	Ch$	99.83	99.83	0.17	0.17	100.00	100.00
96,571,220-8	Banchile Corredores de Bolsa S.A.	Chile	Ch$	99.70	99.70	0.30	0.30	100.00	100.00
96,932,010-K	Banchile Securitizadora S.A.	Chile	Ch$	99.01	99.01	0.99	0.99	100.00	100.00
96,645,790-2	Socofin S.A.	Chile	Ch$	99.00	99.00	1.00	1.00	100.00	100.00

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*2. Legal regulations, basis of preparation and other information, continued:*

*(c) Use of estimates and judgments:*

Preparing the Interim Consolidated Financial Statements requires the Banks Management to make judgments, estimations and assumptions that affect the application of accounting policies and the valuation of assets, liabilities, income and expenses presented. Actual results could differ from these estimated amounts. These estimates refer to:

Useful life of intangible and property and equipment (Notes No.15 and No.16);
Income taxes and deferred taxes (Note No. 17);
Provisions (Note No. 24);
Contingencies and Commitments (Note No. 26);
Provision for loan losses (Notes No. 11. No. 12 and No. 32);
Fair value of financial assets and liabilities (Note No. 39).

Estimates and relevant assumptions are regularly reviewed by the management of the Bank, according to quantify certain assets, liabilities, gains, loss and commitments. Estimates reviewed are registered in income in the period that the estimate is reviewed.

During the period ended March 31, 2018 there have been no significant changes in the estimates made.

*(d) Seasonality or Cyclical Character of the Transactions of the Intermediate Period:*

Given the activities to which the Bank and its subsidiaries are engaged, the transactions of the Bank do not have a cyclical or seasonal nature. For this reason, specific breakdowns in these notes to the Interim Consolidated Financial Statements for the three-month period ended March 31, 2018 are not included.

*(e) Relative Importance:*

In determining the information to be disclosed on the different items of the financial statements or other matters, the relative importance in relation to the financial statements of the period has been taken into account.

*(f) Reclassifications:*

There have not been significant reclassifications at the end of this period 2018.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements:*

*3.1 Standards approved and/or modified by the International Accounting Standards Board (IASB) and by the Superintendency of Banks and Financial Institutions (SBIF):*

*3.1.1 Standards and interpretations that have been adopted in these Consolidated Financial Statements.*

As of the date of issuance of these Consolidated Financial Statements, the new accounting pronouncements issued by both the International Accounting Standards Board and the Superintendency of Bank and Financial Institutions, which have been adopted by the Bank, are detailed below:

*1. Accounting standards issued by IASB.*

*IFRS 9 Financial Instruments.*

On July 24, 2014, the IASB concluded its improvement project on the accounting for financial instruments with the publication of IFRS 9 Financial Instruments.

This standard includes new requirements based on principles for the classification and measurement, introduces a prospective model of expected credit losses on impairment accounting and changes in hedge accounting.

The designation of the classification, determining how financial assets and liabilities are accounted for in the financial statements and, in particular, how they are measured. IFRS 9 introduces a new approach to the classification of financial assets, based on the entitys business model for the management of financial assets and the characteristics of contractual flows.

In terms of impairment, the standard establishes a single model that will be applied to all financial instruments, thus eliminating a source of complexity associated with previous accounting requirements, which will require a timely recognition of expected credit losses.

IFRS 9 introduces flexibility to the regulatory requirements for hedge accounting, and also new alternatives of strategies to be use; the new amendments represent a substantial overhaul of hedge accounting, which will allow aligning the accounting treatment with the risk management activities, enabling entities to better reflect these activities in their financial statements.

In addition, as a result of these changes, users of the financial statements will be provided with better information on risk management and the effect of hedge accounting in the financial statements.

This standard also establishes that the change in fair value that corresponds to own credit risk will be recorded in Other Comprehensive Income, thus reducing any eventual volatility that could arise from entitys income as a result of its recognition. Earlier application of this improvement is permitted, prior to any other requirement of IFRS 9.

The mandatory date of application is from *January 1, 2018*** . However, for the purposes of these financial statements, this regulation has not yet been approved by the Superintendency of Banks and Financial Institutions, an event that is required for its local application.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*IFRS 9 Financial Instruments, continued:*

Banco de Chile as securities issuer of Equity Securities listed on the New York Stock Exchange (NYSE), and in order to comply with the new standards required for the preparation and presentation of the Annual Report 20F to the Securities and Exchange Commission (SEC), during the year 2017 the Bank and its subsidiaries initiated technological developments and other solutions to address the needs generated by the application of the new accounting pronouncement IFRS 9, such as the implementation of models and procedures related to the Expected Credit Loss Model (ECL), the SPPI Test (Only Payment of Principal and Interest) and the evaluation of the Business Model.

As of December 31, 2017 the Bank and subsidiaries have been able to estimate the transitioning impact on ECL for certain portfolios of financial assets and contingent commitments affected by the standard. These portfolios are comprised of wholesale and retail financial assets which represent 71.5% of the whole portfolio of financial assets to be impacted by the ECL model as of December 31, 2017.

With relation to the portfolios mentioned above, the partial estimate of the impact of the transition from IAS 39 to IFRS 9 regarding ECL as of January 1, 2018, is disclosed in Note No. 43 of the Financial Statement included in the Report 20-F of the year 2017.

*IFRS 15 Revenue from Contracts with Customers.*

In May 2014 was issued IFRS 15, which it has like purpose established the principles that will apply an entity to present useful information to users of financial statements about the nature, amount, opportunity and uncertainty of the income for ordinaries activities and cash flows that it is related to a contract with a client.

This new standard replace the following current standard and interpretations: IAS 18 Revenue, IAS 11 Construction contracts, IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements for the Construction of Real State, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue: Barter Transactions involving.

The new model will apply to all contracts with customers, except those that are inside to the scope of the others IFRS, such as leases, insurance contracts and financial instruments.

On April 12, 2016, IASB issued amendments to IFRS 15, clarifying requirements and providing a temporary relief to companies that are implementing the new standard. In short the amendments clarify how to:

Identify a performance obligation (the promise to transfer a good or service to a customer) in a contract;
Determining whether a company is the principal (the provider of a good or service) or an agent (the organization responsible for the good or service provided); and
Determine whether the product of a license must be recognized at a point in time or over time.

The date of application of this standard is from *January 1, 2018*** , which did not generate equity effects in the Bank and its subsidiaries.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*IAS 28 Investments in associates and joint ventures.*

In December 2016, the IASB issued the Annual Improvements to IFRS Cycle 2014-2016, which included the amendment to IAS 28. This amended to clarify that a venture capital organization or a mutual fund, investment trust and similar entities may choose to account for their investments in joint ventures and associates at fair value or using the equity method. The amendment also makes it clear that the method chosen for each investment should be made at the initial time.

This modification had no impact on the Banco de Chile and its subsidiaries.

*IAS 40 Investment Property.*

IAS 40 requires that an asset be transferred to (or from), investment property only when there is a change in its use.

The amendment, issued in December 2016, clarifies that a change in managements intentions for the use of a property does not provide, in isolation, evidence of a change in its use. An entity must, therefore, have taken observable actions to support such a change.

This modification had no impact on the Banco de Chile and its subsidiaries.

*IFRIC 22 Foreign Currency Transactions and Advance Consideration.*

In December 2016, the IASB issued Interpretation IFRIC 22 Foreign Currency Transactions and Advance Consideration.

This interpretation applies to a foreign currency transaction when an entity recognizes a non-financial asset or non-financial liability arising from the payment or collection of an early consideration before the entity recognizes the related asset, expense or income.

The IFRIC specifies that at the date of the transaction for the purpose of determining the exchange rate to be used in the initial recognition of the related asset, expense or income, it is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability that Arising from the payment or collection of the anticipated consideration. That is, the related income, expenses or assets should not be re-evaluated with changes in the exchange rates between the date of the initial recognition of the early consideration and the date of recognition of the transaction to which said consideration relates.

This interpretation had no impact on the Banco de Chile and its subsidiaries.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*3.1.2 New standards and interpretations that have been issued but its date of application have not yet come into force:*

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by the International Accounting Standards Board and Superintendency of Banks and Financial Institutions that are not yet effective as of March 31, 2018, are detailed below:

*1. Accounting standards issued by International Accounting Standards Board .*

*IFRS 16 Leases.*

On January 2016 was issued IFRS 16, which has as purpose to establish principles to recognize, measurement, presentation and disclosure of leases contracts, for both lessee and lessor.

This new rule does not differ significantly from IAS 17 Leases that precedes it, related to the accounting treatment for the lessor. However, related to the lessee, the new rule requires the recognition of assets and liabilities for most lease contracts.

The date of application of this new standard is from *January 1, 2019 .* Early adoption permitted but only if IFRS 15 - Revenue from contracts with customers is also applied.

This standard will not have a material impact on the Banco de Chile and its subsidiaries.

*IAS 28 Investments in Associates and Join Venture and IFRS 10 - Consolidated Financial Statements.*

In September 2014, the IASB issued this amendment, which clarifies the scope of recognized gains and losses in a transaction involving an associate or joint venture, and this depends on whether the asset sold or contribution is a business. Therefore, IASB concluded that all of the profit or loss should be recognized against loss of control of a business. Likewise, gains or losses resulting from the sale or contribution of a subsidiary that is not a business (definition of IFRS 3) to an associate or joint venture should be recognized only to the extent of unrelated interests in the associate or joint venture.

During December 2015 the IASB agreed that the amendments should apply in the future, allowing its immediate application.

This amendment will not impact on the consolidated financial statements of Banco de Chile and its subsidiaries.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*IFRIC 23 Uncertainty over Income Tax Treatments.*

In June 2017, the IASB published IFRIC 23, which clarifies the application of the recognition and measurement criteria required by IAS 12 Income Taxes when there is uncertainty about tax treatments.

The date of application of this interpretation is from *January 1, 2019*** .

The Bank and its subsidiaries are evaluating the impact of this amendment.

*IAS 28 Investments in associates and joint ventures and IFRS 9 Financial instruments.*

In October 2017, the IASB published the amendments to IFRS 9 Financial Instruments and IAS 28 Investments in Associated Entities and Joint Ventures.

The amendments to IFRS 9 allow entities to measure financial assets, prepaid with negative compensation at amortized cost or fair value, through other comprehensive income if a specific condition is met, instead of at fair value with effect on results.

Regarding IAS 28, the amendments clarify that entities must account for long-term results in an associate or joint venture, to which the equity method is not applied, using IFRS 9.

The IASB also released an example that illustrates how companies should apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associated entity or joint venture.

The date of application of these amendments is *January 1, 2019*** .

This modification has no impact on the Consolidated Financial Statements of Banco de Chile and its subsidiaries.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*Annual improvements IFRS*

In December 2017, the IASB issued the Annual Improvements to IFRS Cycle 2015-2017, which includes amendments to the following regulations:

*- IFRS 3 Business Combinations. Interests previously held in a joint operation.*

The amendment provides additional guidance for applying the procurement method to particular types of business combinations.

The amendment states that when a party to a joint arrangement obtains control of a business, which is a joint arrangement and had rights over the assets and liabilities for the liabilities related to this joint arrangement, immediately before the acquisition date, the transaction it is a business combination achieved in stages.

Therefore, the acquirer will apply the requirements for a business combination achieved in stages, including re-measuring its previously held interest in the joint operation. By doing so, the acquirer will re-measure its total value that it previously had in the joint operation.

The date of application of these amendments is *January 1, 2019*** . Early adoption is permitted.

The Bank and its subsidiaries have no impact on the consolidated financial statement as a result from this amendment.

*- IFRS 11 Joint Agreements.*

The amendments to IFRS 11 relate to the accounting for acquisitions of interests in Joint Agreements.

The amendment establishes that a party that participates, but does not have control, in a joint agreement, can obtain control of the joint agreement. Given the above, the activity of the joint agreement would constitute a Business Combination as defined in IFRS 3, in such cases, the interests previously held in the joint agreement are not remeasured.

The date of application of these amendments is *January 1, 2019*** . Early adoption is permitted.

The Bank and its subsidiaries have no impact on the consolidated financial statement as a result from this amendment.

*- IAS 23 Costs for loans. Costs for loans that can be capitalized.*

The amendment to the standard is intended to clarify that, when an asset is available for use or sale, an entity will treat any outstanding loan taken specifically to obtain that asset, as part of the funds it has taken as current loans.

The date of application of these amendments is *January 1, 2019*** . Early adoption is permitted.

This modification has no impact on the Consolidated Financial Statements of Banco de Chile and its subsidiaries.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*- Conceptual Framework.*

On March 29, 2018, the IASB issued a Reviewed Conceptual Framework. Changes to the Conceptual Framework may affect the application of IFRS when no rule applies to a particular transaction or event.

The Conceptual Framework introduces mainly the following improvements:

It incorporates some new concepts of measurement, presentation and disclosure and derecognition of assets and liabilities in the Financial Statements.
Provides updated definitions of assets, liabilities and includes criteria for the recognition of assets and liabilities in the financial statements.
Clarifies some important concepts such as background on form, prudential criteria and measurement of uncertainty.

The Conceptual Framework enters into force for periods beginning on *January 1, 2020*** .

The Bank and its subsidiaries are evaluating the impact of this amendment.

*2. Accounting standards issued by the Superintendency of Banks and Financial Institutions*

Standards in consultation on Provisions for Credit Risk

On January 11, 2018, the SBIF published for consultation, amendments to the regulations contained in Chapter B-1 Provisions for Credit Risk of the Compendium of Accounting Standards. These modifications are related to the use of standard methods for calculating provisions of the commercial portfolio evaluated as of January 1, 2019. To date, the provisions for this type of portfolio are calculated using internal methods.

Without limiting the foregoing, banks must recognize minimum provisions in accordance with standard methodologies. The use of this minimum basis for provisions, in no case exempt financial institutions from their responsibility to have their own methodologies to determine provisions that are sufficient to protect the credit risk of each of their portfolios, and therefore must have both methods The constitution of provisions will be made considering the higher value obtained between the respective standard method and the internal method.

Notwithstanding the foregoing, the Superintendency may allow the establishment of provisions of the commercial group analysis portfolio based on the results of the application of internal models, provided that these have been duly approved within the normal process of reviewing the SBIF.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*3. New Accounting Pronouncements, continued:*

*- Circular No. 3,634*

The SBIF through circular No. 3,634 dated March 9, 2018, introduces modifications to the weighted assets by risk, credit equivalent and credit limits applicable to derivative instruments cleared and settled by a Central Counterparty Entity (ECC).

The main modifications are:

An intermediate category is introduced to classify the credit equivalent of the derivative instruments settled and liquidated in a CCP, when these types of entities are irrevocably constituted in creditors and debtors of the rights and obligations arising from such operations, being legally binding for the parties the obligations resulting from such acts. The risk weight for these assets will be equal to 2%.
For purposes of determining the credit equivalent, which is defined in chapter 12-1 of the RAN of the SBIF, which corresponds to the fair value of the derivative instrument, plus an additional amount that is obtained by applying an additional factor to the additional conversion amount that depends on the underlying and the additional term of the derivative. The SBIF reclassified from the category Contracts on foreign currencies to the category interest rate contracts to derivative instruments whose underlying is the Development Unit.
Modifications to Chapter 12-3 are introduced, given that the SBIF considers that operations on derivative instruments negotiated between banks incorporated in Chile, including branches of foreign banks, are subject to the interbank credit limit, even though such transactions are subsequently compensate and settle in a CCP.

The new dispositions must be implemented no later than June 30, 2018.

*4. Changes in Accounting policies and Disclosures:*

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those used in the preparation of the Banks consolidated annual financial statements for the year ended December 31, 2017, except for the adoption of new regulations in force at 1 January 2018. The Bank has not adopted in advance any standard, interpretation or amendment that has been issued but is not yet effective.

The Bank adopted, for the first time, IFRS 15 Revenue from ordinary contracts with customers (See Note No. 3), there being no capital effects resulting from its application, therefore, the information disclosed as of December 31, 2017 it has not been restated in these financial statements.

During the period ended March 31, 2018, there have been no others accounting changes that may significantly affect these interim consolidated financial statements.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*5. Relevant Events:*

(a) On January 22, 2018, the Board of the subsidiary Banchile Securitizadora S.A., agreed to appoint Claudia Marcela Herrera García as the new Director of the company, until the next Ordinary Shareholders Meeting.

(b) On January 25, 2018 in the Ordinary Session No. BCH 2,874, the Board of Directors of Banco de Chile agreed to convene an Ordinary Meeting of Shareholders for March 22, 2018, with the purpose of proposing, among other matters, the distribution of dividend No. 206 of Ch$3.14655951692 to each of the 99,444,132,192 shares, payable with charge to the distributable net income for the year ended December 31, 2017, corresponding to 60% of such net profits.

In addition, the Board of Directors agreed to convene an Extraordinary Shareholders Meeting to be held on the same date, in order to propose, among other matters, the capitalization of 40% of the Banks net distributable income pertaining to the 2017 financial year, through the issuance of fully paid-in shares, without nominal value, determined at a value of Ch$93.73 per share, which will be distributed among the shareholders at the rate of 0.02238030880 shares per share and adopting the necessary agreements subject to the exercise of the options provided under Article 31 of Law No. 19,396.

(c) On January 25, 2018, Banco de Chile informed that in the Ordinary Session, the Board of Directors accepted the resignation presented by the Principal and Vice-Chairman, Mrs. Jane Fraser. Likewise, the Board of Directors appointed Mr. Álvaro Jaramillo Escallon as its Regular Director until his next Ordinary Shareholders Meeting. Additionally, in the same session, Mr. Jaramillo was appointed Vice Chairman of the Board.

(d) At the Ordinary Shareholders Meeting, held on March 22, 2018, our shareholders agreed to the dividend No 206, and its distribution in the amount of Ch$3.14655951692 per Banco de Chile share, to be charged to net distributable income of Banco de Chile for 2017. Moreover, at the Extraordinary Shareholders Meeting held on the same date, our shareholders agreed to a stock dividend in connection with the capitalization of 40% of our distributable net income obtained during the fiscal year 2017, through the issuance of fully paid-in shares, of no par value, with a value of Ch$93.73 per share.

Additionally, the shareholders appointed of Mr. Álvaro Jaramillo Escallon as its Director until the next renewal of the Board of Directors.

