Edgar Filing: BANK OF CHILE

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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, 2016

Commission File Number 001-15266

BANK OF CHILE

(Translation of registrant’s 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 AND SUBSIDIARIES

Index

I.	Interim Condensed Consolidated Statements of Financial Position
II.	Interim Condensed Consolidated Statements of Comprehensive Income
III.	Interim Condensed Consolidated Statements of Other Comprehensive Income
IV.	Interim Condensed Consolidated Statements of Changes in Equity
V.	Interim Condensed Consolidated Statements of Cash Flows
VI.	Notes to the Interim Condensed Consolidated Financial Statements


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

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BANCO DE CHILE AND SUBSIDIARIES

INDEX

		Page
Interim Condensed Consolidated Statement of Financial Position		3
Interim Condensed Consolidated Statements of Comprehensive Income		4
interim Condensed Consolidated Statement of Changes in Equity		6
Interim Condensed Consolidated Statements of Cash Flows		7
1.	Corporate information:	8
2.	Legal provisions, basis of preparation and other information:	8
3.	New Accounting Pronouncements:	12
4.	Changes in Accounting policies and Disclosures:	15
5.	Relevant Events:	16
6.	Segment Reporting:	17
7.	Cash and Cash Equivalents:	20
8.	Financial Assets Held-for-trading:	21
9.	Cash collateral on securities borrowed and reverse repurchase agreements:	22
10.	Derivative Instruments and Accounting Hedges:	24
11.	Loans and advances to Banks:	29
12.	Loans to Customers, net:	30
13.	Investment Securities:	36
14.	Investments in Other Companies:	38
15.	Intangible Assets:	40
16.	Property and equipment:	43
17.	Current Taxes and Deferred Taxes:	46
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:	59
24.	Provisions:	59
25.	Other Liabilities:	63
26.	Contingencies and Commitments:	64
27.	Equity:	69
28.	Interest Revenue and Expenses:	73
29.	Income and Expenses from Fees and Commissions:	75
30.	Net Financial Operating Income:	75
31.	Foreign Exchange Transactions, net:	76
32.	Provisions for Loan Losses:	77
33.	Personnel Expenses:	78
34.	Administrative Expenses:	79
35.	Depreciation, Amortization and Impairment:	80
36.	Other Operating Income:	81
37.	Other Operating Expenses:	82
38.	Related Party Transactions:	83
39.	Fair Value of Financial Assets and Liabilities:	89
40.	Maturity of Assets and Liabilities:	103
41.	Subsequent Events:	105

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BANCO DE CHILE
REPORT ON FORM 6-K

Attached Banco de Chile’s Consolidated Financial Statements with notes as of March 31, 2016.

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended March 31, 2016 and December 31, 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	March 2016		December 2015
		MCh$		MCh$
ASSETS
Cash and due from banks	7	936,459		1,361,222
Transactions in the course of collection	7	627,906		526,046
Financial assets held-for-trading	8	1,230,122		866,654
Cash collateral on securities borrowed and reverse repurchase agreements	9	37,358		46,164
Derivative instruments	10	1,102,172		1,127,122
Loans and advances to banks	11	1,558,556		1,395,195
Loans to customers, net	12	23,896,852		23,956,275
Financial assets available-for-sale	13	778,194		1,000,001
Financial assets held-to-maturity	13	—		—
Investments in other companies	14	28,718		28,126
Intangible assets	15	26,464		26,719
Property and equipment	16	214,641		215,671
Current tax assets	17	4,219		3,279
Deferred tax assets	17	257,877		255,972
Other assets	18	406,288		484,498
TOTAL ASSETS		31,105,826		31,292,944
LIABILITIES
Current accounts and other demand deposits	19	7,856,852		8,327,048
Transactions in the course of payment	7	421,078		241,842
Cash collateral on securities lent and repurchase agreements	9	189,331		184,131
Savings accounts and time deposits	20	10,730,905		9,907,692
Derivative instruments	10	1,129,658		1,127,927
Borrowings from financial institutions	21	1,207,364		1,529,627
Debt issued	22	5,957,559		6,102,208
Other financial obligations	23	175,266		173,081
Current tax liabilities	17	22,325		27,993
Deferred tax liabilities	17	34,908		32,953
Provisions	24	363,075		639,043
Other liabilities	25	256,510		259,312
TOTAL LIABILITIES		28,344,831		28,552,857
EQUITY	27
Attributable to Bank’s Owners:
Capital		2,138,047		2,041,173
Reserves		486,083		390,616
Other comprehensive income		54,918		57,709
Retained earnings:
Retained earnings from previous periods		16,060		16,060
Income for the period		132,527		558,995
Less:
Provision for minimum dividends		(66,641	)	(324,469	)
Subtotal		2,760,994		2,740,084
Non-controlling interests		1		3
TOTAL EQUITY		2,760,995		2,740,087
TOTAL LIABILITIES AND EQUITY		31,105,826		31,292,944

