Edgar Filing: BANK OF CHILE

Table of Contents

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 July, 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-

Table of Contents

BANCO DE CHILE
REPORT ON FORM 6-K

Attached Banco de Chile’s Consolidated Financial Statements with notes as of June 30, 2016.

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

CONSOLIDATED INTERMEDIATE

FINANCIAL STATEMENTS

For the periods ended as of

June 30, 2016 and 2015 and

December 31, 2015.

Table of Contents

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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

INDEX

		Page
Interim Condensed Consolidated Statement of Financial Position		4
Interim Condensed Consolidated Statements of Comprehensive Income		5
Condensed Consolidated Statement of Changes in Equity		7
Interim Condensed Consolidated Statements of Cash Flows		8
1.	Corporate information:	9
2.	Legal provisions, basis of preparation and other information:	9
3.	New Accounting Pronouncements:	13
4.	Changes in Accounting policies and Disclosures:	15
5.	Relevant Events:	16
6.	Segment Reporting:	19
7.	Cash and Cash Equivalents:	22
8.	Financial Assets Held-for-trading:	23
9.	Cash collateral on securities borrowed and reverse repurchase agreements:	24
10.	Derivative Instruments and Accounting Hedges:	26
11.	Loans and advances to Banks:	31
12.	Loans to Customers, net:	32
13,	Investment Securities:	39
14.	Investments in Other Companies:	41
15.	Intangible Assets:	43
16.	Property and equipment:	45
17.	Current Taxes and Deferred Taxes:	48
18.	Other Assets:	52
19.	Current accounts and Other Demand Deposits:	53
20.	Savings accounts and Time Deposits:	53
21.	Borrowings from Financial Institutions:	54
22.	Debt Issued:	55
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:	76
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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended June 30, 2016 and December 31, 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	June 2016		December 2015
		MCh$		MCh$
ASSETS
Cash and due from banks	7	978,313		1,361,222
Transactions in the course of collection	7	626,653		526,046
Financial assets held-for-trading	8	1,441,372		866,654
Cash collateral on securities borrowed and reverse repurchase agreements	9	39,116		46,164
Derivative instruments	10	1,120,863		1,127,122
Loans and advances to banks	11	1,090,159		1,395,195
Loans to customers, net	12	24,099,024		23,956,275
Financial assets available-for-sale	13	583,290		1,000,001
Financial assets held-to-maturity	13	—		—
Investments in other companies	14	29,352		28,126
Intangible assets	15	27,200		26,719
Property and equipment	16	216,239		215,671
Current tax assets	17	2,072		3,279
Deferred tax assets	17	282,130		255,972
Other assets	18	472,196		484,498
TOTAL ASSETS		31,007,979		31,292,944
LIABILITIES
Current accounts and other demand deposits	19	7,859,630		8,327,048
Transactions in the course of payment	7	379,423		241,842
Cash collateral on securities lent and repurchase agreements	9	179,379		184,131
Savings accounts and time deposits	20	10,605,357		9,907,692
Derivative instruments	10	1,126,109		1,127,927
Borrowings from financial institutions	21	1,071,120		1,529,627
Debt issued	22	6,011,248		6,102,208
Other financial obligations	23	131,838		173,081
Current tax liabilities	17	16,617		27,993
Deferred tax liabilities	17	26,420		32,953
Provisions	24	496,164		639,043
Other liabilities	25	313,674		259,312
TOTAL LIABILITIES		28,216,979		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		10,272		57,709
Retained earnings:
Retained earnings from previous periods		16,060		16,060
Income for the period		283,512		558,995
Less:
Provision for minimum dividends		(142,975	)	(324,469	)
Subtotal		2,790,999		2,740,084
Non-controlling interests		1		3
TOTAL EQUITY		2,791,000		2,740,087
TOTAL LIABILITIES AND EQUITY		31,007,979		31,292,944

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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the six-month ended June 30, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	June 2016		June 2015
		MCh$		MCh$

Interest revenue	28	968,438		873,961
Interest expense	28	(362,166	)	(286,217	)
Net interest income		606,272		587,744

Income from fees and commissions	29	216,603		205,618
Expenses from fees and commissions	29	(58,846	)	(59,824	)
Net fees and commission income		157,757		145,794