(e) The Central Bank of Chile communicated to Banco de Chile that the Board of such institution (Consejo), in Special Session No 2140E, held on March 26, 2018, considered the resolutions adopted by the shareholders meetings of Banco de Chile on March 22, 2018, regarding distribution of dividends and the increase of capital through the issuance of fully paid-in shares corresponding to the 40% of the net income obtained during the fiscal year ending on December 31, 2017, the Council of the Central Bank of Chile resolved to take the option that the entirety of its corresponding surplus, including the part of the profits proportional to the agreed capitalization, be paid to the Central Bank of Chile in cash currency, according to letter b) of article 31 of law No 19.396, regarding a modification of the way of payment of the subordinated obligation and other applicable legislation.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*6. Business Segments:*

For management purposes, the Bank is organized into four segments, which are defined based on the types of products and services offered, and the type of client in which focuses as described below:

Retail:	This segment focuses on individuals and small and medium-sized companies (SMEs) with annual sales up to UF 70,000, where the product offering focuses primarily on consumer loans, commercial loans, checking accounts, credit cards, credit lines and mortgage loans.
Wholesale:	This segment focused on corporate clients and large companies, whose annual revenue exceed UF 70,000, where the product offering focuses primarily on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases.
Treasury:	This segment includes the associated revenues to the management of the investment portfolio and the business of financial transactions and currency trading.
	Transactions with customers carried out by the Treasury are reflected in the respective aforementioned segments. These products are highly transaction-focused and include foreign exchange transactions, derivatives and financial instruments in general.
Subsidiaries:	Corresponds to companies and corporations controlled by the Bank, though its management is related to the segments mentioned previously, the income is obtained individually by the respective subsidiary. The companies that comprise this segment are:
	Entity
	- Banchile Administradora General de Fondos S.A.
	- Banchile Asesoría Financiera S.A.
	- Banchile Corredores de Seguros Ltda.
	- Banchile Corredores de Bolsa S.A.
	- Banchile Securitizadora S.A.
	- Socofin S.A.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*6. Business Segments , continued:*

The financial information used to measure the performance of the Banks business segments is not comparable with similar information from other financial institutions because each institution relies on its own definitions. The accounting policies applied to the segments is the same as those described in the summary of accounting principles. The Bank obtains the majority of the results for: interest, indexation and commissions, provisions for loan losses and operating expenses. Management is mainly based on these concepts to evaluate the performance of the segments and make decisions about the goals and allocations of resources of each unit. Although the results of the segments reconcile with those of the Bank at the total level, this is not necessarily the case in terms of the different concepts, given that management is measured and controlled individually and not on a consolidated basis, applying the following criteria:

· The net interest margin of loans and deposits is obtained aggregating the net financial margins of each individual operation of credit and uptake made by the bank. For these purposes, the volume of each operation and its contribution margin are considered, which in turn corresponds to the difference between the effective rate of the customer and the internal transfer price established according to the term and currency of each operation.

· The capital and its financial impacts on outcome have been assigned to each segment based on the risk-weighted assets.

· Operational expenses are reflected at the level of the different functional areas of the Bank. The allocation of expenses from functional areas to business segments is done using different allocation criteria, at the level of the different concepts and expense items.

Taxes are managed at a corporate level and are not allocated to business segments.

For the periods ended March 31, 2018 and 2017, there was no income from transactions with a customer or counterparty that accounted for 10% or more of the Banks total revenues.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*6. Business Segments, continued:*

The following table presents the income by segment for the periods ended March, 2018 and 2017 for each of the segments defined above:

	Retail — March		March		Wholesale — March		March		Treasury — March		March		Subsidiaries — March		March		Subtotal — March		March		Consolidation adjustment — March		March		Total — March		March
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Net interest income	231,013		225,994		83,722		80,407		2,405		(2,019	)	(1,329	)	(1,425	)	315,811		302,957		706		583		316,517		303,540
Net commissions income (loss)	46,918		48,475		11,183		10,852		(1,028	)	(532	)	35,306		31,504		92,379		90,299		(3,218	)	(3,078	)	89,161		87,221
Other operating income	12,745		8,119		10,014		7,199		10,316		10,472		7,563		7,502		40,638		33,292		(1,397	)	(1,334	)	39,241		31,958
Total operating revenue	290,676		282,588		104,919		98,458		11,693		7,921		41,540		37,581		448,828		426,548		(3,909	)	(3,829	)	444,919		422,719
Provision for loan losses	(65,903	)	(67,658	)	(5,127	)	4,540						85		3		(70,945	)	(63,115	)					(70,945	)	(63,115	)
Depreciation and amortization	(7,201	)	(6,721	)	(1,202	)	(1,088	)	(23	)	(37	)	(745	)	(713	)	(9,171	)	(8,559	)					(9,171	)	(8,559	)
Other operating expenses	(134,096	)	(125,081	)	(37,913	)	(36,053	)	(1,308	)	(1,286	)	(25,668	)	(25,043	)	(198,985	)	(187,463	)	3,909		3,829		(195,076	)	(183,634	)
Income attributable to associates	943		798		180		168		15		14		19		11		1,157		991						1,157		991
Income before income taxes	84,419		83,926		60,857		66,025		10,377		6,612		15,231		11,839		170,884		168,402						170,884		168,402
Income taxes																									(28,233	)	(28,409	)
Income after income taxes																									142,651		139,993

The following table presents assets and liabilities of the periods ended March 31, 2018 and December 31, 2017 by each segment defined above

	Retail — March	December	Wholesale — March	December	Treasury — March	December	Subsidiaries — March	December	Subtotal — March	December	Consolidation adjustment — March		December		Total — March	December
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018		2017		2018	2017
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$		MCh$		MCh$	MCh$
Assets	16,538,096	16,099,926	10,834,453	10,558,278	4,977,907	5,469,829	867,986	637,860	33,218,442	32,765,893	(278,179	)	(232,137	)	32,940,263	32,533,756
Current and deferred taxes															303,478	290,432
Total assets															33,243,741	32,824,188
Liabilities	10,466,873	10,380,250	10,187,620	10,272,607	9,033,181	8,815,056	727,185	479,244	30,414,859	29,947,157	(278,179	)	(232,137	)	30,136,680	29,715,020
Current and deferred taxes															4,046	3,453
Total liabilities															30,140,726	29,718,473

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*7. Cash and Cash Equivalents:*

(a) The detail of the balances included under cash and cash equivalents and their reconciliation with the statement of cash flows at the end of each period are detailed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Cash and due from banks:
Cash (*)	546,531	522,869
Deposit in Chilean Central Bank (*)	139,164	162,421
Deposits in other domestic banks	9,306	9,922
Deposits abroad	225,444	362,181
Subtotal - Cash and due from banks	920,445	1,057,393
Net transactions in the course of collection	274,710	226,097
Highly liquid financial instruments (**)	818,512	719,069
Repurchase agreements	94,868	76,839
Total cash and cash equivalents	2,108,535	2,079,398

(*) Amounts in cash funds and in Central Bank are regulatory reserve deposits that the Bank must maintain as a monthly average.

(**) It corresponds to negotiation instruments and available-for-sale and investment instruments, whose term does not exceed three months from the date of acquisition.

	March	December
	2018	2017
	MCh$	MCh$
Highly liquid financial instruments:
Financial Assets Held-for-trading	818,512	710,162
Available-for-sale Instruments		8,907
Total	818,512	719,069

(b) Transactions in course of settlement:

Transactions in course of settlement are transactions for which the only remaining step is settlement, which will increase or decrease the funds in the Central Bank or in foreign banks, normally occurring within 24 to 48 business hours, and are detailed as follows:

	March — 2018		December — 2017
	MCh$		MCh$
Assets
Documents drawn on other banks (clearing)	187,667		204,624
Funds receivable	554,107		317,185
Subtotal transactions in the course of collection	741,774		521,809
Liabilities
Funds payable	(467,064	)	(295,712	)
Subtotal transactions in the course of payment	(467,064	)	(295,712	)
Net transactions in the course of settlement	274,710		226,097

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*8. Financial Assets Held-for-trading:*

The detail of financial instruments classified as held-for-trading is as follows:

	March	December
	2018	2017
	MCh$	MCh$
Instruments issued by the Chilean Government and Central Bank of Chile:
Central Bank of Chile bonds	320,619	400,368
Central Bank of Chile promissory notes	886,686	662,190
Other instruments issued by the Chilean Government and Central Bank	87,454	254,606
Other instruments issued in Chile
Bonds from other domestic companies
Bonds from domestic banks	2,044	2,070
Deposits in domestic banks	208,198	218,307
Other instruments issued in Chile	3,067	715
Instruments issued by foreign institutions
Instruments from foreign governments or central banks
Other instruments issued abroad		322
Mutual fund investments
Funds managed by related companies	78,790	78,069
Funds managed by third-party
Total	1,586,858	1,616,647

Under Instruments issued by the Chilean Government and Central Bank of Chile are classified instruments sold under repurchase agreements to customers and financial instruments, by an amount of Ch$60,161 million as of March 31, 2018 (Ch$5,096 million as of December 31, 2017). Repurchase agreements had a 3 days average expiration as of period-end (7 days in December 2017). Moreover, under this same item, other financial instruments are maintained as collateral guaranteeing the derivative transactions executed through Comder Contraparte Central S.A. for an amount of Ch$34,585 million as of December 31, 2017. As of March 31, 2018, there are no guarantee instruments for this concept.

Other instruments issued in Chile include instruments sold under repurchase agreements with customers and financial instruments amounting to Ch$159,869 million as of March 31, 2018 (Ch$158,731 million as of December 31, 2017). The repurchase agreements have an average expiration of 9 days as of period-end (7 days in December 2017).

Additionally, the Bank holds financial investments in mortgage finance bonds issued by itself in the amount of Ch$14,085 million as of March 31, 2018 (Ch$15,032 million as of December 31, 2017), which are presented as a reduction of the liability line item Debt issued.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*9. Cash collateral on securities borrowed and reverse repurchase agreements:*

(a) Receivables for repurchase agreements: The Bank provides financing to its customers through repurchase agreements and security borrowings, in which the financial instrument serves as collateral. As of March 31, 2018 and December 31, 2017, the detail is as follows:

	Up to 1 month — March	December	Over 1 month and up to 3 months — March	December	Over 3 months and up to 12 months — March	December	Over 1 year and up to 3 years — March	December	Over 3 years and up to 5 years — March	December	Over 5 years — March	December	Total — March	December
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Instruments issued by the Chilean Governments and Central Bank of Chile
Central Bank bonds		4,114												4,114
Central Bank promissory notes
Other instruments issued by the Chilean Government and Central Bank		2,576												2,576
Other Instruments issued in Chile
Deposit promissory notes from domestic banks
Mortgage bonds from domestic banks
Bonds from domestic banks
Deposits in domestic banks	29,868	13,297											29,868	13,297
Bonds from other Chilean companies
Other instruments issued in Chile	47,425	47,357	34,358	19,207	7,463	5,090							89,246	71,654
Instruments issued by foreign institutions
Instruments from foreign governments or Central Bank
Other instruments
Mutual fund investments
Funds managed by related companies
Funds managed by third-party
Total	77,293	67,344	34,358	19,207	7,463	5,090							119,114	91,641

*Securities received:*

The Bank and its subsidiaries have received financial instruments that they can sell or give as collateral in case the owner of these instruments enters into default or in bankruptcy. As of March 31, 2018, the fair value of the instruments received amounts to Ch$117,129 million (Ch$95,665 million as of December, 2017).

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*9. Cash collateral on securities lent and repurchase agreements, continued:*

(b) Liabilities for repurchase contracts: The Bank obtains financing by selling financial instruments and committing to purchase them at future dates, plus interest at a prefixed rate. As of March 31, 2018 and December 31, 2017, the repurchase agreements are the following:

	Up to 1 month — March	December	Over 1 month and up to 3 months — March	December	Over 3 months and up to 12 months — March	December	Over 1 year and up to 3 years — March	December	Over 3 years and up to 5 years — March	December	Over 5 years — March	December	Total — March	December
	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Instruments issued by the Chilean Governments and Central Bank of Chile
Central Bank bonds	10,091	5,169											10,091	5,169
Central Bank promissory notes	16,519	5,095											16,519	5,095
Other instruments issued by the Chilean Government and Central Bank	17,790												17,790
Other Instruments Issued in Chile
Deposit promissory notes from domestic banks
Mortgage bonds from domestic banks
Bonds from domestic banks	2,044	2,013											2,044	2,013
Deposits in domestic banks	164,410	114,359	1,761		38,067	56,762							204,238	171,121
Bonds from other Chilean companies
Other instruments issued in Chile	9,480	11,994											9,480	11,994
Instruments issued by foreign institutions
Instruments from foreign governments or central bank
Other instruments
Mutual fund investments
Funds managed by related companies
Funds managed by third-party
Total	220,334	138,630	1,761		38,067	56,762							260,162	195,392

*Securities sold:*

The fair value of the financial instruments delivered as collateral by the Bank and its subsidiaries, in sales transactions with repurchase agreement and securities loans as of March 31, 2018 amounts to Ch$260,115 million (Ch$195,437 million in December 2017). In the event that the Bank and its subsidiaries enter into default or bankruptcy, the counterparty is authorized to sell or deliver these investments as collateral.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*10. Derivative Instruments and Accounting Hedges:*

(a) As of March 31, 2018 and December 31, 2017, the Banks portfolio of derivative instruments is detailed as follows:

As of March 31, 2018	Notional amount of contract with final expiration date in — Up to 1 month	Over 1 month and up to 3 months	Over 3 months and up to 12 months	Over 1 year and up to 3 years	Over 3 year and up to 5 years	Over 5 years	Total	Fair Value — Assets	Liabilities
	March	March	March	March	March	March	March	March	March
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Derivatives held for hedging purposes
Interest rate swap and cross currency swap					14,002		14,002		3,686
Interest rate swap				24,791	22,732	69,452	116,975	1,372	1,536
Total derivatives held for hedging purposes				24,791	36,734	69,452	130,977	1,372	5,222
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap		147,115	235,332	253,327	31,069	488,951	1,155,794	12,707	92,954
Total derivatives held as cash flow hedges		147,115	235,332	253,327	31,069	488,951	1,155,794	12,707	92,954
Trading derivatives
Currency forward	7,322,365	6,959,940	15,845,776	1,365,042	145,357	27,229	31,665,709	427,197	487,643
Interest rate forward
Interest rate swap	3,128,696	6,661,343	16,548,029	12,546,108	5,681,324	7,521,161	52,086,661	265,834	257,319
Interest rate swap and cross currency swap	183,096	397,758	2,027,733	3,491,246	2,476,908	2,971,677	11,548,418	520,085	541,808
Call currency options	10,441	41,593	77,716	3,432			133,182	419	656
Put currency options	7,799	46,435	89,753	2,797			146,784	1,787	3,515
Total trading derivatives	10,652,397	14,107,069	34,589,007	17,408,625	8,303,589	10,520,067	95,580,754	1,215,322	1,290,941
Total	10,652,397	14,254,184	34,824,339	17,686,743	8,371,392	11,078,470	96,867,525	1,229,401	1,389,117

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*10 . Derivative Instruments and Accounting Hedges, continued:*

(b) Portfolio of derivative instruments, continued:

As of December 31, 2017	Notional amount of contract with final expiration date in — Up to 1 month	Over 1 month and up to 3 months	Over 3 months and up to 12 months	Over 1 year and up to 3 years	Over 3 year and up to 5 years	Over 5 years	Total	Fair Value — Assets	Liabilities
	December	December	December	December	December	December	December	December	December
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Derivatives held for hedging purposes
Interest rate swap and cross currency swap					13,914		13,914		3,652
Interest rate swap				25,233	12,593	41,144	78,970	277	1,678
Total derivatives held for hedging purposes				25,233	26,507	41,144	92,884	277	5,330
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap			254,724	377,072	30,874	485,891	1,148,561	27,572	80,888
Total derivatives held as cash flow hedges			254,724	377,072	30,874	485,891	1,148,561	27,572	80,888
Trading derivatives
Currency forward	6,217,692	6,739,730	14,706,493	1,630,627	138,946	6,154	29,439,642	506,502	578,083
Interest rate forward	14,000						14,000		206
Interest rate swap	3,450,543	8,494,249	17,762,447	13,242,961	5,287,261	7,379,643	55,617,104	243,931	241,613
Interest rate swap and cross currency swap	156,414	458,006	1,934,358	3,126,560	2,440,814	3,165,088	11,281,240	466,192	504,209
Call currency options	23,191	32,444	94,359	3,782			153,776	514	475
Put currency options	19,140	25,163	97,634	3,936			145,873	2,841	3,433
Total trading derivatives	9,880,980	15,749,592	34,595,291	18,007,866	7,867,021	10,550,885	96,651,635	1,219,980	1,328,019
Total	9,880,980	15,749,592	34,850,015	18,410,171	7,924,402	11,077,920	97,893,080	1,247,829	1,414,237

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*10. Derivative Instruments and Accounting Hedges, continued:*

*(b) Fair value Hedges:*

The Bank uses cross-currency swaps and interest rate swaps to hedge its exposure to changes in the fair value of the hedged elements attributable to interest rates in financial instruments. The aforementioned hedge instruments change the effective cost of long-term issuances from a fixed interest rate to a floating rate, decreasing the duration and modifying the sensitivity to the shortest segments of the curve.

Below is a detail of the hedged elements and instruments under fair value hedges as of March 31 2018 and December 31, 2017:

	March	December
	2018	2017
	MCh$	MCh$
Hedge element
Commercial loans	14,002	13,914
Corporate bonds	116,975	78,970
Hedge instrument
Cross currency swap	14,002	13,914
Interest rate swap	116,975	78,970

*(c) Cash flow Hedges:*

(c.1) The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates and foreign exchange of foreign banks obligations and bonds issued abroad in US Dollars, Hong Kong dollars, Swiss Franc, Japanese Yens and Euros. The cash flows of the cross currency swaps equal the cash flows of the hedged items, which modify uncertain cash flows to known cash flows derived from a fixed interest rate.

Additionally, these cross currency swap contracts used to hedge the risk from variability of the Unidad de Fomento (CLF) in assets flows denominated in CLF until a nominal amount equal to the portion notional of the hedging instrument CLF, whose readjustment daily impact the item Interest Revenue of the Income Financial Statements.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*10. Derivative Instruments and Accounting Hedges, continued:*

*(c) Cash flow Hedges, continued:*

(c.2) Below are the cash flows from bonds issued abroad objects of this hedge and the cash flows of the asset part of the derivative instrument:

	Up to 1 month — March		December		Over 1 month and up to 3 months — March		December		Over 3 months and up to 12 months — March		December		Over 1 year and up to 3 years — March		December		Over 3 years and up to 5 years — March		December		Over 5 years — March		December		Total — March		December
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedge element
Outflows:
Corporate Bond EUR	(672	)							(580	)	(1,246	)	(2,505	)	(2,491	)	(2,505	)	(2,491	)	(82,787	)	(82,348	)	(89,049	)	(88,576	)
Corporate Bond HKD	(1,742	)			(1,435	)			(7,634	)	(11,052	)	(67,136	)	(68,634	)	(18,783	)	(19,202	)	(292,254	)	(298,776	)	(388,984	)	(397,664	)
Corporate Bond CHF					(159,761	)	(986	)	(81,863	)	(161,529	)	(112,704	)	(192,519	)	(474	)	(474	)	(95,250	)	(95,174	)	(450,052	)	(450,682	)
Obligation USD	(204	)	(212	)	(72	)	(235	)	(91,343	)	(93,173	)	(42,552	)	(43,385	)									(134,171	)	(137,005	)
Corporate Bond JPY					(446	)	(292	)	(33,946	)	(1,150	)	(41,761	)	(72,098	)	(30,032	)	(28,886	)	(65,500	)	(63,002	)	(171,685	)	(165,428	)
Hedge instrument
Inflows:
Cross Currency Swap EUR	672								580		1,246		2,505		2,491		2,505		2,491		82,787		82,348		89,049		88,576
Cross Currency Swap HKD	1,742				1,435				7,634		11,052		67,136		68,634		18,783		19,202		292,254		298,776		388,984		397,664
Cross Currency Swap CHF					159,761		986		81,863		161,529		112,704		192,519		474		474		95,250		95,174		450,052		450,682
Cross Currency Swap USD	204		212		72		235		91,343		93,173		42,552		43,385										134,171		137,005
Cross Currency Swap JPY					446		292		33,946		1,150		41,761		72,098		30,032		28,886		65,500		63,002		171,685		165,428
Net cash flows

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*10. Derivative Instruments and Accounting Hedges, continued:*

*(c) Cash flow Hedges, continued:*

(c.2) Below are the cash flows from underlying assets and the cash flows of the liability part of the derivative instrument:

	Up to 1 month — March		December	Over 1 month and up to 3 months — March		December		Over 3 months and up to 12 months — March		December		Over 1 year and up to 3 years — March		December		Over 3 years and up to 5 years — March		December		Over 5 years — March		December		Total — March		December
	2018		2017	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
	MCh$		MCh$	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedge element
Inflows:
Cash flows in CLF	3,053			155,021		2,344		266,394		281,377		276,056		414,764		60,113		59,737		558,959		555,461		1,319,596		1,313,683
Hedge instrument
Outflows:
Cross Currency Swap HKD	(1,690	)		(630	)			(7,143	)	(9,404	)	(66,605	)	(66,188	)	(16,468	)	(16,365	)	(286,862	)	(285,066	)	(379,398	)	(377,023	)
Cross Currency Swap JPY				(1,150	)	(1,061	)	(51,399	)	(3,372	)	(36,981	)	(85,598	)	(35,283	)	(35,063	)	(78,386	)	(77,895	)	(203,199	)	(202,989	)
Cross Currency Swap USD	(1,013	)		(262	)			(110,501	)	(111,077	)	(45,122	)	(44,840	)									(156,898	)	(155,917	)
Cross Currency Swap CHF				(152,447	)	(1,283	)	(96,465	)	(155,767	)	(123,807	)	(214,620	)	(4,823	)	(4,793	)	(108,549	)	(107,870	)	(486,091	)	(484,333	)
Cross Currency Swap EUR	(350	)		(532	)			(886	)	(1,757	)	(3,541	)	(3,518	)	(3,539	)	(3,516	)	(85,162	)	(84,630	)	(94,010	)	(93,421	)
Net cash flows

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*10. Derivative Instruments and Accounting Hedges, continued:*

*(c) Cash flow Hedges, continued:*

With respect to CLF assets hedged; these are revalued monthly according to the variation of the UF, which is equivalent to monthly reinvest the assets until maturity of the relationship hedging.