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

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three-month ended March 31, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	March 2016		March 2015
		MCh$		MCh$
Interest revenue	28	469,729		365,618
Interest expense	28	(168,558	)	(101,895	)
Net interest income		301,171		263,723

Income from fees and commissions	29	107,636		102,372
Expenses from fees and commissions	29	(30,226	)	(30,271	)
Net fees and commission income		77,410		72,101

Net financial operating income	30	37,684		22,005
Foreign exchange transactions, net	31	(11,992	)	15,503
Other operating income	36	6,579		8,147
Total operating revenues		410,852		381,479

Provisions for loan losses	32	(64,830	)	(65,432	)

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES		346,022		316,047

Personnel expenses	33	(105,298	)	(93,557	)
Administrative expenses	34	(76,220	)	(68,389	)
Depreciation and amortization	35	(7,976	)	(7,386	)
Impairment	35	(4	)	—
Other operating expenses	37	(4,612	)	(9,686	)

TOTAL OPERATING EXPENSES		(194,110	)	(179,018	)

NET OPERATING INCOME		151,912		137,029

Income attributable to associates	14	667		691
Income before income tax		152,579		137,720

Income tax	17	(20,052	)	(21,005	)

NET INCOME FOR THE PERIOD		132,527		116,715

Attributable to:
Bank’s Owners		132,527		116,715
Non-controlling interests		—		—

		Ch$	Ch$
Net income per share attributable to Bank’s Owners:
Basic net income per share	27	1.38	1.21
Diluted net income per share	27	1.38	1.21

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

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three-month ended March 31, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	March 2016		March 2015
		MCh$		MCh$

NET INCOME FOR THE YEAR		132,527		116,715

Other comprehensive income that will be reclassified subsequently to profit or loss

Net unrealized gains (losses):
Net change in unrealized gains (losses) on available for sale instruments	13	320		7,317
Gains and losses on derivatives held as cash flow hedges	10	(3,992	)	(5,374	)
Cumulative translation adjustment	27	(1	)	—
Subtotal Other comprehensive income before income taxes		(3,673	)	1,943

Income tax		882		(373	)

Total other comprehensive income items that will be reclassified subsequently to profit or loss		(2,791	)	1,570

Other comprehensive income that will not be reclassified subsequently to profit or loss

Loss in defined benefit plans		—		—

Subtotal other comprehensive income before income taxes		—		—

Income taxes		—		—

Total other comprehensive income items that will not be reclassified subsequently to profit or loss		—		—

TOTAL CONSOLIDATED COMPREHENSIVE INCOME		129,736		118,285

Attributable to:
Equity holders of the parent		129,736		118,285
Non-controlling interest		—		—

	Ch$	Ch$
Comprehensive net income per share from continued operations attributable to equity holders of the parent:
Basic net income per share	1.35	1.23
Diluted net income per share	1.35	1.23

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

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the three-month ended March 31, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in millions of Chilean pesos)