Net financial operating income	30	99,260		31,573
Foreign exchange transactions, net	31	6,403		20,899
Other operating income	36	16,739		14,128
Total operating revenues		886,431		800,138

Provisions for loan losses	32	(157,759	)	(124,809	)

OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES		728,672		675,329

Personnel expenses	33	(206,620	)	(184,066	)
Administrative expenses	34	(157,958	)	(139,385	)
Depreciation and amortization	35	(16,566	)	(14,692	)
Impairment	35	(4	)	(58	)
Other operating expenses	37	(18,592	)	(13,657	)

TOTAL OPERATING EXPENSES		(399,740	)	(351,858	)

NET OPERATING INCOME		328,932		323,471

Income attributable to associates	14	1,831		1,745
Income before income tax		330,763		325,216

Income tax	17	(47,251	)	(40,118	)

NET INCOME FOR THE PERIOD		283,512		285,098
Attributable to:
Bank’s Owners		283,512		285,097
Non-controlling interests		—		1

		Ch$	Ch$
Net income per share attributable to Bank’s Owners:
Basic net income per share	27	2.95	2.97
Diluted net income per share	27	2.95	2.97

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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the six-month ended June 30, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	June 2016		June 2015
		MCh$		MCh$

NET INCOME FOR THE PERIOD		283,512		285,098

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

Net change in unrealized gains (losses) on available for sale instruments	13	(55,946	)	6,703
Gains and losses on derivatives held as cash flow hedges	10	(6,395	)	3,556
Cumulative translation adjustment	27	(59	)	—
Subtotal Other comprehensive income before income taxes		(62,400	)	10,259

Income tax		14,963		(2,254	)

Total other comprehensive income items that will be reclassified subsequently to profit or loss		(47,437	)	8,005

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 FOR THE PERIOD		236,075		293,103

Attributable to:
Bank’s Owners		236,075		293,102
Non-controlling interests		—		1

	Ch$	Ch$
Net income per share attributable to Bank’s Owners:
Basic net income per share	2.46	3.05
Diluted net income per share	2.46	3.05

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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the six-month ended June 30, 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 (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$		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		96,253	—		—	—		—		—		—		(96,253	)	—		—		—		—
Income retention (released) according to law	27	—	—		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		—	—		—	—		2,756		—		—		—		—		2,756		—		2,756
Valuation adjustment on available-for-sale instruments (net)		—	—		—	5,249		—		—		—		—		—		5,249		—		5,249
Income for the period 2015		—	—		—	—		—		—		—		285,097		—		285,097		1		285,098
Equity adjustment investment in other companies		—	(1	)	—	—		—		—		(319	)	—		—		(320	)	—		(320	)
Provision for minimum dividends		—	—		—	—		—		—		—		—		(175,579	)	(175,579	)	—		(175,579	)
Balances as of June 30, 2015		2,041,173	31,833		358,807	39,211		12,842		57		16,060		285,097		(175,579	)	2,609,501		2		2,609,503
Dividends distribution and paid		—	—		—	—		—		—		—		—		—		—		1		1
Defined benefit plans adjustment		—	(24	)	—	—		—		—		—		—		—		(24	)	—		(24	)
Other comprehensive income:
Cumulative translation adjustment		—	—		—	—		—		2		—		—		—		2		—		2
Derivatives cash flow hedge, net		—	—		—	—		4,972		—		—		—		—		4,972		—		4,972
Valuation adjustment on available-for-sale instruments (net)		—	—		—	625		—		—		—		—		—		625		—		625
Income for the period 2015		—	—		—	—		—		—		—		273,898		—		273,898		—		273,898
Provision for minimum dividends		—	—		—	—		—		—		—		—		(148,890	)	(148,890	)	—		(148,890	)
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		96,874	—		—	—		—		—		—		(96,874	)	—		—		—		—
Income retention (released) according to law	27	—	—		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		—	—		—	—		—		(59	)	—		—		—		(59	)	—		(59	)
Derivatives cash flow hedge, net		—	—		—	—		(4,860	)	—		—		—		—		(4,860	)	—		(4,860	)
Valuation adjustment on available-for-sale instruments (net)		—	—		—	(42,518	)	—		—		—		—		—		(42,518	)	—		(42,518	)
Income for the period 2016		—	—		—	—		—		—		—		283,512		—		283,512		—		283,512
Provision for minimum dividends	27	—	—		—	—		—		—		—		—		(142,975	)	(142,975	)	—		(142,975	)
Balances As of June 30, 2016		2,138,047	31,809		454,274	(2,682	)	12,954		—		16,060		283,512		(142,975	)	2,790,999		1		2,791,000