(c.3) The unrealized results generated during the period 2018 by those derivative contracts that conform the hedging instruments in this cash flow hedging strategy, have been recorded with charge to equity amounting to Ch$15,249 million (charge to equity of Ch$4,855 million in March 31, 2017). The net effect of taxes charge to equity amounts to Ch$11,132 million (net charged to equity of Ch$3,617 million credit to equity during the period March 2017).

The accumulated balance for this concept as of March 31, 2018 corresponds to a charge in equity amounted to Ch$27,800 million (charge to equity of Ch$12,551 million as of December 31, 2017).

(c.4) The net effect in income of derivatives cash flow hedges amount to Ch$11,982 million charged to income during the period 2018 (Ch$14,061 million charge to income during the period March 2017).

(c.5) As of March 31, 2018 and 2017, it not exist inefficiency in cash flow hedge, because both, hedge item and hedge instruments, are mirrors of each other, it means that all variation of value attributable to rate and revaluation components are netted totally.

(c.6) As of March 31, 2018 and 2017, the Bank does not have hedges of net investments in foreign business.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*11. Loans and advances to Banks:*

(a) At the end of each reporting period, the balances presented in the item Loans and advances to Banks are as follows:

	March — 2018		December — 2017
	MCh$		MCh$
Domestic Banks
Interbank loans of liquidity	120,017		120,017
Provisions for loans to domestic banks	(43	)	(43	)
Subtotal	119,974		119,974
Foreign Banks
Interbank loans commercial	224,423		187,006
Credits with third countries	50,099		61,091
Chilean exports trade loans	33,922		41,255
Provisions for loans to foreign banks	(617	)	(540	)
Subtotal	307,827		288,812
Central Bank of Chile
Non-available Central Bank deposits	360,045		350,000
Other Central Bank credits	631		916
Subtotal	360,676		350,916
Total	788,477		759,702

(b) The changes in provisions of the credits owed by the banks, during the periods 2018 and 2017, are summarized as follows:

Detail	Banks Location — Chile		Abroad	Total
	MCh$		MCh$	MCh$
Balance as of January 1, 2017	100		429	529
Provisions established			107	107
Provisions released	(79	)		(79	)
Balance as of March 31, 2017	21		536	557
Provisions established	22		4	26
Provisions released
Balance as of December 31, 2017	43		540	583
Provisions established			77	77
Provisions released
Balance as of March 31, 2018	43		617	660

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*12. Loans to Customers, net:*

(a.i) Loans to Customers:

As of March 31, 2018 and December 31, 2017, the portfolio of loans is composed as follows:

	As of March 31, 2018
	Assets before allowances				Allowances established
	Normal Portfolio	Substandard Portfolio	Non-Complying Portfolio	Total	Individual Provisions		Group Provisions		Total		Net assets
	MCh$	MCh$	MCh$	MCh$	MCh$		MCh$		MCh$		MCh$
Commercial loans
Commercial loans	10,466,204	76,222	297,704	10,840,130	(120,650	)	(83,020	)	(203,670	)	10,636,460
Foreign trade loans	1,032,852	13,886	23,864	1,070,602	(42,424	)	(1,859	)	(44,283	)	1,026,319
Current account debtors	210,925	2,906	2,502	216,333	(3,512	)	(6,606	)	(10,118	)	206,215
Factoring transactions	585,605	1,681	1,362	588,648	(10,221	)	(1,935	)	(12,156	)	576,492
Student loans	47,288		1,368	48,656			(1,291	)	(1,291	)	47,365
Commercial lease transactions (1)	1,369,462	16,133	25,852	1,411,447	(2,462	)	(8,765	)	(11,227	)	1,400,220
Other loans and accounts receivable	80,620	265	7,422	88,307	(936	)	(6,020	)	(6,956	)	81,351
Subtotal	13,792,956	111,093	360,074	14,264,123	(180,205	)	(109,496	)	(289,701	)	13,974,422
Mortgage loans
Letters of credit	25,531		1,957	27,488			(10	)	(10	)	27,478
Endorsable mortgage loans	48,822		1,624	50,446			(35	)	(35	)	50,411
Other residential lending	7,273,669		154,790	7,428,459			(29,736	)	(29,736	)	7,398,723
Credit from ANAP	7			7							7
Residential lease transactions
Other loans and accounts receivable	8,525		124	8,649			(199	)	(199	)	8,450
Subtotal	7,356,554		158,495	7,515,049			(29,980	)	(29,980	)	7,485,069
Consumer loans
Consumer loans in installments	2,407,844		224,797	2,632,641			(178,727	)	(178,727	)	2,453,914
Current account debtors	305,818		2,267	308,085			(10,727	)	(10,727	)	297,358
Credit card debtors	1,117,803		21,293	1,139,096			(55,360	)	(55,360	)	1,083,736
Consumer lease transactions
Other loans and accounts receivable	12		753	765			(235	)	(235	)	530
Subtotal	3,831,477		249,110	4,080,587			(245,049	)	(245,049	)	3,835,538
Total	24,980,987	111,093	767,679	25,859,759	(180,205	)	(384,525	)	(564,730	)	25,295,029

(1) In this item, the Bank finances its customers purchases of assets, including real estate and other personal property, through finance lease agreements. As of March 31, 2018 Ch$663,461 million correspond to finance leases for real estate and Ch$747,986 million correspond to finance leases for movable assets.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*12. Loans to Customers net, continued:*

(a.i) Loans to Customers, continued:

	As of December 31, 2017
	Assets before allowances				Allowances established
	Normal Portfolio	Substandard Portfolio	Non-Complying Portfolio	Total	Individual Provisions		Group Provisions		Total		Net assets
	MCh$	MCh$	MCh$	MCh$	MCh$		MCh$		MCh$		MCh$
Commercial loans
Commercial loans	10,199,048	67,602	294,976	10,561,626	(118,710	)	(81,377	)	(200,087	)	10,361,539
Foreign trade loans	948,547	10,627	24,364	983,538	(38,752	)	(2,311	)	(41,063	)	942,475
Current account debtors	265,842	2,706	2,392	270,940	(3,509	)	(6,350	)	(9,859	)	261,081
Factoring transactions	643,352	2,552	931	646,835	(9,349	)	(2,037	)	(11,386	)	635,449
Student loans	44,407		1,617	46,024			(1,319	)	(1,319	)	44,705
Commercial lease transactions (1)	1,337,411	17,468	26,637	1,381,516	(4,946	)	(8,215	)	(13,161	)	1,368,355
Other loans and accounts receivable	55,521	298	6,815	62,634	(912	)	(5,688	)	(6,600	)	56,034
Subtotal	13,494,128	101,253	357,732	13,953,113	(176,178	)	(107,297	)	(283,475	)	13,669,638
Mortgage loans
Letters of credit	27,568		2,105	29,673			(11	)	(11	)	29,662
Endorsable mortgage loans	52,229		1,800	54,029			(58	)	(58	)	53,971
Other residential lending	7,229,037		151,691	7,380,728			(31,478	)	(31,478	)	7,349,250
Credit from ANAP	8			8							8
Residential lease transactions
Other loans and accounts receivable	8,127		441	8,568			(217	)	(217	)	8,351
Subtotal	7,316,969		156,037	7,473,006			(31,764	)	(31,764	)	7,441,242
Consumer loans
Consumer loans in installments	2,311,482		227,239	2,538,721			(175,659	)	(175,659	)	2,363,062
Current account debtors	314,506		2,149	316,655			(10,446	)	(10,446	)	306,209
Credit card debtors	1,134,476		22,654	1,157,130			(56,525	)	(56,525	)	1,100,605
Consumer lease transactions
Other loans and accounts receivable	8		902	910			(313	)	(313	)	597
Subtotal	3,760,472		252,944	4,013,416			(242,943	)	(242,943	)	3,770,473
Total	24,571,569	101,253	766,713	25,439,535	(176,178	)	(382,004	)	(558,182	)	24,881,353

(1) In this item, the Bank finances its customers purchases of assets, including real estate and other personal property, through finance lease agreements. As of December 31, 2017 Ch$653,575 million correspond to finance leases for real estate and Ch$727,941 million correspond to finance leases for movable assets.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*12. Loans to Customers, net, continued:*

(a.ii) Impaired Portfolio:

As of March 31, 2018 and December 31, 2017, the Bank presents the following details of normal and impaired portfolio:

	Assets before Allowances						Allowances established												Net Assets
	Normal Portfolio		Impaired Portfolio		Total		Individual Provisions				Group Provisions				Total
	March	December	March	December	March	December	March		December		March		December		March		December		March	December
	2018	2017	2018	2017	2018	2017	2018		2017		2018		2017		2018		2017		2018	2017
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$	MCh$
Commercial loans	13,900,868	13,593,249	363,255	359,864	14,264,123	13,953,113	(180,205	)	(176,178	)	(109,496	)	(107,297	)	(289,701	)	(283,475	)	13,974,422	13,669,638
Mortgage loans	7,356,554	7,316,969	158,495	156,037	7,515,049	7,473,006					(29,980	)	(31,764	)	(29,980	)	(31,764	)	7,485,069	7,441,242
Consumer loans	3,831,477	3,760,472	249,110	252,944	4,080,587	4,013,416					(245,049	)	(242,943	)	(245,049	)	(242,943	)	3,835,538	3,770,473
Total	25,088,899	24,670,690	770,860	768,845	25,859,759	25,439,535	(180,205	)	(176,178	)	(384,525	)	(382,004	)	(564,730	)	(558,182	)	25,295,029	24,881,353

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*12. Loans to Customers, continued:*

(b) Credit risk provisions:

The changes in credits risk provisions, during the periods 2018 and 2017, are summarized as follows:

	Commercial — Individual		Group		Mortgage — Group		Consumer — Group		Total
	MCh$		MCh$		MCh$		MCh$		MCh$
Balance as of December 31, 2016	221,085		105,174		33,866		249,866		609,991
Charge-offs	(3,761	)	(10,339	)	(1,051	)	(61,272	)	(76,423	)
Sales or transfers of credits	(553	)							(553	)
Allowances established			5,652		1,486		64,815		71,953
Allowances released	(1,034	)							(1,034	)
Balance as of March 31, 2017	215,737		100,487		34,301		253,409		603,934
Charge-offs	(10,013	)	(34,603	)	(4,042	)	(193,709	)	(242,367	)
Sales or transfers of credits	(12,521	)							(12,521	)
Allowances established			41,413		1,505		183,243		226,161
Allowances released	(17,025	)							(17,025	)
Balance as of December 31, 2017	176,178		107,297		31,764		242,943		558,182
Charge-offs	(2,589	)	(12,960	)	(1,580	)	(59,148	)	(76,277	)
Sales or transfers of credits
Allowances established	6,616		15,159				61,254		83,029
Allowances released					(204	)			(204	)
Balance as of March 31, 2018	180,205		109,496		29,980		245,049		564,730

In addition to these credit risk provisions, also provisions are maintained for country risk to cover foreign operations and additional loan provisions agreed upon by the Board of Directors, which are presented in liabilities under the item Provisions (Note No. 24).

*Other disclosures:*

As of March 31, 2018 and December 31, 2017, the Bank and its subsidiaries have made purchases and sales of loan portfolios. The effect in income is no more than 5% of net income before taxes, as described in Note No. 12 (d) and (e).
As of March 31, 2018 and December 31, 2017 the Bank and its subsidiaries have derecognized 100% of its sold loan portfolio and all risks and benefits related to these financial assets have been transferred all or substantially to it. (See Note No. 12 (e)).

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*12. Loans to Customers, continued:*

The cash flows to be received by the Bank from finance lease contracts have the following maturities:

	Total receivable — March	December	Unearned income — March		December		Net balance receivable (*) — March	December
	2018	2017	2018		2017		2018	2017
	MCh$	MCh$	MCh$		MCh$		MCh$	MCh$
Within one year	472,171	461,354	(54,514	)	(54,216	)	417,657	407,138
From 1 to 2 years	349,641	338,305	(40,225	)	(39,946	)	309,416	298,359
From 2 to 3 years	235,696	230,920	(26,117	)	(26,136	)	209,579	204,784
From 3 to 4 years	150,756	146,921	(17,519	)	(17,680	)	133,237	129,241
From 4 to 5 years	98,135	99,268	(12,519	)	(12,564	)	85,616	86,704
After 5 years	276,536	278,607	(26,855	)	(27,315	)	249,681	251,292
Total	1,582,935	1,555,375	(177,749	)	(177,857	)	1,405,186	1,377,518

(*) The net balance receivable does not include past-due portfolio totaling Ch$6,261 million as of March 31, 2018 (Ch$3,998 million as of December 31, 2017).

The Bank maintains financial lease operations associated with real estate, industrial machinery, vehicles and transportation equipment. These leases contracts have an average term between 2 and 15 years.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*12. Loans to Customers, continued:*

(d) Purchase of loan portfolio:

During the period ended March 31, 2018 the Bank has not acquired portfolio loans.

During 2017, the Bank acquired loan portfolios, whose nominal value amounted to Ch$1,495 million.

(e) Sale or transfer of loans from the loan portfolio:

During the periods 2018 and 2017 sale operations or assignments of receivables have been carried out from the loan portfolio according to the following:

	As of March 31, 2018 — Carrying amount	Allowances	Sale price	Effect on income (loss) gain
	MCh$	MCh$	MCh$	MCh$
Sale of current loans
Sale of written off loans
Total

	As of March 31, 2017 — Carrying amount	Allowances		Sale price	Effect on income (loss) gain
	MCh$	MCh$		MCh$	MCh$
Sale of current loans	807	(553	)	807	553
Sale of written off loans				3	3
Total	807	(553	)	810	556

(f) Securitization of own assets:

During the period as of March 31, 2018 and the year 2017, there is no securitization transactions executed involving its own assets.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*13. Investment Securities:*

As of March 31, 2018 and December 31, 2017, investment securities classified as available-for-sale and held-to-maturity are detailed as follows:

	March 2018 — Available- for-sale	Held-to- maturity	Total	December 2017 — Available- for -sale	Held-to- maturity	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Instruments issued by the Chilean Government and Central Bank of Chile
Bonds issued by the Central Bank of Chile	165,896		165,896	204,128		204,128
Promissory notes issued by the Central Bank of Chile				3,346		3,346
Other instruments of the Chilean Government and the Central Bank of Chile	146,804		146,804	148,894		148,894
Other instruments issued in Chile
Deposit promissory notes from domestics banks
Mortgage bonds from domestic banks	96,614		96,614	99,572		99,572
Bonds from domestic banks	5,418		5,418	5,415		5,415
Deposits from domestic banks	879,676		879,676	956,733		956,733
Bonds from other Chilean companies	8,043		8,043	14,969		14,969
Promissory notes issued by other Chilean companies
Other instruments issued in Chile	117,889		117,889	83,006		83,006
Instruments issued abroad
Instruments from foreign governments or Central Banks
Other instruments
Total	1,420,340		1,420,340	1,516,063		1,516,063

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*13. Investment Securities, continued:*

Instruments issued by the Chilean Government and Central Bank include instruments with repurchase agreements sold to clients and financial institutions, totaling Ch$4,324 million as of March 31, 2018 (Ch$5,177 million as of December 31, 2017). The repurchase agreements have an average maturity of 3 days as of March 31, 2018 (3 days in December 2017). Additionally, under the same item, other financial instruments are maintained as collateral guaranteeing the derivative transactions executed through Comder Contraparte Central S.A. for an amount of Ch$40,957 million as of March 31, 2018 (Ch$31,415 million as of December 2017).

In instruments of Foreign Institutions include mainly bank bonds.

As of March 31, 2018, the portfolio of financial assets available-for-sale includes an accumulated unrealized gain of Ch$645 million (accumulated unrealized gain of Ch$1,851 million in December 2017), recorded as an equity valuation adjustment.

During the period 2018 and 2017, there is no evidence of impairment of financial assets available-for-sale.

Gross profits and losses realized on the sale of available-for-sale investments as of March 31, 2018 and 2017 are shown in Note No. 30 Net Financial Operating Income. The changes on results at the end of each period are as fallow:

	March — 2018		March — 2017
	MCh$		MCh$
Unrealized (losses) gains	(677	)	4,590
Realized losses (gains) reclassified to income	(529	)	(822	)
Subtotal	(1,206	)	3,768
Income tax on other comprehensive income	672		(959	)
Net effect in equity	(534	)	2,809

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*14. Investments in Other Companies:*

(a) Investments in other companies include investments of Ch$38,974 million as of March 31, 2018 (Ch$38,041 million as of December 31, 2017), as follows:

						Investment
		Ownership Interest		Equity		Book Value		Income (Loss) (**)
		March	December	March	December	March	December	March	March
Company	Shareholder	2018	2017	2018	2017	2018	2017	2018	2017
		%	%	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Associates
Transbank S.A.	Banco de Chile	26.16	26.16	58,442	56,804	15,286	15,070	428	345
Soc. Operadora de Tarjetas de Crédito Nexus S.A.	Banco de Chile	25.81	25.81	15,681	13,781	4,047	3,822	225	193
Administrador Financiero del Transantiago S.A.	Banco de Chile	20.00	20.00	15,729	15,490	3,146	3,098	47	56
Redbanc S.A.	Banco de Chile	38.13	38.13	7,976	7,484	3,041	2,894	147	121
Centro de Compensación Automatizado S.A.	Banco de Chile	33.33	33.33	4,953	4,696	1,651	1,589	62	55
Sociedad Imerc OTC S.A.	Banco de Chile	12.33	12.33	11,641	11,490	1,435	1,417	18	14
Sociedad Interbancaria de Depósitos de Valores S.A.	Banco de Chile	26.81	26.81	3,812	3,659	1,022	995	27	38
Soc. Operadora de la Cámara de Compensación de Pagos de Alto Valor S.A.	Banco de Chile	15.00	15.00	6,139	5,838	921	908	12	15
Subtotal Associates				124,373	119,242	30,549	29,793	966	837
Joint Ventures
Servipag Ltda.	Banco de Chile	50.00	50.00	10,195	9,997	5,097	4,999	99	66
Artikos Chile S.A.	Banco de Chile	50.00	50.00	2,117	1,654	1,059	979	79	74
Subtotal Joint Ventures				12,312	11,651	6,156	5,978	178	140
Subtotal				136,685	130,893	36,705	35,771	1,144	977
Investments valued at cost (1)
Bolsa de Comercio de Santiago S.A. (*)	Banchile Corredores de Bolsa					1,646	1,646
Banco Latinoamericano de Comercio Exterior S.A. (Bladex)	Banco de Chile					309	309	13	14
Bolsa Electrónica de Chile S.A. (**)	Banchile Corredores de Bolsa					257	257
Sociedad de Telecomunicaciones Financieras Interbancarias Mundiales (Swift)	Banco de Chile					49	50
CCLV Contraparte Central S.A.	Banchile Corredores de Bolsa					8	8
Subtotal						2,269	2,270	13	14
Total						38,974	38,041	1,157	991

(1) Income from investments valorized at cost, corresponds to income recognized on cash basis (dividends).