			Reserves			Other comprehensive income					Retained earnings
	Notes	Paid-in Capital	Other reserves		Reserves from earnings	Unrealized gains (losses) on available-for- sale	Derivatives cash flow hedge		Cumulative translation adjustment		Retained earnings from previous periods		Income for the year		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$		MCh$
Balances as of December 31, 2014		1,944,920	31,834		231,424	33,962	10,086		57		16,379		591,080		(324,588	)	2,535,154		2		2,535,156
Capitalization of retained earnings	27	96,253	—		—	—	—		—		—		(96,253	)	—		—		—		—
Income retention (released) according to law		—	—		127,383	—	—		—		—		(127,383	)	—		—		—		—
Dividends distributions and paid	27	—	—		—	—	—		—		—		(367,444	)	324,588		(42,856	)	(1	)	(42,857	)
Other comprehensive income:	27
Cumulative translation adjustment		—	—		—	—	—		—		—		—		—		—		—		—
Derivatives cash flow hedge, net		—	—		—	—	(4,165	)	—		—		—		—		(4,165	)	—		(4,165	)
Valuation adjustment on available-for-sale instruments (net)		—	—		—	5,735	—		—		—		—		—		5,735		—		5,735
Income for the period 2015		—	—		—	—	—		—		—		116,715		—		116,715		—		116,715
Equity adjustment investment in other companies		—	(1	)	—	—	—		—		(319	)	—		—		(320	)	—		(320	)
Provision for minimum dividends	27	—	—		—	—	—		—		—		—		(81,701	)	(81,701	)	—		(81,701	)
Balances as of March 31, 2015		2,041,173	31,833		358,807	39,697	5,921		57		16,060		116,715		(81,701	)	2,528,562		1		2,528,563
Dividends distribution and paid		—	—		—	—	—		—		—		—		—		—		2		2
Defined benefit plans adjustment		—	(24	)	—	—	—		—		—		—		—		(24	)	—		(24	)
Other comprehensive income:
Cumulative translation adjustment		—	—		—	—	—		2		—		—		—		2		—		2
Cash flow hedge adjustment, net		—	—		—	—	11,893		—		—		—		—		11,893		—		11,893
Valuation adjustment on available-for-sale instruments, net		—	—		—	139	—		—		—		—		—		139		—		139
Income for the period 2015		—	—		—	—	—		—		—		442,280		—		442,280		—		442,280
Provision for minimum dividends		—	—		—	—	—		—		—		—		(242,768	)	(242,768	)	—		(242,768	)
Balances as of December 31, 2015		2,041,173	31,809		358,807	39,836	17,814		59		16,060		558,995		(324,469	)	2,740,084		3		2,740,087
Capitalization of retained earnings	27	96,874	—		—	—	—		—		—		(96,874	)	—		—		—		—
Retention (released) earnings		—	—		95,467	—	—		—		—		(95,467	)	—		—		—		—
Dividends distributions and paid	27	—	—		—	—	—		—		—		(366,654	)	324,469		(42,185	)	(2	)	(42,187	)
Other comprehensive income:	27
Cumulative translation adjustment		—	—		—	—	—		(1	)	—		—		—		(1	)	—		(1	)
Cash flow hedge adjustment, net		—	—		—	—	(3,034	)	—		—		—		—		(3,034	)	—		(3,034	)
Valuation adjustment on available-for-sale instruments (net)		—	—		—	244	—		—		—		—		—		244		—		244
Income for the period 2016		—	—		—	—	—		—		—		132,527		—		132,527		—		132,527
Provision for minimum dividends	27	—	—		—	—	—		—		—		—		(66,641	)	(66,641	)	—		(66,641	)
Balances As of March 31, 2016		2,138,047	31,809		454,274	40,080	14,780		58		16,060		132,527		(66,641	)	2,760,994		1		2,760,995