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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six-month ended June 30, 2016 and 2015

(Translation of financial statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

	Notes	June 2016		June 2015
		MCh$		MCh$
OPERATING ACTIVITIES:
Net income for the period		283,512		285,098
Items that do not represent cash flows:
Depreciation and amortization	35	16,566		14,692
Impairment of intangible assets and property and equipment	35	4		58
Provision for loan losses	32	135,169		150,141
Provision of contingent loans	32	(8,418	)	664
Additional provisions	32	52,075		—
Fair value adjustment of financial assets held-for-trading		(3,382	)	140
(Gain) loss attributable to investments in other companies	14	(1,527	)	(1,448	)
(Gain) loss from sales of assets received in lieu of payment net	36	(2,845	)	(1,394	)
(Gain) loss on sales of property and equipment	36-37	(60	)	(59	)
(Increase) decrease in other assets and liabilities		40,933		(151,837	)
Charge-offs of assets received in lieu of payment	37	2,516		865
Other charges (credits) to income that do not represent cash flows		(14,065	)	370
Net changes from foreign exchange transactions of other assets and other liabilities		30,018		(346,331	)
Net interest variation, readjustment and accrued fees on assets and liabilities		(108,902	)	119,941
Changes in assets and liabilities that affect operating cash flows:
(Increase) decrease in loans and advances to banks, net		304,371		(314,307	)
(Increase) decrease in loans to customers		(205,071	)	(894,736	)
(Increase) decrease in financial assets held-for-trading, net		(509,444	)	(20,933	)
(Increase) decrease in deferred taxes, net	17	(19,263	)	(6,755	)
Increase (decrease) in current account and other demand deposits		(466,592	)	278,255
Increase (decrease) in payables from repurchase agreements and security lending		(5,440	)	(4,142	)
Increase (decrease) in savings accounts and time deposits		677,734		190,927
Proceeds from sale of assets received in lieu of payment		6,781		3,580
Total cash flows from operating activities		204,670		(697,211	)
INVESTING ACTIVITIES:
(Increase) decrease in financial assets available-for-sale, net		242,410		260,997
Purchases of property and equipment	16	(12,697	)	(11,296	)
Proceeds from sales of property and equipment		80		217
Purchases of intangible assets	15	(4,757	)	(4,529	)
Purchases of investments in other companies	14	—		—
Dividends received from investments in other companies	14	506		632
Total cash flows from investing activities		225,542		246,021
FINANCING ACTIVITIES:
Redemption of mortgage finance bonds		(4,057	)	(7,531	)
Proceeds from bond issuances	22	708,048		1,125,714
Redemption of bond issuances		(730,928	)	(400,676	)
Subscription and payment of shares		—		—
Dividends paid	27	(366,654	)	(367,444	)
Increase (decrease) in borrowings from foreign financial institutions		(458,881	)	215,783
Increase (decrease) in other financial obligations		(39,460	)	(7,332	)
Increase (decrease) in borrowings from Central Bank of Chile		(1	)	(1	)
Other borrowings long-term		17,794		13,748
Payment of other borrowings long-term		(19,231	)	(15,247	)
Total cash flows from financing activities		(893,370	)	557,014
TOTAL NET POSITIVE (NEGATIVE) CASH FLOWS FOR THE PERIOD		(463,158	)	105,824
Net effect of exchange rate changes on cash and cash equivalents		(30,018	)	23,578
Cash and cash equivalents at beginning of year		2,093,908		1,825,578
Cash and cash equivalents at end of period	7	1,600,732		1,954,980

	June 2016		June 2015
	MCh$		MCh$
Operational Cash flow interest:
Interest received	904,419		860,457
Interest paid	(407,049	)	(152,772	)

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

Table of Contents

BANCO DE CHILE AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2016 were approved for issuance in accordance with the directors on July 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.

Table of Contents

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	June	December	June	December	June	December
RUT	Subsidiaries	Country	Currency	2016	2015	2016	2015	2016	2015
				%	%	%	%	%	%
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 the Society, after ending all the administrative processes required by regulators, the dissolution was formally declared on July 5th, 2016. (See Note No.41).