(*) The exchange of shares informed as essential event dated May 30, 2017, each shareholder of the Stock Exchange received 1,000,000 shares for each share held as of April 20, 2017. At that date, the subsidiary Banchile Corredores de Bolsa S.A. held the ownership of 3 shares, obtaining 3,000,000 shares due to the exchange.

(**) In the extraordinary shareholders meeting held on May 13, 2017, the exchange of 100,000 shares for each share of the company was agreed. Product of the above Banchile Corredores de Bolsa S.A. obtained 300,000 shares by owning 3 shares as of September 30, 2017.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*14 . Investments in Other Companies, continued:*

(b) The change of investments in companies registered under the equity method in the periods of March 31, 2018 and 2017, are as follows:

	March — 2018		March — 2017
	MCh$		MCh$
Initial book value	38,041		32,588
Acquisition of investments in companies
Participation on income in companies with significant influence and joint control	1,144		977
Dividends receivable	(212	)
Dividends Minimum			560
Dividends received
Others	1		8
Total	38,974		34,133

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*15. Intangible Assets:*

(a) As of March 31, 2018 and December 31, 2017 intangible assets are detailed as follows:

	Years
	Average Useful Life		Average remaining amortization		Gross balance		Accumulated Amortization				Net balance
	March	December	March	December	March	December	March		December		March	December
	2018	2017	2018	2017	2018	2017	2018		2017		2018	2017
					MCh$	MCh$	MCh$		MCh$		MCh$	MCh$
Other Intangible Assets:
Software or computer programs	6	6	5	5	126,918	122,480	(85,152	)	(83,435	)	41,766	39,045
Total					126,918	122,480	(85,152	)	(83,435	)	41,766	39,045

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*15. Intangible Assets, continued:*

(b) The change of intangible assets as of March 31, 2018 and December 31, 2017 are as follows:

	March 2018
	Software or computer programs
	MCh$
Gross Balance
Balance as of January 1, 2018	122,480
Acquisition	5,187
Disposals/ write-downs	(749	)
Impairment loss (*)
Total	126,918
Accumulated Amortization
Balance as of January 1, 2018	(83,435	)
Amortization for the period (*)	(2,466	)
Disposals/ write-downs	749
Total	(85,152	)
Balance as of March 31, 2018	41,766

	December 2017
	Software or computer programs
	MCh$
Gross Balance
Balance as of January 1, 2017	109,491
Acquisition	18,779
Disposals/ write-downs	(5,790	)
Impairment loss
Total	122,480
Accumulated Amortization
Balance as of January 1, 2017	(80,150	)
Amortization for the period	(9,075	)
Disposals/ write-downs	5,790
Total	(83,435	)
Balance as of December 31, 2017	39,045

(*) See Note No. 35 Depreciation, amortization and impairment.

(c) As of March 31, 2018 and December 31, 2017, the Bank maintains the following commitments for technological developments:

	Amount of Commitment — March	December
Detail	2018	2017
	MCh$	MCh$
Software and licenses	5,366	5,129

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COMMAND=ROTATED_TABLE WIDTH="150%"

Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*16. Property and equipment:*

(a) The properties and equipment as of March 31, 2018 and December 31, 2017 are composed as follows:

	Years
	Average Useful Life		Average remaining depreciation		Gross balance		Accumulated Depreciation				Net balance
	March	December	March	December	March	December	March		December		March	December
	2018	2017	2018	2017	2018	2017	2018		2017		2018	2017
					MCh$	MCh$	MCh$		MCh$		MCh$	MCh$
Type of property and equipment:
Land and Buildings	26	27	21	21	312,748	311,428	(144,755	)	(142,768	)	167,993	168,660
Equipment	5	5	3	3	175,508	184,369	(142,304	)	(148,006	)	33,204	36,363
Others	6	6	4	4	52,711	52,552	(41,749	)	(41,316	)	10,962	11,236
Total					540,967	548,349	(328,808	)	(332,090	)	212,159	216,259

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*16. Property and equipment, continued:*

(b) The changes in properties and equipment as of March 31, 2018 and December 31, 2017 are as follows:

	March 2018 — Land and Buildings		Equipment		Others		Total
	MCh$		MCh$		MCh$		MCh$
Gross Balance
Balance as of January 1, 2018	311,428		184,369		52,552		548,349
Additions	1,615		382		525		2,522
Disposals/write-downs/Sales	(295	)	(9,240	)	(358	)	(9,893	)
Impairment losses (*)			(3	)	(8	)	(11	)
Total	312,748		175,508		52,711		540,967
Accumulated Depreciation
Balance as of January 1, 2018	(142,768	)	(148,006	)	(41,316	)	(332,090	)
Reclassification					1		1
Depreciation charges of the period () (*)	(2,282	)	(3,538	)	(793	)	(6,613	)
Sales and disposals of the period	295		9,240		359		9,894
Transfers
Total	(144,755	)	(142,304	)	(41,749	)	(328,808	)
Balance as of March 31, 2018	167,993		33,204		10,962		212,159

	December 2017 — Land and Buildings		Equipment		Others		Total
	MCh$		MCh$		MCh$		MCh$
Gross Balance
Balance as of January 1, 2017	302,187		180,322		50,404		532,913
Additions	10,606		8,898		3,720		23,224
Disposals/write-downs/Sales	(1,365	)	(4,851	)	(1,569	)	(7,785	)
Impairment losses (***)					(3	)	(3	)
Total	311,428		184,369		52,552		548,349
Accumulated Depreciation
Balance as of January 1, 2017	(134,900	)	(139,277	)	(39,654	)	(313,831	)
Depreciation charges of the year (**)	(9,040	)	(13,723	)	(3,045	)	(25,808	)
Sales and disposals of the year	1,172		4,851		1,526		7,549
Transfers			143		(143	)
Total	(142,768	)	(148,006	)	(41,316	)	(332,090	)
Balance as of December 31, 2017	168,660		36,363		11,236		216,259

(*) See Note No.35 Depreciation, Amortization and Impairment.

(**) This amount does not include the depreciation of the year of the Investment Properties, amount is included in Other Assets for Ch$92 million (Ch$368 million as of December 31, 2017).

(***) This amount does not include charge-offs provision of Property and Equipment of Ch$163 million as of December 31, 2017.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*16. Property and equipment, continued:*

(c) As of March 31, 2018 and 2017, the Bank has operating lease contracts that cannot be terminated unilaterally. The information on future payments is detailed as follows:

	Expense for the period	Lease Contracts — Up to 1 month	Over 1 month and up to 3 months	Over 3 months and up to 12 months	Over 1 year and up to 3 years	Over 3 years and up to 5 years	Over 5 years	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
March 2018	8,647	2,847	5,684	22,816	48,918	34,736	31,274	146,275
March 2017	8,386	2,786	6,544	21,636	49,494	36,307	44,278	161,045

As these lease agreements are operating leases under IAS 17 the leased assets are not presented in the Banks statement of financial position .

The Bank has commercial leases of investment properties. These leases have an average life of 5 years.

(d) As of March 31, 2018 and December 31, 2017, the Bank does not have any financial lease contracts and, therefore, there are no property and equipment balances that are in financial lease at the end of both periods.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*17. Current Taxes and Deferred Taxes:*

(a) Current Taxes:

The Bank and its subsidiaries at the end of each period, have constituted a First Category Income Tax Provision, which was determined based on current tax regulations, and has been reflected in the statement of financial position net of taxes to be recovered or payable, as applicable, as of March 31, 2018 and December 31, 2017, according to the following detail:

	March — 2018		December — 2017
	MCh$		MCh$
Income tax	22,144		108,844
Less:
Tax Previous year	(20,711	)
Monthly prepaid taxes	(31,891	)	(123,717	)
Credit for training expenses	(1,700	)	(2,036	)
Others	(1,747	)	(2,670	)
Total	(33,905	)	(19,579	)
Tax rate	27.0	%	25.5	%

	March — 2018		December — 2017
	MCh$		MCh$
Current tax assets	37,907		23,032
Current tax liabilities	(4,002	)	(3,453	)
Total tax receivable	33,905		19,579

(b) Income Tax:

The effect of the tax expense during the periods between January 1 and March 31, 2018 and 2017, broken down as follows:

	March — 2018		March — 2017
	MCh$		MCh$
Income tax expense:
Current year tax	26,261		15,736
Subtotal	26,261		15,736
Charge (credit) for deferred taxes:
Origin and reversal of temporary differences	2,545		13,144
Effect of exchange rates on deferred tax			(1,081	)
Subtotal	2,545		12,063
Others	(573	)	610
Net charge to income for income taxes	28,233		28,409

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*17. Current and Deferred Taxes, continued:*

The following is a reconciliation of the income tax rate to the effective rate applied to determine the Banks income tax expense as of March 31, 2018 and 2017:

	March				March
	2018				2017
	Tax rate				Tax rate
	%		MCh$		%		MCh$
Income tax calculated on net income before tax	27.00		46,139		25.50		42,943
Additions or deductions	(0.51	)	(875	)	(0.33	)	(562	)
Subordinated debt (*)	(5.60	)	(9,572	)	(5.54	)	(9,334	)
Price-level restatement	(4.57	)	(7,813	)	(3.60	)	(6,065	)
Effect in deferred taxes (changes in tax rate)					(0.64	)	(1,081	)
Other	0.21		354		1.49		2,508
Effective rate and income tax expense	16.53		28,233		16.88		28,409

(*) The tax expense related to the subordinated debt held by SAOS, will end in the year in which sufficient resources are generated to pay off the total debt.

The effective rate for income tax for 2018 is 16.53% (16.88% in March 2017).

On September 29, 2014, Law 20,780 was published in the Diario Oficial of Chile (equivalent to the Federal Register), amended the System of Income Taxation and introduces various adjustments in the tax system.

In the same line, on February 8, 2016 Law 20,899 was published, which establishes that open corporations must apply the tax regime of first category with partial deduction of the credit in the final taxes, a regime characterized by the fact that shareholders will only be entitled to allocate against personal taxes (Global Supplementary or Additional), 65% of the first category tax paid by the company.

For this tax regime, the law establishes a gradual increase of first category tax rates according to the following periodicity:

Year	Rate
2014	21.0 %
2015	22.5 %
2016	24.0 %
2017	25.5 %
2018	27.0 %

Additionally, according to No. 11 of Article 1 of Law 20,780, as from January 1, 2017, the rate of sole tax has been increased to rejected expenses of article 21 from 35% to 40%.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*17. Current and Deferred Taxes, continued:*

(d) Effect of deferred taxes on income and equity:

The Bank and its subsidiaries have recorded the effects of deferred taxes in their financial statements. The effects of deferred taxes on assets, liabilities and income accounts are detailed as follows:

	Balances as of December 31, 2017	Effect on — Income		Equity		Balances as of March 31, 2018
	MCh$	MCh$		MCh$		MCh$
Debit Differences:
Allowances for loan losses	195,192	2,623				197,815
Personnel provisions	12,238	(5,875	)			6,363
Staff vacations	6,908	(188	)			6,720
Accrued interests adjustments from impaired loans	3,414	(34	)			3,380
Staff severance indemnities provision	573	(15	)			558
Provision of credit cards expenses	8,955	132				9,087
Provision of accrued expenses	16,358	355				16,713
Leasing	32,549	120				32,669
Other adjustments	17,372	857				18,229
Total Debit Differences	293,559	(2,025	)			291,534
Credit Differences:
Depreciation and price-level restatement of property and equipment	14,281	174				14,455
Adjustment for valuation of financial assets available-for-sale	499			(672	)	(173	)
Transitory assets	4,331	577				4,908
Loans accrued to effective rate	1,608	(36	)			1,572
Other adjustments	5,440	(195	)			5,245
Total Credit Differences	26,159	520		(672	)	26,007
Deferred, Net	267,400	(2,545	)	672		265,527

	March — 2018		December — 2017
	MM$		MM$
Deferred tax assets	265,571		267,400
Deferred tax liabilities	(44	)
Total Deferred tax	265,527		267,400

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*17. Current and Deferred Taxes, continued:*

(e) Effect of deferred taxes on income and equity, continued:

The effects of deferred taxes on assets, liabilities and income as of March 31, 2017 and December 31, 2017, are as follows:

	Balance as					Balance as					Balance as
	of					of					of
	December	Effect on				March	Effect on				December
	31, 2016	Income		Equity		31, 2017	Income		Equity		31, 2017
	MCh$	MCh$		MCh$		MCh$	MCh$		MCh$		MCh$
Debit differences:
Allowances for loan losses	204,056	(1,353	)			202,703	(7,511	)			195,192
Personnel provisions	10,948	(6,450	)			4,498	7,740				12,238
Staff vacations	6,674	(79	)			6,595	313				6,908
Accrued interest adjustments from impaired loans	3,355	197				3,552	(138	)			3,414
Staff severance indemnities provision	970	(217	)			753	(135	)	(45	)	573
Provisions of credit card expenses	12,459	(2,177	)			10,282	(1,327	)			8,955
Provisions of accrued expenses	14,489	715				15,204	1,154				16,358
Leasing	37,119	1,648				38,767	(6,218	)			32,549
Other adjustments	15,960	(3,379	)			12,581	4,790		1		17,372
Total debit differences	306,030	(11,095	)			294,935	(1,332	)	(44	)	293,559
Credit differences:
Depreciation of property and equipment and investment properties	11,815	(516	)			11,299	2,982				14,281
Adjustment for valuation financial assets available-for-sale	216			959		1,175	1		(677	)	499
Transitory assets	3,617	1,096				4,713	(382	)			4,331
Accrued interest to effective rate	2,252	(210	)			2,042	(434	)			1,608
Other adjustments	6,417	598				7,015	(1,575	)			5,440
Total credit differences	24,317	968		959		26,244	592		(677	)	26,159
Total Assets (Liabilities) net	281,713	(12,063	)	(959	)	268,691	(1,924	)	633		267,400

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*18. Other Assets :*

(a) Item composition:

At the end of each period, the item is composed as follows:

	March — 2018		December — 2017
	MCh$		MCh$
Assets held for leasing (*)	116,672		127,979
Assets received or awarded as payment (**)
Assets awarded at judicial sale	11,992		11,433
Assets received in lieu of payment	3,847		2,730
Provision for assets received in lieu of payment or awarded	(1,076	)	(818	)
Subtotal	14,763		13,345
Other Assets
Deposits by derivatives margin	149,097		174,254
Other accounts and notes receivable	126,265		99,201
Trading and brokerage (***)	38,409		32,593
Recoverable income taxes	20,581		20,437
Prepaid expenses	14,554		12,180
Investment properties	14,214		14,306
Servipag available funds	10,051		12,626
VAT receivable	9,282		11,965
Commissions receivable	7,799		6,387
Recovered leased assets for sale	2,713		3,053
Pending transactions	2,301		2,151
Rental guarantees	1,886		1,849
Accounts receivable for sale of assets received in lieu of payment	1,823		3,353
Materials and supplies	659		662
Others	14,857		11,633
Subtotal	414,491		406,650
Total	545,926		547,974

(*) These correspond to property and equipment to be given under finance lease.

(**) Assets received in lieu of payment are assets received as payment of customers past-due debts. The assets acquired must not exceed the aggregate 20% of the Banks effective equity. These assets currently represent 0.0982% (0.0694% as of December 31, 2017) of the Banks effective equity.

The assets awarded at judicial sale are not subject to the aforementioned margin. These properties are assets available for sale and is expected to be completed the sale within one year from the date the asset is received or acquired. In the event that said assets are not sold within one year, it must be written off.

The provision for assets received in lieu of payment or awarded is recorded as indicated in the Compendium of Accounting Standards, Chapter B-5 No.3, which indicates to recognize a provision for the difference between the initial value plus any additions and its realizable value, when the initial is greater.

(***) This item mainly includes simultaneous operations carried out by the subsidiary Banchile Corredores de Bolsa S.A.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*18. Other Assets, continued:*

(b) The changes of the provision for assets received in lieu of payment during the three-month period ended as of March 31, 2018 and 2017 are as follows:

Provision for assets received in lieu of payment
	MCh$
Balance as of January 1, 2017	2,104
Provisions used	(193	)
Provisions established	272
Provisions released
Balance as of March 31, 2017	2,183
Provisions used	(2,754	)
Provisions established	1,389
Provisions released
Balance as of December 31, 2017	818
Provisions used	(487	)
Provisions established	745
Provisions released
Balance as of March 31, 2018	1,076

*19. Current accounts and Other Demand Deposits:*

At the end of each period , this item is composed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Current accounts	7,039,719	7,200,050
Other demand deposits	1,123,807	1,081,223
Other demand deposits and sight accounts	636,832	634,433
Total	8,800,358	8,915,706

*20. Savings accounts and Time Deposits:*

At the end of each period , this item is composed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Time deposits	10,025,299	9,743,968
Term savings accounts	217,173	214,120
Other term balances payable	128,575	109,690
Total	10,371,047	10,067,778

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*21. Borrowings from Financial Institutions:*

(a) At the end of each period, borrowings from financial institutions are detailed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Domestic banks
Banco Ripley	5,381
Banco do Brasil		1,100
Foreign banks
Foreign trade financing
Citibank N.A.	260,355	246,937
Wells Fargo Bank	133,569	185,255
Bank of New York Mellon	121,134	43,143
Sumitomo Mitsui Banking	118,017	120,107
The Bank of Nova Scotia	97,134	73,905
Bank of America	93,120	166,651
ING Bank	56,584	57,331
Commerzbank AG	14,524	71,602
Standard Chartered Bank	2,750	76,268
HSBC Bank USA		46,179
Others	142	121
Borrowings and other obligations
Wells Fargo Bank	91,107	92,684
Citibank N.A.	10,025	4,618
Banco Santander Euro	3,159	3,575
Deutsche Bank AG	2,660	5,551
Bank of America	2,623
Standard Chartered Bank	670
Subtotal foreign banks	1,007,573	1,193,927
Chilean Central Bank		1
Total	1,012,954	1,195,028

(b) Chilean Central Bank Obligations:

Debts with the Central Bank of Chile include credit lines for the renegotiation of loans and other Central Bank borrowings.