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

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BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three-month ended March 31, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	March 2016		March 2015
		MCh$		MCh$
OPERATING ACTIVITIES:
Net income for the period		132,527		116,715
Items that do not represent cash flows:
Depreciation and amortization	35	7,976		7,386
Impairment of intangible assets and property and equipment	35	4		—
Provision for loan losses	32	72,590		76,781
Provision of contingent loans	32	2,622		1,120
Additional provisions	32	—		—
Fair value adjustment of financial assets held-for-trading		(3,095	)	156
Income attributable to investments in other companies	14	(651	)	(677	)
Income from sales of assets received in lieu of payment	36	(2,379	)	(764	)
Net gain on sales of property and equipment	36-37	(32	)	(28	)
(Increase) decrease in other assets and liabilities		72,458		(95,057	)
Charge-offs of assets received in lieu of payment	37	1,699		437
Other charges (credits) to income that do not represent cash flows		(64	)	1,226
(Gain) loss from foreign exchange transactions of other assets and other liabilities		22,327		(11,816	)
Net changes in interest and fee accruals		(8,906	)	(116,786	)
Changes in assets and liabilities that affect operating cash flows:
(Increase) decrease in loans and advances to banks, net		(163,470	)	(316,477	)
(Increase) decrease in loans to customers		(8,082	)	(135,222	)
(Increase) decrease in financial assets held-for-trading, net		(225,662	)	26,137
(Increase) decrease in deferred taxes, net	17	(26	)	4,237
(Increase) decrease in current account and other demand deposits		(469,763	)	114,755
(Increase) decrease in payables from repurchase agreements and security lending		(435	)	5,094
(Increase) decrease in savings accounts and time deposits		805,592		35,566
Proceeds from sale of assets received in lieu of payment		4,616		1,311
Total cash flows from operating activities		239,846		(52,334	)
INVESTING ACTIVITIES:
(Increase) decrease in financial assets available-for-sale, net		93,511		198,129
Purchases of property and equipment	16	(4,757	)	(4,658	)
Proceeds from sales of property and equipment		42		40
Purchases of intangible assets	15	(1,855	)	(2,405	)
Investments in other companies	14	—		—
Dividends received from investments in other companies	14	—		(72	)
Total cash flows from investing activities		86,941		191,034
FINANCING ACTIVITIES:
Redemption of mortgage finance bonds		(1,826	)	(4,451	)
Proceeds from bond issuances	22	126,570		480,406
Redemption of bond issuances		(248,297	)	(297,130	)
Proceeds from subscription and payment of shares		—		—
Dividends paid	27	(366,654	)	(367,444	)
(Increase) decrease in borrowings from foreign financial institutions		(322,749	)	94,372
(Increase) decrease in other financial obligations		3,030		(20,296	)
(Increase) decrease in borrowings from Central Bank of Chile		(1	)	(1	)
Other borrowings (long-term)		17,783		13,705
Payment of other borrowings (long-term)		(18,557	)	(14,470	)
Total cash flows from financing activities		(810,701	)	(115,309	)
TOTAL NET POSITIVE CASH FLOWS FOR THE PERIOD		(483,914	)	23,391
Net effect of exchange rate changes on cash and cash equivalents		(22,327	)	11,816
Cash and cash equivalents at beginning of year		2,093,908		1,825,578
Cash and cash equivalents at end of period	7	1,587,667		1,860,785

Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest received		464,318		434,556
Interest paid		(172,053	)	(54,047	)

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

1. Corporate information:

Banco de Chile is authorized to operate like a commercial bank since June 17, 1996, in conformity with the Article 25 of Law No, 19,396. Banco de Chile, resulting from the merger of Banco Nacional de Chile, Banco Agrícola and Banco de Valparaíso, was formed on October 28, 1893 in the city of Santiago, in the presence of the Notary Eduardo Reyes Lavalle.

Banco de Chile (“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, - when the bank was first listed on the New York Stock Exchange (“NYSE”), in the course of its American Depository Receipt (ADR) program — Banco de Chile additionally follows the regulations published by the United States Securities and Exchange Commission (“SEC”).

Banco de Chile offers a broad range of banking services to its customers, ranging from individuals to large corporations. The services are managed in large corporate banking, middle and small corporate banking, personal banking services and retail. Additionally, the Bank offers international as well as treasury banking services. The Bank’s subsidiaries provide other services including securities brokerage, mutual fund and investment management, insurance brokerage, financial advisory and securitization.