(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);

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

3. Provisions (Note No. 24);

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

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

6. 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.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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

(c) Use of estimates and judgment, continued:

During year 2016 it was implemented rules changes related to Compendium of Accounting Rules of Superintendency of Banks and Financial Institutions (SBIF), established in Circulars No. 3,573, No. 3,584 and No. 3,604. The net effect of these changes on results meant a credit for Ch$653 million, according to the following detail:

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

b) New rule to specific provisions for factoring operations, that allows the substitution of the credit quality of the grantor by the bill acceptor, as long as this is classified in a category up to A3 or major. This impacted in a provision release of Ch$2,420 million.

c) New definition of default according to Circular No. 3,584 of June 22, 2015, which required recalibration of the models of group provisions. The latter implied a higher charge to income of Ch$ 13,443 million in the first half.

d) Changes in the percentage of credit equivalent for the free disposition credit lines, which decreased from 50% to 35%. This change implied a credit to income for Ch$9,551 million.

During the period of June 30, 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 six-month ended June 30, 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.

Table of Contents

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 it 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$43,201 million, as of June 30, 2016. See Note No. 12 (a.i).

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

Table of Contents

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 June 30, 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 its contractual flows.

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

IFRS 9 introduces changes to the requirements for accounting hedge, and also new alternatives of strategies to use. The amendments means 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.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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.

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:

a) Identify a performance obligation (the promise to transfer a good or service to a customer) in a contract;

b) 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

c) Determine whether the product of a license must be recognized at a point in time or over time.

The date of application of this new standard starts in January 1, 2018, earlier 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 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.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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 host and apply these provisions, as long as the issuing date of the financial statements these changes in liabilities have existed, and that deserve to be disclosed in accordance with the new requirements.

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 standard will not impact financial statements of 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 will not impact financial statements of Banco de Chile and its subsidiaries.

4. Changes in Accounting policies and Disclosures:

During the period ended June 30, 2016, changes have occurred in accounting estimates result of instructions issued by the Superintendency of Banks and Financial Institutions. See Note No. 2 C).

Table of Contents

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, 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.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

5. Relevant Events, continued:

d) In the Board Meeting held on May 19, 2016, the Board of the subsidiary Banchile Corredores de Bolsa S.A. He accepted the resignation of General Manager, Mr. Andrés Bucher Cepeda, presented on 5 May 2016. The Board also agreed to appoint Mr. Andrés Ergas Heller as Acting General Manager.

e) At the Board Meeting held on May 20, 2016, the Board of Directors of the subsidiary Banchile Asesoría Financiera S.A. The resignation presented by director Don Arturo Tagle Quiroz was accepted, proceeding to appoint Mr. José Miguel Quintana Malfanti as alternate until the next Ordinary Shareholders Meeting. Additionally, in that board meeting it was agreed to appoint Mr. Alfonso Yáñez Fernández as General Manager of Banchile Asesoría Financiera S.A., replacing Mr. Jorge Muñoz Apara, who submitted his resignation as General Manager dated May 5, 2016.

f) On June 23, 2016, Banco de Chile reported in connection with the capitalization of 30% of the net profit for distributable the year 2015, by issuing bonus shares agreed at an Extraordinary Meeting of Shareholders held on 24 March 2016, the following:

· In the aforementioned Extraordinary Shareholders Meeting, agreed to increase the Bank’s capital in the amount of 96,874,072,595 by issuing 1,495,200,997 bonus shares with no nominal value, payable under the distributable net income for the year 2015 which was not distributed as dividend as agreed at the Ordinary Shareholders’ Meeting held on the same day.

The Superintendency of Banks and Financial Institutions (SBIF) approved the amendment of the by-laws, through Resolution N°162 of May 13 this year, which was registered in the Registry of Commerce of Santiago fs. 35.404 No.19,610 of 2016 and published in the Official Journal on May 20, 2016.

The issue of bonus shares was registered in the Securities Registry of the aforementioned Superintendency under N° 4/2016, dated June 16, 2016.

· The board of Banco de Chile, in Session No. BCH 2,840, dated June 23, 2016, agreed to set a date for the issuance and distribution of bonus shares on July 7, 2016.