The total amounts of the debt to the Central Bank of Chile are as follows:

	March	December
	2018	2017
	MCh$	MCh$
Borrowings and other obligations
Credit lines for the renegotiation of loans with the Central Bank		1
Total		1

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*22. Debt Issued:*

At the end of each period, this item is composed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Mortgage bonds	21,392	23,424
Bonds	6,192,158	5,769,334
Subordinated bonds	698,309	696,217
Total	6,911,859	6,488,975

During the period ended as of March 31, 2018, Banco de Chile issued bonds by an amount of Ch$555,947 million, from which corresponds to current bonds and short-term bonds by an amount of Ch$462,311 million and Ch$95,636 million respectively, according to the following details:

*Current Bonds*

Serie	Amount	Terms Years	Annual issue rate %	Currency	Issue date	Maturity date
	MCh$
BCHIEA0617	106,001	6	1.60	UF	03/01/2018	03/01/2024
BCHIBN1015	114,212	12	2.90	UF	24/01/2018	24/01/2030
BCHIEF1117	79,612	6	1.80	UF	09/02/2018	09/02/2024
BCHIEP0717	104,550	11	2.00	UF	13/02/2018	13/02/2029
BCHIBT1215	57,936	14	3.00	UF	13/03/2018	13/03/2032
Total as of March 31, 2018	462,311

*Short-term Bonds*

Counterparty	Amount	Annual interest rate %	Currency	Issued date	Maturity date
	MCh$
Wells Fargo Bank	2,998	1.85	USD	06/02/2018	08/05/2018
Wells Fargo Bank	2,998	1.93	USD	06/02/2018	08/06/2018
Wells Fargo Bank	2,998	1.98	USD	06/02/2018	09/07/2018
Wells Fargo Bank	2,998	2.05	USD	06/02/2018	06/08/2018
Wells Fargo Bank	2,998	2.05	USD	06/02/2018	08/08/2018
Wells Fargo Bank	29,716	2.25	USD	28/02/2018	28/06/2018
Wells Fargo Bank	1,723	2.40	USD	28/02/2018	29/08/2018
Citibank N.A.	6,894	2.60	USD	28/02/2018	25/02/2019
Wells Fargo Bank	13,780	2.30	USD	02/03/2018	02/07/2018
Wells Fargo Bank	4,489	2.30	USD	05/03/2018	06/07/2018
Citibank N.A.	18,080	2.22	USD	07/03/2018	05/06/2018
Wells Fargo Bank	1,747	2.25	USD	13/03/2018	11/06/2018
Wells Fargo Bank	3,006	2.45	USD	14/03/2018	11/09/2018
Wells Fargo Bank	606	2.60	USD	15/03/2018	14/12/2018
Wells Fargo Bank	605	2.60	USD	29/03/2018	28/09/2018
Total as of March 31, 2018	95,636

During the period ended March 31, 2018, there were no issues subordinated bonds.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*22. Debt Issued, continued:*

During the year ended as of December 31, 2017, Banco de Chile issued bonds by an amount of Ch$1,399,001 million, from which corresponds to current bonds and short-term bonds by an amount of Ch$590,052 million and Ch$808,949 million respectively, according to the following details:

*Current Bonds*

Serie	Amount	Terms Years	Annual issue rate %	Currency	Issue date	Maturity date
	MCh$
BCHIBQ0915	58,643	13	3.00	UF	20/01/2017	20/01/2030
BCHIBH0915	56,338	9	2.70	UF	01/02/2017	01/02/2026
BCHIBP1215	58,157	13	3.00	UF	06/03/2017	06/03/2030
BCHIBC1215	30,544	6	2.50	UF	06/03/2017	06/03/2023
BCHIBC1215	5,554	6	2.50	UF	07/03/2017	07/03/2023
BCHIBC1215	19,600	6	2.50	UF	12/04/2017	12/04/2023
BONO EUR	36,782	15	1.71	EUR	26/04/2017	26/04/2032
BCHIBG1115	85,115	9	2.70	UF	09/05/2017	09/05/2026
BCHIBE1115	55,097	7	2.70	UF	16/10/2017	16/10/2024
BONO JPY	55,506	20	1.02	JPY	17/10/2017	17/10/2037
BCHIBR1215	57,350	13	3.00	UF	17/11/2017	17/11/2030
BONO USD	71,366	20	2.49	USD	20/12/2017	20/12/2037
Total as of December 31, 2017	590,052

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*22. Debt Issued, continued:*

*Short-term Bonds*

Counterparty	Amount MCh$	Annual interest rate %	Currency	Issued date	Maturity date
Citibank N.A.	13,223	1.37	USD	05/01/2017	05/06/2017
Wells Fargo Bank	16,702	1.50	USD	06/01/2017	03/07/2017
Wells Fargo Bank	6,681	1.48	USD	06/01/2017	05/07/2017
Wells Fargo Bank	3,340	1.38	USD	06/01/2017	05/06/2017
Wells Fargo Bank	3,340	1.27	USD	06/01/2017	08/05/2017
Wells Fargo Bank	3,340	1.17	USD	06/01/2017	06/04/2017
Wells Fargo Bank	24,906	1.20	USD	09/01/2017	10/04/2017
Wells Fargo Bank	671	1.47	USD	09/01/2017	10/07/2017
Citibank N.A.	2,685	1.47	USD	09/01/2017	28/07/2017
Citibank N.A.	67,131	1.27	USD	09/01/2017	12/05/2017
Wells Fargo Bank	20,105	1.36	USD	10/01/2017	09/06/2017
Bofa Merrill Lynch	16,754	1.35	USD	10/01/2017	09/06/2017
Wells Fargo Bank	1,318	1.23	USD	13/01/2017	12/05/2017
Wells Fargo Bank	3,295	1.43	USD	13/01/2017	12/07/2017
Bofa Merrill Lynch	3,884	1.70	USD	07/02/2017	06/02/2018
Bofa Merrill Lynch	4,531	1.70	USD	07/02/2017	06/02/2018
Bofa Merrill Lynch	11,017	1.70	USD	08/02/2017	07/02/2018
Wells Fargo Bank	12,797	1.40	USD	10/02/2017	01/09/2017
Wells Fargo Bank	19,196	1.40	USD	10/02/2017	11/09/2017
Wells Fargo Bank	19,284	1.70	USD	13/02/2017	12/02/2018
Wells Fargo Bank	1,607	1.32	USD	13/02/2017	14/08/2017
Citibank N.A.	10,992	1.04	USD	15/02/2017	15/05/2017
Citibank N.A.	15,977	1.34	USD	15/02/2017	15/08/2017
Citibank N.A.	4,474	1.34	USD	15/02/2017	15/08/2017
Citibank N.A.	4,471	1.35	USD	16/02/2017	08/09/2017
Wells Fargo Bank	9,885	1.40	USD	21/03/2017	29/09/2017
Bofa Merrill Lynch	33,024	1.16	USD	24/03/2017	23/06/2017
Bofa Merrill Lynch	26,419	1.16	USD	24/03/2017	23/06/2017
Bofa Merrill Lynch	33,165	1.42	USD	30/03/2017	27/09/2017
Wells Fargo Bank	16,651	1.30	USD	10/04/2017	08/08/2017
Wells Fargo Bank	13,351	1.45	USD	11/04/2017	10/10/2017
Citibank N.A.	33,061	1.30	USD	12/06/2017	12/09/2017
Wells Fargo Bank	2,645	1.48	USD	12/06/2017	11/12/2017
Bofa Merrill Lynch	7,972	1.30	USD	16/06/2017	15/09/2017
Wells Fargo Bank	6,643	1.75	USD	16/06/2017	15/06/2018
Wells Fargo Bank	6,786	1.81	USD	21/06/2017	20/06/2018
Citibank N.A.	10,418	1.48	USD	23/06/2017	19/12/2017
Citibank N.A.	5,960	1.46	USD	27/06/2017	19/12/2017
Citibank N.A.	26,487	1.35	USD	27/06/2017	23/10/2017
Jp.Morgan Chase	33,322	1.48	USD	11/07/2017	08/11/2017
Citibank N.A.	32,871	1.52	USD	14/07/2017	12/01/2018
Wells Fargo Bank	16,284	1.55	USD	31/07/2017	31/01/2018
Wells Fargo Bank	3,257	1.55	USD	31/07/2017	31/01/2018
Wells Fargo Bank	6,513	1.42	USD	31/07/2017	31/10/2017
Wells Fargo Bank	6,513	1.42	USD	31/07/2017	31/10/2017
Wells Fargo Bank	10,952	1.52	USD	14/08/2017	09/02/2018
Wells Fargo Bank	12,852	1.52	USD	21/08/2017	16/02/2018
Wells Fargo Bank	19,047	1.47	USD	25/08/2017	22/12/2017
Wells Fargo Bank	18,708	1.63	USD	13/10/2017	11/04/2018
Wells Fargo Bank	12,472	1.63	USD	13/10/2017	09/04/2018
Wells Fargo Bank	24,944	1.77	USD	13/10/2017	10/07/2018
Wells Fargo Bank	6,236	1.91	USD	13/10/2017	12/10/2018
Bofa Merrill Lynch	12,472	1.63	USD	13/10/2017	12/04/2018
Jp.Morgan Chase	8,215	1.83	USD	14/11/2017	13/08/2018
Wells Fargo Bank	15,883	1.65	USD	21/11/2017	21/03/2018
Wells Fargo Bank	42,624	1.75	USD	07/12/2017	05/03/2018
Wells Fargo Bank	1,596	2.25	USD	14/12/2017	13/12/2018
Total as of December 31, 2017	808,949

During the year ended December 31, 2017, there were no issues subordinated bonds.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*22. Debt Issued, continued:*

During the periods of March 31, 2018 and December 31, 2017, the Bank has not been in default of principal and interest on its debt instruments. Likewise, there have been no breaches of covenants and other commitments associated with the debt instruments issued.

*23. Other Financial Obligations:*

At the end of each period , this item is composed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Other Chilean obligations	119,037	104,665
Public sector obligations	31,639	32,498
Total	150,676	137,163

*24. Provisions:*

(a) At the end of each period, this item is composed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Provisions for minimum dividends (*)	72,513	312,907
Provisions for personnel benefits and payroll expenses	58,839	86,628
Provisions for contingent loan risks	58,661	58,031
Provisions for contingencies:
Additional loan provisions	213,252	213,252
Country risk provisions	5,794	3,317
Other provisions for contingencies	21,734	21,733
Total	430,793	695,868

(*) See Note No. 27 (d).

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*24. Provisions, continued:*

(b) The following table shows the changes in provisions and accrued expenses during the periods 2018 and 2017:

	Minimum dividends — MCh$		Personnel benefits and payroll — MCh$		Contingent loan Risks — MCh$	Additional loan provisions — MCh$	Country risk provisions and other contingencies — MCh$		Total — MCh$
Balances as of January 1, 2017	285,233		83,345		53,681	213,252	26,513		662,024
Provisions established	73,529		14,537		2,803		334		91,203
Provisions used	(285,233	)	(44,405	)					(329,638	)
Provisions released							(48	)	(48	)
Balances as of March 31, 2017	73,529		53,477		56,484	213,252	26,799		423,541
Provisions established	239,378		53,954		1,547				294,879
Provisions used			(20,803	)					(20,803	)
Provisions released							(1,749	)	(1,749	)
Balances as of December 31, 2017	312,907		86,628		58,031	213,252	25,050		695,868
Provisions established	72,513		16,932		630		2,478		92,553
Provisions used	(312,907	)	(44,721	)					(357,628	)
Provisions released
Balances as of March 31, 2018	72,513		58,839		58,661	213,252	27,528		430,793

	March	December
	2018	2017
	MCh$	MCh$
Provisions for performance bonuses	17,653	43,372
Staff accrued vacation provision	24,921	25,159
Staff severance indemnities	7,596	7,676
Other personnel benefits provision	8,669	10.421
Total	58,839	86,628

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*24. Provisions, continued:*

(d) Staff severance indemnities:

(i) Changes in the staff severance indemnities:

	March — 2018		March — 2017
	MCh$		MCh$
Present value of the obligations at the beginning of the year	7,676		8,851
Increase (Decrease) in provision	17		(41	)
Benefit paid	(97	)	(267	)
Effect of change in actuarial factors
Total	7,596		8,543

(ii) Net benefits expenses:

	March — 2018		March — 2017
	MCh$		MCh$
(Decrease) Increase in provisions	(326	)	(409	)
Interest cost of benefits obligations	343		368
Effect of change in actuarial factors
Net benefit expenses	17		(41	)

(iii) Factors used in the calculation of the provision:

The main assumptions used in the determination of severance indemnity obligations for the Banks plan are shown below:

	March 31, 2018	December 31, 2017
	%	%
Discount rate	4.53	4.53
Salary increase rate	4.14	4.14
Payment probability	99.99	99.99

The most recent actuarial valuation of the staff severance indemnities provision was carried out during the year ended December 31, 2017

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*24. Provisions, continued:*

(e) Changes in compliance bonuses provision:

	March — 2018		March — 2017
	MCh$		MCh$
Balances as of January 1	43,372		37,868
Provisions established	9,252		7,509
Provisions used	(34,971	)	(31,137	)
Provisions release
Total	17,653		14,240

(f) Changes in staff accrued vacation provision:

	March — 2018		March — 2017
	MCh$		MCh$
Balances as of January 1	25,159		25,539
Provisions established	1,611		1,917
Provisions used	(1,849	)	(2,455	)
Provisions release
Total	24,921		25,001

(g) Employee benefits share-based provision:

As of March 31, 2018 and 2017, the Bank and its subsidiaries do not have a stock-based compensation plan.

(h) Contingent loan provisions:

As of March 31, 2018 and December 31, 2017, the Bank and its subsidiaries maintain contingent loan provisions by an amount of Ch$58,661 million (Ch$58,031 million in December 2017). See Note No. 26 (d).

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*25. Other Liabilities:*

At the end of each period , this item is composed as follows:

	March	December
	2018	2017
	MCh$	MCh$
Accounts and notes payable (*)	184,773	190,158
Income received in advance	5,307	5,576
Dividends payable	1,239	1,186
Other liabilities
Documents intermediated (**)	85,031	49,672
Cobranding	33,394	32,905
VAT debit	13,093	12,883
Insurance payments	570	478
Outstanding transactions	328	675
Securities unliquidated	157	2,618
Others	18,758	13,010
Total	342,650	309,161

(*) It comprises obligations that do not correspond to transactions inside the ordinary course of business, such as withholding tax, social security contributions, balances of prices for the purchase of materials and provisions for expenses pending payment.

(**) This item mainly includes financing of simultaneous operations performed by subsidiary Banchile Corredores de Bolsa S.A.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*26. Contingencies and Commitments:*

(a) Commitments and responsibilities accounted for in off-balance-sheet accounts:

In order to satisfy its customers needs, the Bank entered into several irrevocable commitments and contingent obligations. Although these obligations are not recognized in the Statement of Financial Position, they entail credit risks and, therefore, form part of the Banks overall risk.

The Bank and its subsidiaries keep recorded in off-balance sheet accounts the main balances related to commitments or with responsibilities inherent to the course of its normal business:

	March	December
	2018	2017
	MCh$	MCh$
Contingent loans
Guarantees and sureties	297,351	285,035
Confirmed foreign letters of credit	33,454	64,970
Issued letters of credit	178,887	94,313
Bank guarantees	2,185,558	2,220,828
Freely disposition credit lines	7,294,485	7,240,406
Other credit commitments	46,162	60,609
Transactions on behalf of third parties
Documents in collections	200,380	168,353
Third-party resources managed by the Bank:
Financial assets managed on behalf of third parties	26,229	7,121
Other assets managed on behalf of third parties
Financial assets acquired on its own behalf	98,380	133,794
Other assets acquired on its own behalf
Custody of securities
Securities held in safe custody in the Bank and subsidiaries	12,649,564	13,623,725
Securities held in safe custody in other entities	7,373,113	7,105,587
Total	30,383,563	31,004,741

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*26. Contingencies and Commitments, continued:*

(b) Lawsuits and legal proceedings:

(b.1) Normal judicial contingencies in the industry:

At the date of issuance of these interim consolidated financial statements, there are legal actions filed against the Bank and its subsidiaries related with the ordinary course operations. As of March 31, 2018 the Bank and its subsidiaries maintain provisions for judicial contingencies amounting to Ch$21,471 million (Ch$21,470 million as of December 31, 2017), which are part of the item Provisions in the Statement of Financial Position.

The most significant lawsuit corresponds to the collective lawsuit filed by the National Consumer Service (Servicio Nacional del Consumidor) in accordance with Law No. 19,496 before the 12th Civil Court of Santiago. This legal action seeks to challenge certain clauses of the Person Products Unified Agreement (Contrato Unificado de Productos de Personas) regarding overdraft fees on credit lines and validity of the tacit consent to changes in rates, charges and other conditions in consumer contracts. To date, the probationary period has been concluded.

The estimated end dates of the respective legal contingencies are as follows:

	As of March 31, 2018 — 2018	2019	2020	2021	Total
	MCh$	MCh$	MCh$	MCh$	MCh$
Legal contingencies	21,269	202			21,471

(b.2) Contingencies for significant lawsuits in courts:

As of March 31, 2018 and December 31, 2017 there are not significant lawsuits in court that affect or may affect these interim consolidated financial statements.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*26. Contingencies and Commitments, continued:*

*i. In subsidiary Banchile Administradora General de Fondos S.A.:*

In compliance with Article No, 12 of Law No, 20,712, Banchile Administradora General de Fondos S.A., has designated Banco de Chile as the representative of the beneficiaries of the guarantees it has established, and in such role the Bank has issued bank guarantees totaling UF 2,938,400, maturing January 10, 2019 (UF 2,588,500, maturing on January 10, 2018 as of December 31, 2017). The subsidiary took a policy with Mapfre Seguros Generales S.A. for the Real State Funds by a guaranteed amount of UF 516,200.

As of March 31, 2018 and December 31, 2017 the Bank has not guaranteed mutual funds.

In compliance with the rules established by the Superintendency of Securities and Insurance (SVS) (now the Chilean Commission for the Financial Market (CMF)) in letter f) of Circular No. 1,894 of September 24, 2008, the entity has constituted guarantees, by management portfolio, in benefit of investors. Such guarantee corresponds to a bank guarantee for UF 449,800, with maturity on January 10, 2019.

*ii. In subsidiary Banchile Corredores de Bolsa S.A.:*

For the purposes of ensuring correct and complete compliance with all of its obligations as broker-dealer entity, in conformity with the provisions from Article No. 30 and subsequent of Law 18,045 on Securities Markets, the subsidiary established a guarantee in an insurance policy for UF 20,000, insured by HDI Seguros de Garantía y Créditos S.A., that matures April 22, 2018, whereby the Securities Exchange of the Santiago Stock Exchange was appointed as the subsidiarys creditor representative.

	March	December
Guarantees:	2018	2017
	MCh$	MCh$
Shares delivered to cover simultaneous forward sales transactions:
Santiago Securities Exchange, Stock Exchange	25,325	20,249
Electronic Chilean Securities Exchange, Stock Exchange	17,279	29,926
Fixed income securities to guarantee CCLV system, Santiago Securities Exchange, Stock Exchange	5,987	3,995
Shares delivered to guarantee equity lending, Electronic Chilean Securities Exchange, Stock Exchange		3,864
Total	48,591	58,034

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*26. Contingencies and Commitments, continued:*

*ii. In subsidiary Banchile Corredores de Bolsa S.A., continued:*

In conformity with the internal regulation of the stock exchange in which this subsidiary participates, and for the purpose of securing the brokers correct performance, the Company established a pledge over 1,000,000 shares of the Santiago Stock Exchange, in favor of that institution, as stated in the Public Deed dated September 13, 1990 before the notary of Santiago Mr. Raul Perry Pefaur, and over 100,000 shares of the Electronic Chilean Stock Exchange, in favor of that Institution, as stated in a contract signed between both entities dated May 16, 1990.

Banchile Corredores de Bolsa S.A. keeps an insurance policy current with Southbridge Compañía de Seguros Generales S.A. that expires January 2, 2019, this considers matters of employee fidelity, physical losses, falsification or adulteration, and currency fraud with a coverage amount equivalent to US$10,000,000.

According to disposition of Chilean Central Bank, it provided a bank guarantee corresponding to UF 10,500, with purposes to comply with the requirements of the SOMA contract (Contract for Service of System Open Market Operations) of the Chilean Central Bank. This bank guarantee is readjustable in UF to fixed term, non-endorsable and has a maturity date of July 20, 2018.

It also provided a bank guarantee No. 359886-6 in the amount of UF 242,000for the benefits of investors in portfolio management contracts. This bank guarantee is revaluated in UF to fixed term, non-endorsable and has a maturity date of January 10, 2019.

It also provided a cash guarantee in the amount of US$122,494.32 for the purpose of complying with the obligations to Pershing, for any operations conducted through that broker.

*iii. In subsidiary Banchile Corredores de Seguros Ltda.:*

According to established in article No. 58, letter D of D.F.L. 251, as of March 31, 2018 the entity maintains two insurance policies which protect it against of potential damages caused by infractions of the law, regulations and complementary rules that regulate insurance brokers, especially when the non-compliance comes from acts, errors or omissions of the broker, representatives, agents or dependents that participate in the intermediation.

The policies contracted are:

Matter insured	Amount Insured (UF)
Errors and omissions liability policy	60,000
Civil liability policy	500

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*26. Contingencies and Commitments, continued:*

(d) Provisions for contingencies loans:

Established provisions for credit risk from contingencies operations are the followings:

	March	December
	2017	2017
	MCh$	MCh$
Freely disposition credit lines	34,157	34,031
Bank guarantees provision	21,119	20,509
Guarantees and sureties provision	2,730	2,871
Letters of credit provision	479	360
Other credit commitments	176	260
Total	58,661	58,031

(e) On January 30, 2014, the SVS (now the CMF) brought administrative charges against Banchile Corredores de Bolsa S.A. for the alleged infringement of the second paragraph of Article 53 of Security Market Law in relation to certain specific transactions performed during the years 2009, 2010 and 2011 related to Sociedad Química y Minera de Chile S.A.s shares (SQM). In relation with the preceding, the second paragraph of Article 53 of Security Market Law states that no person may engage in transactions or induce or attempt to induce the purchase or sale of securities, whether or not governed by this Act, by means of any misleading or deceptive act, practice, mechanism or artifice .

On October 30, 2014, the SVS (now the CMF) imposed a fine of UF 50,000 on Banchile Corredores de Bolsa S.A., for violation to de second paragraph of Article 53 of the Securities Market Law in relation to certain transaction of SQM-As shares intermediated by the Company in 2011.

Banchile Corredores de Bolsa S.A., filed a claim in the Eleventh Civil Court of Santiago against Exempt Resolution No. 270 of October 30, 2014 of the SVS (now the CMF), requesting the annulment of the fine. This claim was consolidated with the trial due No. 25,795-2014, of the 22nd Civil Court of Santiago. To date the evidence stage has expired and is pending the personal inspection of the court to the Electronic Stock Exchange of Chile, Stock Exchange.

According to the provisions policy, the company has not made provisions because there has not yet been a judgment, and the the legal advisor in charge of the case believe that there are solid grounds for dismissal.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*27. Equity:*

(a) Capital:

(i) Authorized, subscribed and paid shares:

As of March 31 , 2018, the paid-in capital of Banco de Chile is represented by 99,444,132,192 registered shares (99,444,132,192 shares as of December 31, 2017), with no par value, subscribed and fully paid.

(ii) Shares:

(ii.1) On March 22, 2018 the Extraordinary Shareholders approved the capitalization of 40% of the distributable net income obtained during the fiscal year ending as of

December 31, 2017. At the end of this present financial statement it has not issued fully-paid in shares.

(ii.2) The following table shows the changes in share from December 31, 2016 to March 31, 2018:

	Total
	Ordinary Shares
Total shares as of December 31, 2016	97,624,347,430
Total shares as of March 31, 2017	97,624,347,430
Capitalization of earning Issue fully paid-in shares	1,819,784,762
Total shares as of December 31, 2017	99,444,132,192
Total shares as March 31, 2018	99,444,132,192

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*27. Equity, continued:*

(b) Distributable income:

In accordance with the Bank of Chiles bylaws in which establish that for the purposes of articles 24, 25 and 28 of Law No. 19,396 and the agreement of November 8, 1996, concluded between the Central Bank of Chile and the Parent Company of Banco de Chile S.A., the net distributable profit of Banco de Chile, shall be that which results from lowering or adding to net income for the year, price-Level restatement of the value of paid-in capital and reserves by effects of the variation of the Consumer Price Index between November of the previous year and November of the current year. This transitional article, which was approved at an Extraordinary Shareholders Meeting held on March 25, 2010, will remain in force until the obligation referred in Law 19,396 maintained by the Parent Company of Banco de Chile S.A. is completely paid off directly or indirectly through its subsidiary SAOS S.A. The above described agreement was submitted under consideration to the Council of the Central Bank of Chile, institution which, in an ordinary session held on December 3, 2009, decided to resolve favorably the proposal.

The distributable income for the period ended as of March 31, 2018 ascend to Ch$120,855 million (Ch$521,511 million as of December 31, 2017).

As stated, the retention of earnings for the year ended December 31, 2017, made in March of 2018 amounted to Ch$54,501 million (the retention of earnings for the year ended December 31, 2016, made in March of 2017 amounted to Ch$76,861 million).

At the Bank Ordinary Shareholders Meeting held on March 22, 2018 it was approved the distribution and payment of dividend No. 206 de Ch$3.14655951692 per share of the Banco de Chile, with charged to the net distributable income for the year ended as of December 31, 2017. The amount of the dividend paid in year 2018 amounts to Ch$374,079 million.

At the Bank Ordinary Shareholders Meeting held on March 23, 2017 it was approved the distribution and payment of dividend No. 205 of Ch$2.92173783704 per share of the Banco de Chile, with charged to the net distributable income for the year ended as of December 31, 2016. The amount of the dividend paid in year 2017 amounts to Ch$342,034 million.

(d) Provision for minimum dividends:

As of January 2016, the Board of Directors established, for minimum dividend purpose, a 60% provision on net distributable income. Accordingly, the Bank recorded in the liability under the item Provisions an amount of Ch$72,513 million (Ch$312,907 million in December 2017), reflecting as a counterpart an equity reduction for the same amount in the item Retained earnings.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*27. Equity, continued:*

(e) Earnings per share:

(i) Basic earnings per share:

Basic earnings per share are determined by dividing the net income attributable to the Bank ordinary equity holders in a period between the weighted average number of shares outstanding during that period, excluding the average number of own shares held throughout the period.

(ii) Diluted earnings per share:

In order to calculate the diluted earnings per share, both the amount of income attributable to common shareholders and the weighted average number of shares outstanding, net of own shares, must be adjusted for all the inherent dilutive effects to the potential common shares (stock options, warrants and convertible debt).

Accordingly, the basic and diluted earnings per share as of March 31, 2018 and 2017 were determined as follows:

	March	March
	2018	2017
Basic earnings per share:
Net profits attributable to ordinary equity holders of the bank (in million Chilean pesos)	142,651	139,993
Weighted average number of ordinary shares (*)	99,444,132,192	99,444,132,192
Earning per shares (in Chilean pesos)	1.43	1.41
Diluted earnings per share:
Net profits attributable to ordinary equity holders of the bank (in million Chilean pesos)	142,651	139,993
Weighted average number of ordinary shares (*)	99,444,132,192	99,444,132,192
Assumed conversion of convertible debt
Adjusted number of shares	99,444,132,192	99,444,132,192
Diluted earnings per share (in Chilean pesos)	1.43	1.41

(*) March 2017 considers the number of fully paid-in shares issued on July 27, 2017.

As of March 31, 2018 and 2017, the Bank does not have instruments that generate dilutive effects.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*27. Equity, continued:*

(f) Other comprehensive income:

This item includes the following concepts:

The adjustment of cash flow hedge derivatives comprises the portion of income recorded in hedge instruments equity in a cash flow hedge. During the period 2018 it was made a charge to equity for Ch$15,249 million (debit to equity of Ch$4,855 million during the period 2017). The income tax effect presented a credit to equity of Ch$4,117 million (credit of Ch$1,238 million in March 2017).

The valuation adjustment of investments available for sale originates from fluctuations in the fair value of such portfolio, with a charge or credit to equity. During the period 2018, it was made a charge to equity for Ch$1,206 million (credit of Ch$3,768 million during the period 2017). The deferred tax effect meant a credit to equity of Ch$672 million (debit for Ch$959 million in March 2017).

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COMMAND=ROTATED_TABLE WIDTH="150%"

Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*28. Interest Revenue and Expenses:*

(a) On the closing date of the Financial Statement, the interest and indexation income, excluding hedge results, are composed as follows:

	March 2018 — Interest	UF Indexation	Prepaid fees	Total	March 2017 — Interest	UF Indexation	Prepaid fees	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Commercial loans	165,039	33,083	793	198,915	176,895	23,824	898	201,617
Consumer loans	147,048	426	2,187	149,661	152,387	328	2,331	155,046
Residential mortgage loans	69,833	45,992	1,347	117,172	68,043	32,655	934	101,632
Financial investment	9,908	2,904		12,812	4,283	778		5,061
Repurchase agreements	574			574	442			442
Loans to banks	3,990			3,990	6,151			6,151
Other interest and indexation revenue	1,523	455		1,978	708	569		1,277
Total	397,915	82,860	4,327	485,102	408,909	58,154	4,163	471,226

The amount of interest recognized on a received basis for impaired portfolio in the period 2018 amounts to Ch$884 million (Ch$1,073 million in March 2017).

(b) At the each period end, the stock of interest and UF indexation not recognized in income is the following:

	March 2018 — Interest	UF Indexation	Total	March 2017 — Interest	UF Indexation	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Commercial loans	7,035	869	7,904	7,398	1,351	8,749
Residential mortgage loans	3,047	1,501	4,548	2,758	1,912	4,670
Consumer loans	40	18	58	71	15	86
Total	10,122	2,388	12,510	10,227	3,278	13,505

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*28. Interest Revenue and Expenses, continued:*

	March 2018 — Interest	UF Indexation	Total	March 2017 — Interest	UF Indexation	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Savings accounts and time deposits	59,093	10,350	69,443	75,493	8,053	83,546
Debt securities issued	46,725	33,437	80,162	45,236	23,081	68,317
Other financial obligations	357	33	390	382	38	420
Repurchase agreements	1,753		1,753	1,578		1,578
Obligations with banks	4,913	1	4,914	3,669		3,669
Demand deposits	60	1,782	1,842	48	1,441	1,489
Other interest and indexation expenses	2	148	150	1	109	110
Total	112,903	45,751	158,654	126,407	32,722	159,129

(d) As of March 31, 2018 and 2017, the Bank uses cross currency and interest rate swaps to hedge its position on movements on the fair value of corporate bonds and commercial loans and cross currency swaps to hedge the risk of variability of obligations flows with foreign banks and bonds issued in foreign currency.

	March 2018 — Income		Expense		Total		March 2017 — Income		Expense		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Gain from fair value accounting hedges	1,195				1,195		750				750
Loss from fair value accounting hedges	(304	)			(304	)	(1,036	)			(1,036	)
Gain from cash flow accounting hedges	1,983		6,946		8,929		4,232		7,727		11,959
Loss from cash flow accounting hedges	(16,984	)	(1,653	)	(18,637	)	(18,098	)	(1,825	)	(19,923	)
Net gain on hedge items	(1,114	)			(1,114	)	(307	)			(307	)
Total	(15,224	)	5,293		(9,931	)	(14,459	)	5,902		(8,557	)

(e) At each period end, the summary of interest is as follows:

	March — 2018		March — 2017
	MCh$		MCh$
Interest revenue	485,102		471,226
Interest expense	(158,654	)	(159,129	)
Subtotal interest income	326,448		312,097
Net gain (loss) from accounting hedges	(9,931	)	(8,557	)
Total net interest income	316,517		303,540

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*29. Income and Expenses from Fees and Commissions:*

The income and expenses for commissions that are shown in the Interim Consolidated Statements of Income for the period refers to the following items:

	March — 2018		March — 2017
	MCh$		MCh$
Commission income
Card services	41,316		38,990
Investments in mutual funds and others	22,075		19,848
Collections and payments	12,599		11,995
Portfolio management	11,190		10,454
Fees for insurance transactions	8,032		7,282
Guarantees and letters of credit	6,001		5,979
Trading and securities management	5,637		3,505
Use of distribution channel	5,162		4,155
Brand use agreement	3,673		3,603
Lines of credit and overdrafts	1,179		1,287
Financial advisory services	663		1,325
Other commission earned	4,978		5,389
Total commissions income	122,505		113,812
Commission expenses
Credit card transactions	(26,617	)	(21,046	)
Interbank transactions	(3,556	)	(2,941	)
Collections and payments	(1,585	)	(1,514	)
Securities transactions	(1,345	)	(859	)
Sales force	(14	)	(46	)
Other commission	(227	)	(185	)
Total commissions expenses	(33,344	)	(26,591	)

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*30. Net Financial Operating Income:*

The gains (losses) from trading and brokerage activities are detailed as follows:

	March — 2018		March — 2017
	MCh$		MCh$
Financial assets held-for-trading	15,808		20,715
Sale of available-for-sale instruments	711		788
Sale of loan portfolios			556
Net income on other transactions	(161	)	131
Trading derivative	(14,252	)	(10,456	)
Total	2,106		11,734

*31. Foreign Exchange Transactions, Net:*

Net foreign exchange transactions are detailed as follows:

	March — 2018		March — 2017
	MCh$		MCh$
Indexed foreign currency	29,004		20,785
Exchange difference, net	(1,247	)	(800	)
Gain from accounting hedges	(2,274	)	(6,097	)
Total	25,483		13,888

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COMMAND=ROTATED_TABLE WIDTH="150%"

Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*32. Provisions for Loan Losses:*

The change registered in income during the periods ended 2018 and 2017 due to provisions, are summarized as follows:

					Loans to customers
	Loans and advance to banks				Commercial Loans				Mortgage Loans			Consumer Loans				Subtotal				Contingent Loans				Total
	March		March		March		March		March	March		March		March		March		March		March		March		March		March
	2018		2017		2018		2017		2018	2017		2018		2017		2018		2017		2018		2017		2018		2017
	MCh$		MCh$		MCh$		MCh$		MCh$	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Provisions established:
- Individual provisions	(77	)	(28	)	(6,616	)										(6,616	)			(517	)			(7,210	)	(28	)
- Group provisions					(15,159	)	(5,652	)		(1,486	)	(61,254	)	(64,815	)	(76,413	)	(71,953	)	(113	)	(3,021	)	(76,526	)	(74,974	)
Provisions established, net	(77	)	(28	)	(21,775	)	(5,652	)		(1,486	)	(61,254	)	(64,815	)	(83,029	)	(71,953	)	(630	)	(3,021	)	(83,736	)	(75,002	)
Provisions released:
- Individual provisions							1,034											1,034				218				1,252
- Group provisions									204							204								204
Provisions realeased, net							1,034		204							204		1,034				218		204		1,252
Provision, net	(77	)	(28	)	(21,775	)	(4,618	)	204	(1,486	)	(61,254	)	(64,815	)	(82,825	)	(70,919	)	(630	)	(2,803	)	(83,532	)	(73,750	)
Additional provision
Recovery of written-off assets					3,401		2,820		687	545		8,499		7,270		12,587		10,635						12,587		10,635
Provision for loan losses, net	(77	)	(28	)	(18,374	)	(1,798	)	891	(941	)	(52,755	)	(57,545	)	(70,238	)	(60,284	)	(630	)	(2,803	)	(70,945	)	(63,115	)

In the opinion of the Administration, provisions constituting for credit risk cover all possible losses that may arise from the non-recovery of assets, according to the records examined by the Bank.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*33. Personnel Expenses:*

Salaries and personnel expenses during the periods ended 2018 and 2017 are as follows :

	March	March
	2018	2017
	MCh$	MCh$
Remunerations	59,947	58,592
Bonuses and incentives	16,098	9,972
Variable compensation	7,971	8,993
Lunch and health benefits	6,794	6,812
Gratifications	6,707	6,673
Staff severance indemnities	4,707	4,336
Training expenses	1,079	958
Other personnel expenses	4,463	4,582
Total	107,766	100,918

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*34. Administrative Expenses:*

This item is composed as follows:

	March	March
	2018	2017
	MCh$	MCh$
General administrative expenses
Information technology and communications	18,502	17,825
Maintenance and repair of property and equipment	8,368	8,813
Office rental and equipment	6,726	6,553
Surveillance and securities transport services	2,956	3,184
Office supplies	2,210	2,343
Rent ATM area	1,921	1,833
External advisory services and professional services fees	1,827	1,691
Energy, heating and other utilities	1,608	1,512
Insurance premiums	1,405	1,178
External service of financial information	1,324	1,279
Postal box, mail , postage and home delivery services	1,254	1,310
Representation and travel expenses	868	900
Legal and notary expenses	849	987
External service of custody of documentation	702	747
Donations	589	534
Other general administrative expenses	4,979	3,914
Subtotal	56,088	54,603
Outsource services
Credit pre-evaluation	4,922	4,602
Data processing	2,987	3,410
External technological developments expenses	2,490	2,295
Certification and technology testing	1,431	1,751
Other	944	855
Subtotal	12,774	12,913
Board expenses
Board of Directors Compensation	581	611
Other Board expenses	89	153
Subtotal	670	764
Marketing expenses
Advertising	6,157	7,343
Subtotal	6,157	7,343
Taxes, payroll taxes and contributions
Contribution to the Superintendency of Banks	2,355	2,250
Real estate contributions	706	747
Patents	306	322
Other taxes	292	264
Subtotal	3,659	3,583
Total	79,348	79,206

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*35. Depreciation, Amortization and Impairment:*

(a) The amounts corresponding to charges to results for depreciation and amortization during the periods 2018 and 2017, are detailed as follows:

	March	March
	2018	2017
	MCh$	MCh$
Depreciation and amortization
Depreciation of property and equipment (Note No. 16 (b))	6,705	6,372
Amortization of intangibles assets (Note No. 15 (b))	2,466	2,187
Total	9,171	8,559

(b) As of March 31, 2018 and 2017 the impairment expenses is composed as follows:

	March	March
	2018	2017
	MCh$	MCh$
Impairment
Impairment of financial instruments
Impairment of properties and equipment (Note No. 16 (b))	11	1
Impairment of intangible assets (Note No. 15 (b))
Total	11	1

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*36. Other Operating Income:*

During the periods 2018 and 2017, the Bank and its subsidiaries present other operating income, according to the following:

	March	March
	2018	2017
	MCh$	MCh$
Income for assets received in lieu of payment
Income from sale of assets received in lieu of payment	1,537	475
Other income	6	24
Subtotal	1,543	499
Release of provisions for contingencies
Country risk provisions
Other provisions for contingencies		48
Subtotal		48
Other income
Gain on sale of property and equipment	3,536	76
Rental income	2,246	2,026
Expense recovery	1,056	1,052
Credit card income	1,001	1,161
Income from differences sale leased assets	744	120
Recovery from correspondent banks	593	683
Fiduciary and trustee commissions	54	68
Revaluation of prepaid monthly payments	1	23
Others	878	580
Subtotal	10,109	5,789
Total	11,652	6,336

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*37. Other Operating Expenses:*

During the periods 2018 and 2017, the Bank and its subsidiaries present other operating expenses, according to the following:

	March	March
	2018	2017
	MCh$	MCh$
Provisions and expenses for assets received in lieu of payment
Charge-off assets received in lieu of payment	776	664
Provisions for assets received in lieu of payment	877	276
Expenses to maintain assets received in lieu of payment	199	135
Subtotal	1,852	1,075
Provisions for contingencies
Country risk provisions	2,477	334
Other provisions for contingencies	1
Subtotal	2,478	334
Other expenses
Leasings operational expenses	1,012	436
Write-offs for operating risks	797	1,025
Expenses for charge-off leased assets recoveries	440	257
Correspondent bank	196	196
Credit life insurance	66	61
Contribution to other organisms	58	79
Others	1,052	46
Subtotal	3,621	2,100
Total	7,951	3,509

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*38. Related Party Transactions:*

Related parties are considered to be those natural or legal persons who are in positions to directly or indirectly have significant influence through their ownership or management of the Bank and its subsidiaries, as set out in the Compendium of Accounting Standards and Chapter 12-4 of the current Compilation of Standards issued by the Chilean Superintendency of Banks and Financial Institutions (SBIF).

According to the above, the Bank has considered as related parties those natural or legal persons who have a direct participation or through third parties on bank ownership, where such participation exceeds 5% of the shares, and also people who, regardless of ownership, have authority and responsibility for planning, management and control of the activities of the entity or its subsidiaries. There also are considered as related the companies in which the parties related by ownership or management of the bank have a share which reaches or exceeds 5%, or has the position of director, general manager or equivalent.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*38. Related Party Transactions, continued:*

(a) Loans to related parties:

The following are the loans and accounts receivable and contingent loans, corresponding to related entities.

	Production and Services Companies (*) — March		December		Investment Companies (**) — March		December		Individuals (***) — March		December		Total — March		December
	2018		2017		2018		2017		2018		2017		2018		2017
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Loans and accounts receivable:
Commercial loans	230,188		243,989		204,119		169,403		9,137		8,871		443,444		422,263
Residential mortgage loans									34,202		33,695		34,202		33,695
Consumer loans									6,888		7,265		6,888		7,265
Gross loans	230,188		243,989		204,119		169,403		50,227		49,831		484,534		463,223
Allowance for loan losses	(859	)	(988	)	(396	)	(394	)	(210	)	(241	)	(1,465	)	(1,623	)
Net loans	229,329		243,001		203,723		169,009		50,017		49,590		483,069		461,600
Contingent loans:
Guarantees and sureties	4,448		4,527		20,776		21,146						25,224		25,673
Letters of credits	1,298		294		1,344		1,170						2,642		1,464
Foreign letters of credits
Banks guarantees	35,610		34,457		22,945		23,071						58,555		57,528
Freely disposition credit lines	50,945		53,151		14,486		13,907		14,985		15,179		80,416		82,237
Other contingencies loans
Total contingent loans	92,301		92,429		59,551		59,294		14,985		15,179		166,837		166,902
Provision for contingencies loans	(221	)	(217	)	(77	)	(81	)	(50	)	(48	)	(348	)	(346	)
Contingent loans, net	92,080		92,212		59,474		59,213		14,935		15,131		166,489		166,556
Amount covered by guarantee:
Mortgage	27,756		27,928		52,301		53,835		53,761		53,181		133,818		134,944
Warrant
Pledge	810		1,417										810		1,417
Others (****)	48,592		39,022		14,577		14,186		2,127		2,175		65,296		55,383
Total collateral	77,158		68,367		66,878		68,021		55,888		55,356		199,924		191,744

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*38. Related Party Transactions, continued:*

(a) Loans with related parties, continued:

(*) For these effects are considered productive companies, those that meet the following conditions:

i) They engage in production activities and generate a separate flow of income.

ii) Less than 50% of their assets are financial assets held-for-trading or investments.

Service companies are considered entities whose main purpose is oriented to rendering services to third parties.

(**) Investment companies include those legal entities that do not meet the conditions for productive companies or services providers and are profit-oriented.

(***) Individuals include key members of the management and correspond to those who directly or indirectly have authority and responsibility for planning, administrating and controlling the activities of the organization, including directors. This category also includes their family members who influence or are influenced by such individuals in their interactions with the organization.

(****) These guarantees mainly correspond to shares and other financial guarantees.

(b) Other assets and liabilities with related parties:

	March	December
	2016	2017
	MCh$	MCh$
Assets
Cash and due from banks	73,955	57,563
Transactions in the course of collection	94,029	13,249
Derivative instruments	257,829	323,186
Financial assets	6,290
Other assets	140,825	114,536
Total	572,928	508,534
Liabilities
Demand deposits	171,810	173,715
Transactions in the course of payment	72,478	16,116
Repurchase agreements	73,878	25,227
Savings accounts and time deposits	317,913	169,322
Derivative instruments	330,223	370,356
Borrowings with banks	270,380	251,555
Other liabilities	68,701	51,814
Total	1,305,383	1,058,105

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*38. Related Party Transactions, continued:*

	March — 2018		March — 2017
	Income	Expense	Income	Expense
	MCh$	MCh$	MCh$	MCh$
Type of income or expense recognized
Profit/loss for commission and services	4,808	1,658	4,500	2,999
Profit/loss for financial operation	16,379	17,640	15,370	17,776
Net Financial Operating Income
Derivative instruments (**)	30,967	37,674	7,092	14,108
Released or established of provision for credit risk	105			121
Operating expenses		39,343		38,057
Other income and expenses	110	12	49	11

(*) This detail does not constitute a Statement of Comprehensive Income for related party transactions since the assets with these parties are not necessarily equal to liabilities and each item reflects total income and expense and not those corresponding to exact transactions.

(**)The outcome of derivative operations is presented net at each related counterparty level. Additionally, this line includes operations with local counterpart banks (unrelated) which have been novated by Comder Contraparte Central S.A. (Related entity) for centralized clearing purposes, which generated a net loss of Ch$37,555 million as of March 31, 2018 (net loss of Ch$10,680 million as of March 31, 2017).

(d) Contracts with related parties:

During the period ended March 31, 2018, the Bank has signed, renewed or amended the contractual terms and conditions of the following contracts with related parties that do not correspond to the ordinary transactions with clients in general, for above UF 1.000:

Company name	Concept or service description
Artikos Chile S.A.	Electronic billing and administration services
Canal 13	Advertising service
Fundación Educacional Oportunidad	Donation
Servipag S.A.	Developement of collction and payment system

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*38. Related Party Transactions, continued:*

(e) Payments to key management personnel:

	March	March
	2018	2017
	MCh$	MCh$
Remunerations	1,162	1,032
Short-term benefits	3,230	3,302
Severance pay	692
Paid based on shares
Total	5,084	4,334

Composition of key personnel:

	No. of executives — March	March
	2018	2017
Position
CEO	1	1
CEOs of subsidiaries	6	6
Division Managers	12	14
Total	19	21

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*38. Related Party Transactions, continued:*

(f) Directors expenses and remunerations:

	Remunerations — March		March		Fees for attending Board meetings — March	March	Fees for attending Committees and Subsidiary Board meetings (1) — March	March	Consulting — March	March	Total — March	March
Name of Directors	2018		2017		2018	2017	2018	2017	2018	2017	2018	2017
	MCh$		MCh$		MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Pablo Granifo Lavín	142	(*)	137	(*)	12	12	86	94			240	243
Andrónico Luksic Craig	44		43		1	2					45	45
Gonzalo Menéndez Duque	15		14		6	6	31	33		5	52	58
Jaime Estévez Valencia	15		14		6	6	31	33			52	53
Rodrigo Manubens Moltedo	15		14		6	6	10	11			31	31
Francisco Pérez Mackenna	15		14		4	6	8	20			27	40
Thomas Fürst Freiwirth	15		14		4	5	6	7			25	26
Jean-Paul Luksic Fontbona	15		14		1	1					16	15
Alfredo Ergas Segal	15				5		20				40
Andrés Ergas Heymann	15				5		10				30
Jorge Awad Mehech			14			6		21				41
Jorge Ergas Heymann			14			6		12				32
Other directors of subsidiaries							22	32			22	32
Total	306		292		50	56	224	263		5	580	616

(1) It includes fees paid to members of the Advisory Committee of Banchile Corredores de Seguros Ltda, of Ch$3 million (Ch$5 million in March 2017).

(*) It includes a provision of Ch$96 million (Ch$93 million in March 2017) for an incentive subject to achieving the Banks forecasted earnings.

Fees paid to the advisors of the Board of Directors amount to Ch$72 million (Ch$121 million in March 2017).

Travel and other related expenses amount to Ch$17 million (Ch$27 million in March 2017).

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities:*

Banco de Chile and its subsidiaries have defined a corporate framework for valuation and control related with the process to the fair value measurement.

Within the established framework includes the Product Control Unit, which is independent of the business areas and reports to the Financial Management and Control Division Manager. The Financial Risk Management Area is responsible for independent verification of the results of trading and investment operations and all fair value measurements.

To achieve the appropriate measurements and controls, the Bank and its subsidiaries, take into account at least the following aspects:

(i) Industry standard valuation.

To value financial instruments, Banco de Chile uses industry standard modeling; quota value, share price, discounted cash flows and valuation of options through Black-Scholes-Merton, in the case of options. The input parameters for the valuation correspond to rates, prices and levels of volatility for different terms and market factors that are traded in the national and international market.

(ii) Quoted prices in active markets.

The fair value for instruments with quoted prices in active markets is determined using daily quotes from electronic systems information (such as Bolsa de Comercio de Santiago, Bloomberg, LVA and Risk America, etc). This quote represents the price at which these instruments are regularly traded in the financial markets.

(iii) Valuation techniques.

If no quotes are available for the instrument to be valued, valuation techniques will be used to determine the fair value.

Due to, in general, the valuation models require a set of market parameters as inputs, the aim is to maximize information based on observable or price-related quotations for similar instruments in active markets. To the extent there is no information in active markets, data from external suppliers of market information, prices of similar transactions and historical information are used to validate the valuation parameters.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(iv) Fair value adjustments.

Part of the fair value process considers two adjustments to the market value of each instrument calculated based on the market parameters; a liquidity adjustment and a Bid/Offer adjustment. The latter represents the impact on the valuation of an instrument depending on whether corresponds to a long or purchased position or if the position corresponds to a short or sold position. To calculate this adjustment is used the active market prices or indicative prices depending on the instrument, considering the Bid, Mid and Offer, respectively.

On the other hand, the liquidity adjustment calculation considers the size of the position in each factor, the particular liquidity of each factor, the relative size of Banco de Chile in relation to the market and the liquidity observed in recent operations in the market.

(v) Fair value control.

A process of independent verification of prices and rates is executed daily, in order to control that the market parameters used by Banco de Chile in the valuation of the financial instruments relating to the current state of the market and the best estimate of the fair value. The objective of this process is to control that the official market parameters provided by the respective business area, before being entered into the valuation, are within acceptable ranges of differences when compared to the same set of parameters prepared independently by the Financial Risk Control and Management Area. As a result, value differences are obtained at the level of currency, product and portfolio, which are compared against specific ranges for each grouping level.

In the event significant differences exist, these differences are scaled according to the amount of individual materiality of each market factor and aggregated at the portfolio level, according to the grouping levels within previously defined ranges. These ranges are approved by the Finance, International and Financial Risk Committee.

Complementary and in parallel, the Financial Risk Control and Management Area generates and reports on a daily basis Profit and Loss (P&L) and Exposure to Market Risks, which allow for proper control and consistency of the parameters used in the valuation.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(vi) Judgmental analysis and information to Management.

In particular cases, where there are no market quotations for the instrument to be valued and there are no prices for similar transactions or indicative parameters, a specific control and a reasoned analysis must be carried out in order to estimate the fair value of the operation. Within the valuation framework described in the Reasonable Value Policy approved by the Board of Directors of Banco de Chile, a required level of approval is set in order to carry out transactions where market information is not available or it is not possible to infer prices or rates from it.

(a) Hierarchy of instrument valued at Fair value:

Banco de Chile and its subsidiaries, classify all the financial instruments among the following levels:

*Level 1:* These are financial instruments whose fair value is realized at quoted prices (unadjusted) in active markets for identical assets or liabilities. For these instruments there are observable market prices (return internal rates, quote value, price), so that assumptions are not required to determine the value.

In this level, the following instruments are considered: currency futures, Chilean Central Bank and Treasury securities, mutual fund investments and equity shares.

For the instruments of the Central Bank of Chile and the General Treasury of the Republic, all those mnemonics belonging to a Benchmark, in other words corresponding to one of the following categories published by the Santiago Stock Exchange, will be considered as Level 1: Pesos-02, Pesos-03, Pesos-04, Pesos-05, Pesos-07, Pesos-10, UF-02, UF-04, UF-05, UF-07, UF-10, UF-20, UF-30. A Benchmark corresponds to a group of mnemonics that are similar in duration and are traded in an equivalent way, i.e., the price obtained is the same for all the instruments that make up a Benchmark. This feature defines a greater depth of market, with daily quotations that allow classifying these instruments as Level 1.

In the case of debt issued by the Government, the internal rate of return of the market is used to discount all flows to present value. In the case of mutual funds and equity shares, the current market price multiplied by the number of instruments results in the fair value.

The preceding described valuation methodology is equivalent to the one used by the Bolsa de Comercio de Santiago (Santiago Stock Exchange) and correspond to the standard methodology used in the market.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

*Level 2:* There are financial instruments whose fair value is obtained with variables other than the prices quoted in Level 1 that are observable for the asset or liability, directly (that is, as prices) or indirectly (that is, derived from prices). These categories include:

a) Quoted prices for similar assets or liabilities in active markets.

b) Quoted prices for identical or similar assets or liabilities in markets that are not active.

c) Inputs data other than quoted prices that are observable for the asset or liability.

d) Inputs data corroborated by the market.

At this level there are mainly derivatives instruments, debt issued by banks, debt issues of Chilean and foreign companies, issued in Chile or abroad, mortgage claims, financial brokerage instruments and some issuances by the Central Bank of Chile and the General Treasury of the Republic.

To value derivatives, depends on whether they are impacted by volatility as a relevant market factor in standard valuation methodologies; for options the Black-Scholes-Merton formula is used; for the rest of the derivatives, forwards and swaps, net present value through discounted cash flows is used.

For the remaining instruments at this level, as for debt issues of level 1, the valuation is done through cash flows model by using an internal rate of return that can be derived or estimated from similar securities as mentioned above.

In the event that there is no observable price for an instrument in a specific term, the price will be inferred from the interpolation between periods that have observable quoted price in active markets. These models incorporate various market variables, including the credit quality of counterparties, exchange rates and interest rate curves.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

Valuation Techniques and Inputs:

Type of Financial Instrument	Valuation Method	Description: Inputs and Sources
Local Bank and Corporate Bonds	Discounted cash flows model	Prices are provided by third party price providers that are widely used in the Chilean market. Model is based on a Base Yield (Central Bank Bonds) and issuer spread. The model is based on daily prices and risk/maturity similarities between Instruments.
Offshore Bank and Corporate Bonds		Prices are provided by third party price providers that are widely used in the Chilean market. Model is based on daily prices.
Local Central Bank and Treasury Bonds		Prices are provided by third party price providers that are widely used in the Chilean market. Model is based on daily prices.
Mortgage Notes		Prices are provided by third party price providers that are widely used in the Chilean market. Model is based on a Base Yield (Central Bank Bonds) and issuer spread. The model takes into consideration daily prices and risk/maturity similarities between instruments.
Time Deposits		Prices are provided by third party price providers that are widely used in the Chilean market. Model is based on daily prices and considers risk/maturity similarities between instruments.
Cross Currency Swaps, Interest Rate Swaps, FX Forwards, Inflation Forwards		Forward Points, Inflation forecast and local swap rates are provided by market brokers that are widely used in the Chilean market. Offshore rates and spreads are obtained from third party price providers that are widely used in the Chilean market. Zero Coupon rates are calculated by using the bootstrapping method over swap rates.
FX Options	Black-Scholes Model	Prices for volatility surface estimates are obtained from market brokers that are widely used in the Chilean market.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

*Level 3:* These are financial instruments whose fair value is determined using non-observable inputs data. An adjustment to an input that is significant to the entire measurement can result in a fair value measurement classified within Level 3 of the fair value hierarchy, if the adjustment uses significant non-observable data entry.

The instruments likely to be classified as level 3 are mainly Corporate Debt by Chilean and foreign companies, issued both in Chile and abroad.

Valuation Techniques and Inputs:

Type of Financial Instrument	Valuation Method	Description: Inputs and Sources
Local Bank and Corporate Bonds	Discounted cash flows model	Since inputs for these types of securities are not observable by the market, we model interest rate of returns for them based on a Base Yield (Central Bank Bonds) and issuer spread. These inputs (base yield and issuer spread) are provided on a daily basis by third party price providers that are widely used in the Chilean market.
Offshore Bank and Corporate Bonds	Discounted cash flows model	Since inputs for these types of securities are not observable by the market, we model interest rate of returns for them based on a Base Yield (US-LIBOR) and issuer spread. These inputs (base yield and issuer spread) are provided on a weekly basis by third party price providers that are widely used in the Chilean market.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(b) Level chart:

The following table shows the classification by levels, for financial instruments registered at fair value.

	Level 1 — March	December	Level 2 — March	December	Level 3 — March	December	Total — March	December
	2018	2017	2018	2017	2018	2017	2018	2017
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Financial Assets
Financial assets held-for-trading
From the Chilean Government and Central Bank	432,234	623,276	862,525	693,888			1,294,759	1,317,164
Other instruments issued in Chile	3,067	714	193,380	212,366	16,862	8,012	213,309	221,092
Instruments issued abroad		322						322
Mutual fund investments	78,790	78,069					78,790	78,069
Subtotal	514,091	702,381	1,055,905	906,254	16,862	8,012	1,586,858	1,616,647
Derivative contracts for trading purposes
Forwards			427,197	506,502			427,197	506,502
Swaps			785,919	710,123			785,919	710,123
Call Options			419	514			419	514
Put Options			1,787	2,841			1,787	2,841
Futures
Subtotal			1,215,322	1,219,980			1,215,322	1,219,980
Hedge derivative contracts
Fair value hedge (Swap)			1,372	277			1,372	277
Cash flow hedge (Swap)			12,707	27,572			12,707	27,572
Subtotal			14,079	27,849			14,079	27,849
Financial assets available-for-sale (1)
From the Chilean Government and Central Bank	211,620	229,296	101,080	127,072			312,700	356,368
Other instruments issued in Chile			1,070,274	1,113,430	37,366	46,265	1,107,640	1,159,695
Instruments issued abroad
Subtotal	211,620	229,296	1,171,354	1,240,502	37,366	46,265	1,420,340	1,516,063
Total	725,711	931,677	3,456,660	3,394,585	54,228	54,277	4,236,599	4,380,539
Financial Liabilities
Derivative contracts for trading purposes
Forwards			487,643	578,289			487,643	578,289
Swaps			799,127	745,822			799,127	745,822
Call Options			656	475			656	475
Put Options			3,515	3,433			3,515	3,433
Futures
Subtotal			1,290,941	1,328,019			1,290,941	1,328,019
Hedge derivative contracts
Fair value hedge (Swap)			5,222	5,330			5,222	5,330
Cash flow hedge (Swap)			92,954	80,888			92,954	80,888
Subtotal			98,176	86,218			98,176	86,218
Total			1,389,117	1,414,237			1,389,117	1,414,237

(1) As of March 31, 2018, 86% of instruments of level 3 have denomination Investment Grade. Also, 100% of total of these financial instruments correspond to domestic issuers.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

The following table shows the reconciliation between the balances at the beginning and at the end of period for those instruments classified in Level 3, whose fair value is reflected in the financial statements:

	As of March, 2018 — Balance as of January 1, 2018	Gain (Loss) Recognized in Income (1)		Gain (Loss) Recognized in Equity (2)		Purchases	Sales		Transfer from Level 1 and 2	Transfer to Level 1 and 2		Balance as of March 31, 2018
	MCh$	MCh$		MCh$		MCh$	MCh$		MCh$	MCh$		MCh$
Financial Assets
Financial assets held-for-trading:
Other instruments issued in Chile	8,012	121				8,729						16,862
Subtotal	8,012	121				8,729						16,862
Available-for-Sale Instruments:
Other instruments issued in Chile	46,265	(910	)	(173	)		(2,845	)		(4,971	)	37,366
Instruments issued abroad
Subtotal	46,265	(910	)	(173	)		(2,845	)		(4,971	)	37,366
Total	54,277	(789	)	(173	)	8,729	(2,845	)		(4,971	)	54,228

	As of December, 2017 — Balance as of January 1, 2017	Gain (Loss) Recognized in Income (1)		Gain (Loss) Recognized in Equity (2)	Purchases	Sales		Transfer from Level 1 and 2	Transfer to Level 1 and 2		Balance as of December 31, 2017
	MCh$	MCh$		MCh$	MCh$	MCh$		MCh$	MCh$		MCh$
Financial Assets
Financial assets held-for-trading:
Other instruments issued in Chile	8,960	(7	)		7,446	(10,772	)	2,385			8,012
Subtotal	8,960	(7	)		7,446	(10,772	)	2,385			8,012
Available-for-Sale Instruments:
Other instruments issued in Chile	76,005	(4,186	)	1,137	4,922	(28,604	)	2,672	(5,681	)	46,265
Instruments issued abroad
Subtotal	76,005	(4,186	)	1,137	4,922	(28,604	)	2,672	(5,681	)	46,265
Total	84,965	(4,193	)	1,137	12,368	(39,376	)	5,057	(5,681	)	54,277

(1) Recorded in income under item Net financial operating income.

(2) Recorded in equity under item Other Comprehensive Income.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(d) Sensitivity of instruments classified in level 3 to changes in key assumptions of models:

The following table shows the sensitivity, by type of instrument, of those instruments classified in Level 3 using alternative in key valuation assumptions:

	As of March, 2018 — Level 3	Sensitivity to changes in key assumptions of models		As of December, 2017 — Level 3	Sensitivity to changes in key assumptions of models
	MCh$	MCh$		MCh$	MCh$
Financial Assets
Financial assets held-for-trading
Other instruments issued in Chile	16,862	(94	)	8,012	(26	)
Subtotal	16,862	(94	)	8,012	(26	)
Available-for- Sale Instruments
Other instruments issued in Chile	37,366	(345	)	46,265	(417	)
Instruments issued abroad
Subtotal	37,366	(345	)	46,265	(417	)
Total	54,228	(439	)	54,277	(443	)

With the purpose to determine the sensitivity of the financial investments to changes in significant market factors, the Bank has made alternative calculations at fair value, changing those key parameters for the valuation and which are not directly observable in screens. In the case of the financial assets listed in the table above, which correspond to Bank Bonds and Corporate Bonds, it was considered that, since there are no current observables prices, the input prices will be based on brokers quotes. The prices are usually calculated as a base rate plus a spread. For Local Bonds it was determined to apply a 10% impact on the price, while for the Off Shore Bonds it was determined to apply a 10% impact only on the spread, since the base rate is covered by interest rate swaps instruments in the so-called accounting hedges. The 10% impact is considered a reasonable move taking into account the market performance of these instruments and comparing it against the bid / offer adjustment that is provisioned by these instruments.

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(e) Other assets and liabilities:

The following table summarizes the fair values of the Banks main financial assets and liabilities that are not recorded at fair value in the Statement of Financial Position. The values shown in this note are not attempt to estimate the value of the Banks income-generating assets, nor forecast their future behavior. The estimated fair value is as follows:

	Book Value — March	December	Estimated Fair Value — March	December
	2018	2017	2018	2017
	MCh$	MCh$	MCh$	MCh$
Assets
Cash and due from banks	920,445	1,057,393	920,445	1,057,393
Transactions in the course of collection	741,774	521,809	741,774	521,809
Repurchase agreements and securities lending	119,114	91,641	119,114	91,641
Subtotal	1,781,333	1,670,843	1,781,333	1,670,843
Loans and advances to banks
Domestic banks	119,974	119,974	119,974	119,974
Central Bank of Chile	360,676	350,916	360,676	350,916
Foreign banks	307,827	288,812	307,827	288,812
Subtotal	788,477	759,702	788,477	759,702
Loans to customers, net
Commercial loans	13,974,422	13,669,638	13,744,057	13,477,466
Residential mortgage loans	7,485,069	7,441,242	7,852,466	7,769,694
Consumer loans	3,835,538	3,770,473	3,836,559	3,773,005
Subtotal	25,295,029	24,881,353	25,433,082	25,020,165
Total	27,864,839	27,311,898	28,002,892	27,450,710
Liabilities
Current accounts and other demand deposits	8,800,358	8,915,706	8,800,358	8,915,706
Transactions in the course of payment	467,064	295,712	467,064	295,712
Repurchase agreements and securities lending	260,162	195,392	260,162	195,392
Savings accounts and time deposits	10,371,047	10,067,778	10,373,815	10,073,030
Borrowings from banks	1,012,954	1,195,028	1,006,079	1,188,943
Other financial obligations	150,676	137,163	150,676	137,163
Subtotal	21,062,261	20,806,779	21,058,154	20,805,946
Debt Issued
Letters of credit for residential purposes	19,329	21,059	20,681	22,542
Letters of credit for general purposes	2,063	2,365	2,207	2,532
Bonds	6,192,158	5,769,334	6,338,858	5,896,424
Subordinate bonds	698,309	696,217	697,693	699,926
Subtotal	6,911,859	6,488,975	7,059,439	6,621,424
Total	27,974,120	27,295,754	28,117,593	27,427,370

Other financial assets and liabilities not measured at their fair value, but for which a fair value is estimated, even if not managed based on such value, include assets and liabilities such as placements, deposits and other time deposits, debt issued, and other financial assets and obligations with different maturities and characteristics. The fair value of these assets and liabilities is calculated using the Discounted Cash Flow model and the use of various data sources such as yield curves, credit risk spreads, etc. In addition, due to some of these assets and liabilities are not traded on the market, periodic reviews and analyzes are required to determine the suitability of the inputs and determined fair values.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial assets and liabilities, continued:*

(f) Levels of other assets and liabilities:

The following table shows the estimated fair value of financial assets and liabilities not valued at their fair value, as of March 31, 2018 and December 31, 2017:

	Level 1 Estimated Fair Value — March	December	Level 2 Estimated Fair Value — March	December	Level 3 Estimated Fair Value — March	December	Total Estimated Fair Value — March	December
	2018	2017	2018	2017	2018	2017	2018	2017
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Assets
Cash and due from banks	920,445	1,057,393					920,445	1,057,393
Transactions in the course of collection	741,774	521,809					741,774	521,809
Repurchase agreements and security lending	119,114	91,641					119,114	91,641
Subtotal	1,781,333	1,670,843					1,781,333	1,670,843
Loans and advances to banks
Domestic banks	119,974	119,974					119,974	119,974
Central Bank	360,676	350,916					360,676	350,916
Foreign banks	307,827	288,812					307,827	288,812
Subtotal	788,477	759,702					788,477	759,702
Loans to customers, net
Commercial loans					13,744,057	13,477,466	13,744,057	13,477,466
Residential mortgage loans					7,852,466	7,769,694	7,852,466	7,769,694
Consumer loans					3,836,559	3,773,005	3,836,559	3,773,005
Subtotal					25,433,082	25,020,165	25,433,082	25,020,165
Total	2,569,810	2,430,545			25,433,082	25,020,165	28,002,892	27,450,710
Liabilities
Current accounts and other demand deposits	8,800,358	8,915,706					8,800,358	8,915,706
Transactions in the course of payment	467,064	295,712					467,064	295,712
Repurchase agreements and security lending	260,162	195,392					260,162	195,392
Savings accounts and time deposits					10,373,815	10,073,030	10,373,815	10,073,030
Borrowings from banks					1,006,079	1,188,943	1,006,079	1,188,943
Other financial obligations	150,676	137,163					150,676	137,163
Subtotal	9,678,260	9,543,973			11,379,894	11,261,973	21,058,154	20,805,946
Debt Issued
Letters of credit for residential purposes			20,681	22,542			20,681	22,542
Letters of credit for general purposes			2,207	2,532			2,207	2,532
Bonds			6,338,858	5,896,424			6,338,858	5,896,424
Subordinated bonds					697,693	699,926	697,693	699,926
Subtotal			6,361,746	5,921,498	697,693	699,926	7,059,439	6,621,424
Total	9,678,260	9,543,973	6,361,746	5,921,498	12,077,587	11,961,899	28,117,593	27,427,370

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(f) Levels of other assets and liabilities, continued:

The Bank determines the fair value of these assets and liabilities according to the following:

· Short-term assets and liabilities: For assets and liabilities with short-term maturity, it is assumed that the book values approximate to their fair value. This assumption is applied to the following assets and liabilities:

Assets — -	Cash and deposits in banks	Liabilities — -	Current accounts and other demand deposits
-	Transactions in the course of collection	-	Transactions in the course of payments
-	Repurchase agreements and security lending	-	Repurchase agreements and security lending
-	Loans and advance to banks	-	Other financial obligations

· Loans to Customers: Fair value is determined by using the discounted cash flow model and internally generated discount rates, based on internal transfer rates derived from our internal transfer price policy. Once the present value is determined, we deduct the related loan loss allowances in order to incorporate the credit risk associated with each contract or loan. As we use internally generated parameters for valuation purposes, we categorize these instruments in Level 3.

· Letters of Credit and Bonds: In order to determine the present value of contractual cash flows, we apply the discounted cash flow model by using market interest rates that are available in the market, either for the instruments under valuation or instruments with similar features that fit valuation needs in terms of currency, maturities and liquidity. The market interest rates are obtained from third party price providers widely used by the market. As a result of the valuation technique and the quality of inputs (observable) used for valuation, we categorize these financial liabilities in Level 2.

· Saving Accounts, Time Deposits, Borrowings from Financial Institutions and Subordinated Bonds: The discounted cash flow model is used to obtain the present value of committed cash flows by applying a bucket approach and average adjusted discount rates that derived from both market rates for instruments with similar features and our internal transfer price policy. As we use internally generated parameters and/or apply significant judgmental analysis for valuation purposes, we categorize these financial liabilities in Level 3.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*39. Fair Value of Financial Assets and Liabilities, continued:*

(g) Offsetting of financial assets and liabilities:

The Bank trades financial derivatives with foreign counterparties using ISDA Master Agreement (International Swaps and Derivatives Association, Inc.), under legal jurisdiction of the City of New York USA or London United Kingdom. Legal framework in these jurisdictions, along with documentation mentioned, it allows Banco de Chile the right to anticipate the maturity of the transaction and then, offset the net value of those transactions in case of default of counterparty. Additionally, the Bank has negotiated with these counterparties an additional annex (CSA Credit Support Annex), that includes other credit mitigating, such as entering margins on a certain amount of net value of transactions, early termination (optional or mandatory) of transactions at certain dates in the future, coupon adjustment of transaction in exchange for payment of the debtor counterpart over a certain threshold amount, etc.

Below are detail the contracts susceptible to offset:

	Fair Value — March	December	Negative Fair Value of contracts with right to offset — March		December		Positive Fair Value of contracts with right to offset — March		December		Financial Collateral — March		December		Net Fair Value — March	December
	2018	2017	2018		2017		2018		2017		2018		2017		2018	2017
	MCh$	MCh$	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$	MCh$
Derivative financial assets	1,229,401	1,247,829	(390,336	)	(155,595	)	(449,900	)	(444,844	)	(39,282	)	(34,212	)	349,883	613,178
Derivative financial liabilities	1,389,117	1,414,237	(390,336	)	(155,595	)	(449,900	)	(444,844	)	(72,621	)	(83,523	)	476,260	730,275

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*40. Maturity of Assets and Liabilities:*

The table below details the main financial assets and liabilities grouped in accordance with their remaining maturity, including accrued interest as of March 31, 2018 and December 31, 2017, respectively. As these are for trading and available-for-sale instruments are included at their fair value:

	As of March 31, 2018 — Up to 1 month	Over 1 month and up to 3 months	Over 3 month and up to 12 months	Subtotal up to 1 year	Over 1 year and up to 3 years	Over 3 year and up to 5 years	Over 5 years	Subtotal over 1 year	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Assets
Cash and due from banks	920,445			920,445					920,445
Transactions in the course of collection	741,774			741,774					741,774
Financial Assets held-for-trading	1,586,858			1,586,858					1,586,858
Repurchase agreements and security lending	77,293	34,358	7,463	119,114					119,114
Derivative instruments	89,272	187,592	272,773	549,637	258,892	169,174	251,698	679,764	1,229,401
Loans and advances to banks (*)	536,568	125,160	109,248	770,976	18,161			18,161	789,137
Loans to customers (*)	3,646,483	2,091,526	4,202,332	9,940,341	5,556,366	2,945,807	7,417,245	15,919,418	25,859,759
Financial assets available-for-sale	27,238	68,480	807,923	903,641	215,110	140,446	161,143	516,699	1,420,340
Financial assets held-to-maturity
Total assets	7,625,931	2,507,116	5,399,739	15,532,786	6,048,529	3,255,427	7,830,086	17,134,042	32,666,828

	As of December 31, 2017 — Up to 1 month	Over 1 month and up to 3 months	Over 3 month and up to 12 months	Subtotal up to 1 year	Over 1 year and up to 3 years	Over 3 year and up to 5 years	Over 5 years	Subtotal over 1 year	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Assets
Cash and due from banks	1,057,393			1,057,393					1,057,393
Transactions in the course of collection	521,809			521,809					521,809
Financial Assets held-for-trading	1,616,647			1,616,647					1,616,647
Repurchase agreements and security lending	67,344	19,207	5,090	91,641					91,641
Derivative instruments	127,849	133,111	364,957	625,917	248,066	125,303	248,543	621,912	1,247,829
Loans and advances to banks (*)	531,959	48,717	148,758	729,434	30,851			30,851	760,285
Loans to customers (*)	3,734,931	1,851,564	4,224,817	9,811,312	5,326,979	2,941,239	7,360,005	15,628,223	25,439,535
Financial assets available-for-sale	5,084	29,770	917,627	952,481	166,626	188,535	208,421	563,582	1,516,063
Financial assets held-to-maturity
Total assets	7,663,016	2,082,369	5,661,249	15,406,634	5,772,522	3,255,077	7,816,969	16,844,568	32,251,202

(*) These balances are presented without deduction of their respective provisions, which amount to Ch$564,730 million (Ch$558,182 million in December 2017) for loans to customers and Ch$660 million (Ch$583 million in December 2017) for borrowings from financial institutions.

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Table of Contents

*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*40. Maturity of Assets and Liabilities, continued:*

	As of March 31, 2018 — Up to 1 month	Over 1 month and up to 3 months	Over 3 month and up to 12 months	Subtotal up to 1 year	Over 1 year and up to 3 years	Over 3 year and up to 5 years	Over 5 years	Subtotal over 1 year	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Liabilities
Current accounts and other demand deposits	8,800,358			8,800,358					8,800,358
Transactions in the course of payment	467,064			467,064					467,064
Repurchase agreements and security lending	220,334	1,761	38,067	260,162					260,162
Savings accounts and time deposits (**)	4,915,219	2,608,284	2,569,142	10,092,645	60,640	421	168	61,229	10,153,874
Derivative instruments	86,196	192,249	321,244	599,689	262,850	199,446	327,132	789,428	1,389,117
Borrowings from financial institutions	131,631	226,966	563,475	922,072	90,882			90,882	1,012,954
Debt issued:
Mortgage bonds	1,494	2,029	4,122	7,645	7,824	3,878	2,045	13,747	21,392
Bonds	47,603	591,494	434,431	1,073,528	773,069	1,081,776	3,263,785	5,118,630	6,192,158
Subordinate bonds	9,067	23,289	20,400	52,756	46,600	33,227	565,726	645,553	698,309
Other financial obligations	120,376	2,223	12,572	135,171	13,348	1,787	370	15,505	150,676
Total liabilities	14,799,342	3,648,295	3,963,453	22,411,090	1,255,213	1,320,535	4,159,226	6,734,974	29,146,064

	As of December 31, 2017 — Up to 1 month	Over 1 month and up to 3 months	Over 3 month and up to 12 months	Subtotal up to 1 year	Over 1 year and up to 3 years	Over 3 year and up to 5 years	Over 5 years	Subtotal over 1 year	Total
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Liabilities
Current accounts and other demand deposits	8,915,706			8,915,706					8,915,706
Transactions in the course of payment	295,712			295,712					295,712
Repurchase agreements and security lending	138,630		56,762	195,392					195,392
Savings accounts and time deposits (**)	4,946,212	2,280,011	2,604,864	9,831,087	22,041	311	219	22,571	9,853,658
Derivative instruments	117,443	146,602	410,270	674,315	269,651	173,964	296,307	739,922	1,414,237
Borrowings from financial institutions	267,183	240,048	613,795	1,121,026	74,002			74,002	1,195,028
Debt issued:
Mortgage bonds	1,875	1,997	4,537	8,409	8,572	4,159	2,284	15,015	23,424
Bonds	147,029	274,119	595,599	1,016,747	836,725	1,043,853	2,872,009	4,752,587	5,769,334
Subordinate bonds	3,627	2,063	45,843	51,533	48,183	36,565	559,936	644,684	696,217
Other financial obligations	105,870	3,331	10,298	119,499	15,474	1,797	393	17,664	137,163
Total liabilities	14,939,287	2,948,171	4,341,968	22,229,426	1,274,648	1,260,649	3,731,148	6,266,445	28,495,871

(**) Excludes term saving accounts, which amount to Ch$217,173 million (Ch$214,120 million in December 2017)

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*NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued*

(Free translation of interim financial statements originally issued in Spanish)

*41. Subsequent Events:*

In Managements opinion, there are no significant subsequent events that affect or could affect the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries between March 31, 2018 and the date of issuance of these Interim Consolidated Financial Statements.

Héctor Hernández G. General Accounting Manager Eduardo Ebensperger O. Chief Executive Officer

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*SIGNATURE*

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.

Date: April 27, 2018
	Banco de Chile
	/S/ Eduardo Ebensperger O.
By:	Eduardo Ebensperger O. CEO

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