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

The Interim Condensed Consolidated Financial Statements of Banco de Chile, for the period ended March 31, 2016 were approved for issuance in accordance with the directors on April 28, 2016.

2. Legal provisions, basis of preparation and other information:

(a) Legal provisions:

The General Banking Law in its Article No.15 authorizes the Chilean Superintendency of Banks (SBIF) to issue generally applicable accounting standards for entities it supervises. The Corporations Law, in turn, requires generally accepted accounting principles to be followed.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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

(b) Basis of preparation:

(b.1) These Interim Condensed 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 controlling interest and that are therefore consolidated in these financial statements:

				Interest Owned
				Direct		Indirect		Total
			Functional	2016	2015	2016	2015	2016	2015
RUT	Subsidiaries	Country	Currency	%	%	%	%	%	%
44,000,213-7	Banchile Trade Services Limited (*)	Hong Kong	US$	100.00	100.00	—	—	100.00	100.00
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
96,510,950-1	Promarket S.A.	Chile	Ch$	99.00	99.00	1.00	1.00	100.00	100.00

(*) On May 29, 2014 the Board of Directors of Banco de Chile agreed to dissolve liquidate and terminate this entity. At the date of these Financials Statements these process is ongoing.

(c) Use of estimates and judgment:

Preparing financial statements requires management to make judgments, estimations and assumptions that affect the application of accounting policies and the valuation of assets, liabilities, income and expenses presented. Real results could differ from these estimated amounts. Details on the use of estimates and judgment and their effect on the amounts recognized in the Interim Condensed Consolidated Financial Statement are included in the following notes:

1. Useful lives of property and equipment and intangible assets (Notes No.15 and No.16);

3. Income taxes and deferred taxes (Note No. 17);

4. Provisions (Note No. 24);

5. Contingencies and Commitments (Note No. 26);

6. Provision for loan losses (Note No. 11, No. 12 and No. 32);

7. 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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

(c) Use of estimates and judgment, continued:

In January 2016 it was implemented rules changes related to Compendium of Accounting Rules of Superintendency of Banks and Financial Institutions, published in Circular No. 3,573. These changes affected provisions by an amount of Ch$3,308 million according to followings:

a) It enlarges risk classifications until A3 for guarantees with the objective of replace the probability of default of the debtor by of the guarantee at the moment to make the provision. This impacted in a provision release of Ch$2,125 million.

b) A new rule to specific provisions for factoring operations, that allows the substitution of the default probability of the grantor by the bill acceptor, as long as this is classified in a category until A3. This impacted in a provision release of Ch$2,420 million.

c) A new definition of non-complying, according to the Circular No. 3,584 of June 22, 2015, which requested calibration of models of group provision (specifically the probability of non-complying an the loss produced by the non-complying.

The above implied a charge to income of Ch$7,853 million.

During the period of March 31, 2016, there have not been others significant changes in the estimates.

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

Due to the nature of its business, the Bank and its subsidiaries’ activities do not have a cyclical or seasonal character. Accordingly, no specific details have been included on the notes to this Interim Condensed Consolidated Financial Statements with the information regarding the period of three-month ended March 31, 2016.

(e) Relative Importance:

When determining the information to present on the different items from the financial statements or other subjects, the Bank has considered the relative importance in relation to the Interim Condensed Consolidated financial statements of the period.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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

(f) Reclassifications:

On May 25, 2015 the Superintendency of Banks and Financial Institutions issued a Circular No. 3,583; which modifies the Chapter C-3 of Compendium of Accounting Rules establishing a new opening for classification of credits for higher education inside of Commercial Loans.

This modification implied the reclassification of higher education loans from “Consumer Loans” to “Commercial Loans” by an amount of CH$41,885 million as of March 31, 2016. See Note No. 12 (a.i).

There have not been others significant reclassifications at the end of this period 2016.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

3. New Accounting Pronouncements:

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) that it is not effective as of March 31, 2016:

IFRS 9 Financial Instruments

The July 24, 2014, IASB completed its upgrade project about accounting for financial instruments with the publication of IFRS 9 Financial Instruments.

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

The classification determines how financial assets and liabilities are accounted in financial statements and, in particular, how they are measured. IFRS 9 introduces a new approach for the classification of financial assets, based in the business model of the entity for the management of financial assets and the characteristic of it contractual flows.

The IASB has introduced single impairment model that will apply all financial instruments, which will require a timely recognition of expected credit losses.

IFRS 9 introduces accounting hedge, and also new alternatives of strategies to use. The amendments changes to requirements for a substantial overhaul of hedge accounting that aligns the accounting treatment with 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 about risk management and the effect of hedge accounting on the financial statements

IFRS 9 established that the fair value of credit risk of the entity shall be recognized in Other Comprehensive Income, allowing decrease any eventual volatility that would be generated in the income of the entity, because its recognition. IFRS 9 permits early application of this improvement, before any other requirement of IFRS 9.

Mandatory adoption date is January 1, 2018. Early application is permitted.

Banco de Chile and its subsidiaries are assessing the possible impact of adoption of these changes on the consolidated financial statements.

The Superintendency of Banks and Financial Institutions has not approved this rule. This event is required to its application.

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3. New Accounting Pronouncements, continued:

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 util 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 rule replace the following current rules and interpretations: IAS 18 — Revenue, IAS 11 — Construction contracts, IFRIC 13 — Customer Loyalty Programmes, 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.

Application of the standard is mandatory for annual reporting periods starting from January 1, 2018 onward, early application is permitted.

Banco de Chile and its subsidiaries are assessing the impact of the adoption of this rule.

IFRS 16 Leases

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

This new rule is no different to the previous rule, IAS 17 — Leases, related to the accounting treatment for the lessor. However, related to the lessee, the new rule requires recognize the assets and liabilities, so eliminate the differences between financial lease and operating lease.

The effective date of application is beginning January 1, 2019. It is permitted its early application but, only if it is applied IFRS 15 also.

Banco de Chile and its subsidiaries are assessing the impact of this rule.

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3. New Accounting Pronouncements, continued:

IAS 7 Statement of Cash Flows

On January 2016, the IASB has published amendments to IAS 7, which has as objective that entities shall provide additional disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including changes from financing cash flows and other changes that are not cash flows.

The amendments are effective for annual periods beginning on or after 1 January 2017, earlier application is permitted.

Banco de Chile and its subsidiaries will apply these requirements, if at date of financial statements there are modifications of liabilities, according described above.

IAS 12 Income Taxes

On January 2016, the IASB has published amendments to IAS 12, to clarify the recognition of deferred tax assets on debt instruments measured at fair value, assessing if the Bank has probability to generate futures fiscal income for use the deductible temporary difference.

The amendments are effective for annual periods beginning on or after 1 January 2017, earlier application is permitted.

This rule will have not impact in 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.

On December 2015, the IASB agreed that the amendments should apply in the future, and its early application is permitted.

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

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3. New Accounting Pronouncements, continued:

Rules issued by the Superintendency of Banks and Financial Institutions

On March 29, 2016 the Superintendency of Banks and Financial Institutions issued Circular No. 3,604, where it has established a decrease from a 50% to 35% in the percentage of credit equivalent for credit lines with freely available. In consequence, it has modified the Chapter B-3 of Compendium of accounting rules. This amendment is effective since May 2016.

4. Changes in Accounting policies and Disclosures:

During the period ending as of March 31, 2016, there has been no significant accounting changes that affect the presentation of these interim financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

5. Relevant Events:

a) On January 28, 2016, in the Ordinary Meeting No. BCH 2832, the Board of Directors of Banco de Chile resolved to call an Ordinary Shareholders Meeting to be held on March 24th, 2016, with the objective of proposing, among other matters, the distribution of the Dividend number 204 of $3.37534954173 per each of the 96,129,146,433 shares, which will be payable at the expense of the distributable net income obtained during the fiscal year ending on December 31st, 2015, corresponding to the 70% of such income.

Likewise, the Board of Directors resolved to call an Extraordinary Shareholders Meeting to be held on the same date in order to propose, among other matters, the capitalization of the 30% of the distributable net income of the Bank obtained during the fiscal year ending on December 31st, 2015, through the issuance of fully paid-in shares, of no par value, with a value $64.79 per share, which will be distributed among the shareholders in the proportion of 0.02232718590 shares for each share and to adopt the necessary agreements subject to the exercise of the options established in article 31 of Law 19,396.

Moreover, the Board, according to the established in No. 3.2 Chapter B4 of Compendium of Accounting Standards of the Superintendency of Banks and Financial Institutions, about minimum dividends provision, agreed to establish that since January 2016 it will constitute provision by the 60% of distributable net income that it will be accumulating during the each period.

b) The Board of Directors of Banco de Chile, in Meeting No. BCH 2,835 held on March 24, 2016, agreed to accept the resignation of the CEO Mr. Arturo Tagle Quiroz, effective April 30, 2016.

Likewise, in the above referred Meeting the Board appointed Mr. Eduardo Ebensperger Orrego as CEO of Banco de Chile, effective May 1, 2016.

Lastly, Mr. Arturo Tagle Quiroz was appointed as advisor to the Board of Directors effective May 1, 2016.

c) On March 29, 2016 Banco de Chile informed as Essential Information that Central Bank of Chile has communicated to Banco de Chile that the Board of such institution (Consejo), in Special Session No 1967E, held on March 28, 2016, considering the resolutions adopted by the shareholders’ meetings of Banco de Chile of March 24, 2016, regarding distribution of dividends and the increase of capital through the issuance of fully paid-in shares corresponding to the 30% of the net income obtained during the fiscal year ending on December 31, 2015, 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 the letter b) of the article 31 of the law No 19.396, regarding a modification of the way of payment of the subordinated obligation and other applicable legislation.

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6. Segment Reporting:

For management purposes, the Bank has organized its operations and commercial strategies into four business segments, which are defined in accordance with the type of products and services offered to target customers. These business segments are currently defined as follows:

Retail: This segment focuses on individuals and small and medium-sized companies with annual sales up to 70,000UF, 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 70,000UF, where the product offering focuses primarily on commercial loans, checking accounts and liquidity management services, debt instruments, foreign trade, derivative contracts and leases.

Treasury and money market operations:

This segment includes revenue associated with managing the Bank’s balance sheet (currencies, maturities and interest rates) and liquidity, including financial instrument and currency trading on behalf of the Bank itself.

Transactions on behalf of 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, where 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.

· Banchile Trade Services Limited

· Socofin S.A.

· Promarket S.A.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

6. Segment Reporting, continued:

The financial information used to measure the performance of the Bank’s business segments is not necessarily comparable with similar information from other financial institutions because it is based on internal reporting policies. The accounting policies used to prepare the Bank’s operating segment information are similar as those described in “Summary of Significant Accounting Principles”. The Bank obtains the majority of its income from: interest, revaluations and fees, discounted the credit cost and expenses. Management is mainly based on these concepts in its evaluation of segment performance and decision-making regarding goals, allocation of resources for each unit individually. Although the results of the segments reconcile with those of the Bank at total level, it is not thus necessarily concerning the different concepts, since the management is measured and controls in individual form and 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 is considered the volume of each operation and its contribution margin, stemming from the difference between the effective customer rate and the related Bank’s fund transfer price in terms of maturity and currency.

· The internal performance profitability system considers capital allocation in each segment in accordance to the Basel guidelines.

· Operating expenses are distributed at each area level. The Bank allocates all of its indirect operating costs to each business segment by utilizing a different cost driver in order to allocate such costs to the specific segment.

The Bank did not enter into transactions with a particular customer or third parties that exceed 10% or more of its total income during the three-month period ended March 31, 2016 and 2015.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

6. Segment Reporting, continued:

The following table presents the income by segment for the periods ended March 2016 and 2015 for each of the segments defined above:

	Retail				Wholesale				Treasury				Subsidiaries				Subtotal				Consolidation adjustment				Total
	March		March		March		March		March		March		March		March		March		March		March		March		March		March
	2016		2015		2016		2015		2016		2015		2016		2015		2016		2015		2016		2015		2016		2015
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Net interest income	212,763		190,270		84,053		70,521		5,015		3,857		(927	)	(1,395	)	300,904		263,253		267		470		301,171		263,723
Net fees and commissions income (loss)	40,409		34,954		10,426		11,341		(505	)	(451	)	30,753		30,421		81,083		76,265		(3,673	)	(4,164	)	77,410		72,101
Other operating income	24		6,835		1,280		13,989		25,656		19,366		6,236		6,615		33,196		46,805		(925	)	(1,150	)	32,271		45,655
Total operating revenue	253,196		232,059		95,759		95,851		30,166		22,772		36,062		35,641		415,183		386,323		(4,331	)	(4,844	)	410,852		381,479
Provisions for loan losses	(68,305	)	(60,526	)	3,485		(5,006	)	—		—		(10	)	100		(64,830	)	(65,432	)	—		—		(64,830	)	(65,432	)
Depreciation and amortization	(5,790	)	(5,275	)	(1,369	)	(1,311	)	(67	)	(160	)	(750	)	(640	)	(7,976	)	(7,386	)	—		—		(7,976	)	(7,386	)
Other operating expenses	(123,038	)	(112,553	)	(38,523	)	(37,080	)	(1,847	)	(1,778	)	(27,057	)	(25,065	)	(190,465	)	(176,476	)	4,331		4,844		(186,134	)	(171,632	)
Income attributable to associates	512		635		136		50		15		—		4		6		667		691		—		—		667		691
Income before income taxes	56,575		54,340		59,488		52,504		28,267		20,834		8,249		10,042		152,579		137,720		—		—		152,579		137,720
Income taxes																									(20,052	)	(21,005	)
Income after income taxes																									132,527		116,715

The following table presents assets and liabilities of the period ended March 31, 2016 and December 31, 2015 by each segment defined above:

	Retail		Wholesale		Treasury		Subsidiaries		Subtotal		Consolidation adjustment				Total
	March	December	March	December	March	December	March	December	March	December	March		December		March	December
	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015	2016		2015		2016	2015
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$		MCh$		MCh$	MCh$

Assets	14,854,862	14,431,003	11,631,983	11,866,488	4,001,688	4,362,051	577,797	523,080	31,066,330	31,182,622	(222,600	)	(148,929	)	30,843,730	31,033,693
Current and deferred taxes															262,096	259,251
Total assets															31,105,826	31,292,944

Liabilities	9,632,282	9,726,434	10,332,307	9,934,304	8,096,903	8,605,278	448,706	374,824	28,510,198	28,640,840	(222,600	)	(148,929	)	28,287,598	28,491,911
Current and deferred taxes															57,233	60,946
Total liabilities															28,344,831	28,552,857

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

7. Cash and Cash Equivalents:

(a) Cash and cash equivalents and their reconciliation to the statement of cash flows at each period-end are detailed as follows:

	March 2016	December 2015
	MCh$	MCh$
Cash and due from banks:
Cash(*)	619,303	672,253
Current account with the Chilean Central Bank(*)	85,743	111,330
Deposits in other domestic banks	9,817	9,676
Deposits abroad	221,596	567,963
Subtotal - Cash and due from banks	936,459	1,361,222

Net transactions in the course of collection	206,828	284,204
Highly liquid financial instruments	417,450	407,111
Repurchase agreements	26,930	41,371
Total cash and cash equivalents	1,587,667	2,093,908

(*) Amounts in cash and Central Bank deposits are regulatory reserve deposits for which the Bank must maintain a certain monthly average.

(b) Transactions in the course of collection:

Transactions in the 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 2016		December 2015