· They will be entitled to receive the new shares at the rate of bonus shares 0.02232718590 per share, shareholders who are registered in the Register of Shareholders of the company at 1st July 2016.

· The respective titles will be properly allocated to each shareholder, and will only be printed for those who henceforth request by written at the Department of Shares of Banco de Chile.

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

5. Relevant Events, continued:

· As a result of the issuance of bonus shares, the Bank’s capital is divided into 97,624,347,430 shares with no nominal value, fully subscribed and paid.

g) During this period it took place the process of Collective Bargaining between the subsidiary Socofin and the Socofin Company Union S.A., signing a Collective Bargaining Agreement for four years (2016-2020).

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

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.

(*) See Note No 41.

Table of Contents

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 six-month period ended June 30, 2016 and 2015.

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

Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, continued

6. Segment Reporting, continued:

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

	Retail				Wholesale				Treasury				Subsidiaries				Subtotal				Consolidation adjustment				Total
	June		June		June		June		June		June		June		June		June		June		June		June		June		June
	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	430,735		409,176		168,049		169,358		9,015		11,343		(2,067	)	(3,210	)	605,732		586,667		540		1,077		606,272		587,744
Net fees and commissions income (loss)	80,672		70,177		21,271		23,175		(1,064	)	(908	)	65,797		61,677		166,676		154,121		(8,919	)	(8,327	)	157,757		145,794
Other operating income	72,106		10,340		12,498		24,704		27,331		21,176		12,261		12,682		124,196		68,902		(1,794	)	(2,302	)	122,402		66,600
Total operating revenue	583,513		489,693		201,818		217,237		35,282		31,611		75,991		71,149		896,604		809,690		(10,173	)	(9,552	)	886,431		800,138
Provisions for loan losses (*)	(154,807	)	(114,709	)	(2,948	)	(10,164	)	—		—		(4	)	64		(157,759	)	(124,809	)	—		—		(157,759	)	(124,809	)
Depreciation and amortization	(12,075	)	(10,547	)	(2,821	)	(2,673	)	(131	)	(194	)	(1,539	)	(1,278	)	(16,566	)	(14,692	)	—		—		(16,566	)	(14,692	)
Other operating expenses	(254,005	)	(223,532	)	(76,301	)	(69,410	)	(3,210	)	(2,981	)	(59,831	)	(50,795	)	(393,347	)	(346,718	)	10,173		9,552		(383,174	)	(337,166	)
Income attributable to associates	1,144		1,206		389		233		36		18		262		288		1,831		1,745		—		—		1,831		1,745
Income before income taxes	163,770		142,111		120,137		135,223		31,977		28,454		14,879		19,428		330,763		325,216		—		—		330,763		325,216
Income taxes																									(47,251	)	(40,118	)
Income after income taxes																									283,512		285,098

(*) At June 30, 2016, the Retail and Wholesale segments include additional provisions assigned according to their risk-weighted assets.

The following table presents assets and liabilities of the period ended June 30, 2016 and December 31, 2015 by each segment defined above:

	Retail		Wholesale		Treasury		Subsidiaries		Subtotal		Consolidation adjustment				Total
	June	December	June	December	June	December	June	December	June	December	June		December		June	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	14,858,110	14,431,003	11,432,635	11,866,488	4,067,977	4,362,051	591,514	523,080	30,950,236	31,182,622	(226,459	)	(148,929	)	30,723,777	31,033,693
Current and deferred taxes															284,202	259,251
Total assets															31,007,979	31,292,944

Liabilities	9,867,669	9,726,434	10,084,889	9,934,304	7,991,997	8,605,278	455,846	374,824	28,400,401	28,640,840	(226,459	)	(148,929	)	28,173,942	28,491,911
Current and deferred taxes															43,037	60,946
Total liabilities															28,216,979	28,552,857

Table of Contents

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:

	June 2016	December 2015
	MCh$	MCh$
Cash and due from banks:
Cash (*)	518,159	672,253
Current account with the Chilean Central Bank (*)	129,665	111,330
Deposits in other domestic banks	6,257	9,676
Deposits abroad	324,232	567,963
Subtotal - Cash and due from banks	978,313	1,361,222

Net transactions in the course of collection	247,230	284,204
Highly liquid financial instruments	341,554	407,111
Repurchase agreements	33,635	41,371
Total cash and cash equivalents	1,600,732	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: