Skip to main content
Equibles

Bank Of Chile 6-K, filed Oct 30, 2020

Bank Of Chile (BCH)

6-K 2020-10-30 For: 2020-10-29
View Original
Added on April 04, 2026

About this 6-K

Bank Of Chile filed this 6-K on October 30, 2020.

FORM 6-KSECURITIES AND EXCHANGE COMMISSIONWashington, 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 October, 2020

Commission File Number 001-15266

BANK OF CHILE

(Translation of registrant’s name into English)

Ahumada 251Santiago, 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 ☒    Form 40-F ☐

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): ☐

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): ☐

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 ☐    No ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in

connection with Rule 12g3-2(b): 82- ________

BANCO DE CHILE

REPORT ON FORM 6-K

Attached Banco de Chile’s Consolidated Financial Statements with notes as of September 30, 2020.

1

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 29, 2020

Banco de Chile
/S/ Eduardo Ebensperger O.
By: Eduardo Ebensperger O.
CEO

2

Exhibit 99.1

BANCO DE CHILE AND SUBSIDIARIES

(Free translation of Consolidated Financial Statements originally issued in Spanish)

INDEX

I. Interim Consolidated Statements of Financial Position
II. Interim Consolidated Statements of Income
III. Interim Consolidated Statements of Other Comprehensive Income
IV. Interim Consolidated Statements of Changes in Equity
V. Interim Consolidated Statements of Cash Flows
VI. Notes to the Interim Consolidated Financial Statements
MCh$ = Millions of Chilean pesos
--- --- ---
ThUS$ = Thousands of U.S. dollars
UF or CLF = Unidad de Fomento
(The UF is an inflation-indexed, Chilean peso denominated monetary unit set daily in advance on the basis of the previous month’s inflation rate).
Ch$ or CLP = Chilean pesos
US$ or USD = U.S. dollar
JPY = Japanese yen
EUR = Euro
HKD = Hong Kong dollar
CHF = Swiss Franc
PEN = Peruvian sol
AUD = Australian dollar
NOK = Norwegian krone
IFRS = International Financial Reporting Standards
IAS = International Accounting Standards
RAN = Actualized Standards Compilation of the Chilean Commission for Financial Market (“CMF”)
IFRIC = International Financial Reporting Interpretations Committee
SIC = Standards Interpretation Committee

BANCO DE CHILE AND SUBSIDIARIES

INDEX

Page
Interim Consolidated Statement of Financial Position 1
Interim Consolidated Statements of Income 2
Interim Consolidated Statements of Other Comprehensive Income 3
Interim Consolidated Statement of Changes in Equity 4
Interim Consolidated Statements of Cash Flows 5
1. Company information: 6
2. Legal regulations, basis of preparation and Other information: 7
3. New Accounting Pronouncements: 10
4. Changes in Accounting Policies and Disclosures: 21
5. Relevant Events: 22
6. Business Segments: 26
7. Cash and Cash Equivalents: 29
8. Financial Assets Held-for-trading: 30
9. Investments under resale agreements and obligations under repurchase agreements: 31
10. Derivative Instruments and Accounting Hedges: 33
11. Loans and Advances to Banks, net: 39
12. Loans to Customers, net: 40
13. Investment Securities: 46
14. Investments in Other Companies: 48
15. Intangible Assets: 50
16. Fixed assets, leased assets and lease liabilities: 52
17. Current Taxes and Deferred Taxes: 57
18. Other Assets: 61
19. Current Accounts and Other Demand Deposits: 62
20. Savings Accounts and Time Deposits: 62
21. Borrowings from Financial Institutions: 63
22. Debt Issued: 64
23. Other Financial Obligations: 68
24. Provisions: 68
25. Other Liabilities: 72
26. Contingencies and Commitments: 73
27. Equity: 78
28. Interest Revenue and Expenses: 81
29. Income and Expenses from Fees and Commissions: 83
30. Net Financial Operating Income: 84
31. Foreign Exchange Transactions, Net: 84
32. Provisions for Loan Losses: 85
33. Personnel Expenses: 86
34. Administrative Expenses: 87
35. Depreciation, Amortization and Impairment: 88
36. Other Operating Income: 89
37. Other Operating Expenses: 90
38. Related Party Transactions: 91
39. Fair Value of Financial Assets and Liabilities: 96
40. Maturity of Assets and Liabilities: 109
41. Subsequent Events: 111 
i

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION

For the periods ended September 30, 2020 and December 31, 2019

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

September December
Notes 2020 2019
MCh MCh
ASSETS
Cash and due from banks 7
Transactions in the course of collection 7
Financial assets held-for-trading 8
Investment under resale agreements 9
Derivative instruments 10
Loans and advances to banks 11
Loans to customers, net 12
Financial assets available-for-sale 13
Financial assets held-to-maturity 13
Investments in other companies 14
Intangible assets 15
Property and equipment 16
Leased assets 16
Current tax assets 17
Deferred tax assets 17
Other assets 18
TOTAL ASSETS
LIABILITIES
Current accounts and other demand deposits 19
Transactions in the course of payment 7
Obligations under repurchase agreements 9
Savings accounts and time deposits 20
Derivative instruments 10
Borrowings from financial institutions 21
Debt issued 22
Other financial obligations 23
Lease liabilities 16
Current tax liabilities 17
Deferred tax liabilities 17
Provisions 24
Other liabilities 25
TOTAL LIABILITIES
EQUITY
Attributable to Bank’s Owners:
Capital
Reserves
Other comprehensive income ) )
Retained earnings:
Retained earnings from previous years
Income for the period
Less:
Provision for minimum dividends ) )
Subtotal
Non-controlling interests
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY

All values are in US Dollars.

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

1

BANCODE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME

For the nine-month ended September 30, 2020 and 2019

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

September September
Notes 2020 2019
MCh MCh
Interest revenue 28
Interest expense 28
Net interest income
Income from fees and commissions 29
Expenses from fees and commissions 29
Net fees and commission income
Net financial operating income 30
Foreign exchange transactions, net 31
Other operating income 36
Total operating revenues
Provisions for loan losses 32
OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES
Personnel expenses 33
Administrative expenses 34
Depreciation and amortization 35
Impairment 35
Other operating expenses 37
TOTAL OPERATING EXPENSES
NET OPERATING INCOME
Income attributable to associates 14
Income before income tax
Income tax 17
NET INCOME FOR THE PERIOD
Attributable to:
Bank’s Owners 27
Non-controlling interests
Net income per share attributable to Bank’s Owners:
Basic net income per share 27
Diluted net income per share 27

All values are in US Dollars.

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

2

BANCODE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF

OTHER COMPREHENSIVE INCOME

For the nine-month ended September 30, 2020 and 2019

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

September September
2020 2019
Notes MCh MCh
NET INCOME FOR THE PERIOD
OTHER COMPREHENSIVE INCOME THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Net gains (losses) on available-for-sale instruments valuation 13 )
Net gains (losses) on derivatives held as cash flow hedges 10 ) )
Subtotal Other comprehensive income before income taxes ) )
Income tax relating to the components of other comprehensive income that are reclassified in income for the period
Total other comprehensive income items that will be reclassified subsequently to profit or loss ) )
OTHER COMPREHENSIVE INCOME THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Adjustment for defined benefit plans 24 ) )
Subtotal other comprehensive income before income taxes ) )
Income tax relating to the components of other comprehensive income that will not be reclassified to income for the period 17
Total other comprehensive income items that will not be reclassified subsequently to profit or loss ) )
CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD
Attributable to:
Bank’s Owners
Non-controlling interests

All values are in US Dollars.

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

3

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CHANGESIN EQUITY

For the nine-month ended September 30, 2020 and 2019

(Free translation of Interim Consolidated 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 Income Tax Retained earnings from previous period Income (losses) for the period Provision for minimum dividends Attributable to equity holders of the parent Non-controlling interest Total equity
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Balances as of December 31, 2018 ) ) 14,208 )
Retention of profits — )
Retention (release) of profits according to bylaws — )
Dividends distributions and paid 27 — ) ) )
Other comprehensive income:
Defined benefit plans adjustment, net ) — ) )
Derivatives cash flow hedge 27 <br>27 ) 22,244 ) )
Valuation adjustment on available-for-sale instruments 27 (5,652 )
Equity effect change in accounting policy — ) ) )
Income for the period 2019 27 —
Provision for minimum dividends — ) ) )
Balances as of September 30, 2019 ) 30,800 )
Other comprehensive income:
Defined benefit plans adjustment, net —
Derivatives cash flow hedge (12,106 )
Valuation adjustment on available-for-sale instruments ) 1,918 ) )
Income for the period 2019 —
Provision for minimum dividends — ) ) )
Balances as of December 31, 2019 ) 20,612 )
Retention of profits 27 — )
Dividends distributions and paid 27 — ) ) ) )
Other comprehensive income:
Defined benefit plans adjustment, net ) — ) )
Derivatives cash flow hedge, net 27 ) 4,610 ) )
Valuation adjustment on available-for-sale instruments 27 ) 378 ) )
Income for the period 2020 27 —
Provision for minimum dividends 27 — ) ) )
Balances as of September 30, 2020 ) 25,600 )

All values are in US Dollars.

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

4

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASHFLOWS

For the nine-month ended September 30, 2020 and 2019

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

(Expressed in million of Chilean pesos)

September September
2020 2019
Notes MCh MCh
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the period
Charges (credits) to income  that do not represent cash flows:
Depreciation and amortization 35
Impairment 35
Provision for loans and accounts receivable from customers and owed by banks 32
Provisions for deductible of guarantees fogape COVID-19 32
Provision of contingent loans 32
Additional provisions 32
Fair value adjustment of financial assets held-for-trading ) )
Changes in assets and liabilities by deferred taxes 17 ) )
(Gain) loss attributable to investments in companies with significant influence, net 14 )
(Gain) loss from sales of assets received in lieu of payment,net 36 ) )
(Gain) loss on sales of property and equipment, net 36 ) )
Charge-offs of assets received in lieu of payment 37
Other charges (credits) to income that do not represent cash flows
Net changes in exchange rate, interest and fees accrued on assets and liabilities
Changes in assets and liabilities that affect operating cash flows:
(Increase) decrease in loans and advances to banks, net )
(Increase) decrease in loans to customers ) )
(Increase) decrease in financial assets held-for-trading, net
(Increase) decrease in other assets and liabilities
Increase (decrease) in current account and other demand deposits
Increase (decrease) in transactions from reverse repurchase agreements ) )
Increase (decrease) in savings accounts and time deposits )
Sale of assets received in lieu of payment or adjudicated
Total cash flows from operating activities )
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in financial assets available-for-sale, net )
Payments for lease agreements 16 ) )
Net changes in leased assets 16 ) )
Purchases of property and equipment 16 ) )
Sales of property and equipment
Acquisition of intangible assets 15 ) )
Acquisition of investments in companies 14
Dividends received from investments in companies 14
Total cash flows from investing activities )
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of letters of credit ) )
Issuance of bonds 22
Redemption of bonds ) )
Dividends paid 27 ) )
Increase (decrease) in borrowings from foreign financial institutions )
Increase (decrease) in other financial obligations )
Increase (decrease) in other obligations with Central Bank of Chile
Payment of other long-term borrowings ) )
Total cash flows from financing activities
TOTAL NET  POSITIVE CASH FLOWS FOR THE PERIOD
Effect of exchange rate changes
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period 7

All values are in US Dollars.

September September
2020 2019
Operational Cash flow interest: MCh MCh
Interest received
Interest paid ) )

All values are in US Dollars.

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

5

BANCO DE CHILE AND SUBSIDIARIES

NOTES TO THE INTERIM CONSOLIDATED FINANCIALSTATEMENTS

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

______________

1. Company information:

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

Banco de Chile (or the “Bank”) is a Corporation organized under the laws of the Republic of Chile, regulated by the Chilean Commission for the Financial Market (“CMF”), in accordance with the established in the Law 21,130 dated January 12, 2019, which ordered the integration of the Superintendency of Banks and Financial Institutions (“SBIF”) with the Commission for the Financial Market as of June 1, 2019. Since 2001, it is subject to the supervision of the Securities and Exchange Commission of the United States of America (“SEC”), in consideration of the fact that the Bank is registered on the New York Stock Exchange (“NYSE”), through a program of American Depositary Receipt (“ADR”).

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

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

The Interim Consolidated Financial Statements of Banco de Chile, for the period ended September 30, 2020 were approved by the Directors on October 29, 2020.

6

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

2. Legal regulations, basis of preparation and Other information:
(a) Legal regulations:
--- ---

The Law 21,000 that creates the CMF, in its article 5, empowers it to issue accounting standards of general application for entities it supervises. The Corporations Law, in turn, requires following the generally accepted accounting principles.

Based on the aforementioned laws, banks should use the criteria provided by the 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 standards issued by the Chilean Association of Accountants (Colegio de Contadores de Chile A.G.), that coincide with the International Financial Reporting Standards (“IFRS”) 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 CMF, the latter shall prevail.

(b) Basis of preparation:
(b.1) These Interim Consolidated Financial Statements are presented<br>according to Chapter C-2 of the Compendium of Accounting Standards, issued by the CMF.
(b.2) The following table details the entities in which<br>the Bank has control and are part of this consolidated financial statements:
--- ---
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Indirect Total
Functional December September December September December
RUT Subsidiaries Country Currency 2019 2020 2019 2020 2019
% % % % %
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

All values are in US Dollars.

7

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

2. Legal regulations, basis of preparation and Other information,continued:
(c) Use of estimates and judgments:

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

1. Provision for loan losses (Notes 11, 12 and 32);
2. Useful life of intangible, property and equipment<br>and leased assets and lease liabilities (Notes 15 and 16);
--- ---
3. Income taxes and deferred taxes (Note 17);
--- ---
4. Provisions (Note 24);
--- ---
5. Contingencies and Commitments (Note 26);
--- ---
6. Fair value of financial assets and liabilities (Note<br>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.

As of September 30, there have been no changes in the estimates made other than those indicated in Note No. 4.

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

Given the activities to which the Bank and its subsidiaries are engaged, the transactions of the Bank do not have a cyclical or seasonal nature. For this reason, specific breakdowns in these notes to the Interim Consolidated Financial Statements for the nine-month period ended September 30, 2020 are not included.

(e) Relative Importance:

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

(f) Leases:

The Bank acts as a lessor

Assets that are leased to clients under contracts that substantially transfer all risks and property recognition, with or without legal title, are classified as a financial lease. When the retained assets are subject to a financial leasing, the leased assets are no longer recognized and are recorded an account receivable, which is equal to the minimum value of the lease payment, discounted at the interest rate of the lease. The initial negotiation expenses in a financial lease are incorporated into the account receivable through the discount rate applied to the lease. Lease income is recognized on lease terms based on a model that consistently reflects a periodic rate of return on the net investment of the lease.

8

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

2. Legal regulations, basis of preparation and Other information,continued:
(f) Leases, continued:
--- ---

Assets that are leased to customers under contracts that do not transfer substantially all the risks and benefits of the property are classified as an operating lease.

The leased investment properties, under the operating lease modality, are included in “Other assets” in the statement of financial position and depreciation is determined on the book value of these assets, applying a proportion of the value in a systematic way on the economic use of the estimated useful life. Lease income is recognized on a straight-line basis over the lease period.

The Bank acts as a lessee

A contract is or contains a lease if it has the right to control the use of an identified asset for a period of time in exchange for a consideration.

At the start date of a lease, an asset is determined by right of use of the leased asset at cost, which comprises the amount of the initial measurement of the lease liability plus other disbursements made.

The amount of the lease liability is measured at the present value of future lease payments that have not been paid on that date, which are discounted using the Bank’s incremental financing interest.

The right-of-use asset is measured using the cost model less accumulated depreciation and accumulated impairment losses. The depreciation of the right-of-use asset is recognized in the Income Statement based on the straight-line method of depreciation from the start date and until the end of the term of the lease.

As established by the Circular No. 3,649 of the CMF, the monthly variation of the UF for the contracts established in said monetary unit should be treated as a new measurement, therefore the value effect of this monetary unit as a result of the change in the Consumer Price Index (CPI) modifies the value of the lease liability and in parallel, the amount of the asset for the right to use leased assets must be adjusted for this effect.

After the start date, the lease liability is measured by reducing the carrying amount to reflect the lease payments made and the lease contract modifications.

According to IFRS 16 “Leases”, the bank does not apply this standard to contracts with duration of 12 months or less and those that contain a low value underlying asset. In these cases, the payments are recognized as a lease expense.

(g) Reclassifications:

There have not been significant reclassifications at the end of this period 2020.

9

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements:

3.1 Standards approved and/ormodified by the International Accounting Standards Board (IASB) and by the Chilean Commission for the Financial Market (CMF):

3.1.1 Standards and interpretationsthat have been adopted in these Interim Consolidated Financial Statements.

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

Accounting standards issuedby IASB.

IAS 1 Presentation of Financial Statements and IAS8 Accounting Policies, Changes in Accounting Estimates and Errors. Definition of materiality or relative importance.

The IASB issued changes to IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to clarify the definition of materiality and align these standards with the Revised Conceptual Framework issued in March 2018, to facilitate companies to make materiality judgments.

Under the old definition omissions or misrepresentations of elements are important if they could, individually or collectively, influence the economic decisions that users make on the basis of Financial Statements (IAS 1 Presentation of Financial Statements).

The new definition states that information is material if the omission, distortion or concealment of the information can reasonably be expected to influence decisions that primary users of financial statements of general purpose make on the basis of those financial statements, which provide financial information about a specific reporting entity.

This amendment had no impact on the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

IFRS 9 Financial Instruments,IFRS 7 Financial Instruments: Disclosures and IAS 39 Financial Instruments: Recognition and Measurement. Interest rate benchmarkreform.

In September 2019, the IASB issued amendments to IFRS 9, IFRS 7 and IAS 39, as a result of the IBOR (Interbank Offered Rate) reform, which results in the replacement of existing reference interest rates, by alternative interest rates.

The amendments provide temporary application exceptions that allow hedge accounting to continue during the uncertainty period, prior to the replacement of existing reference interest rates.

This amendment had no impact on the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

10

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Amendment to IFRS 16 Leases,for facilities granted to lessees related to COVID-19.

During May 2020, the IASB issued the amendment to IFRS 16 Leases, to make it easier for lessees to account for changes in leases, due to the pandemic declared by COVID-19.

The amendment adds a practical simplification that deviates from the requirements in IFRS 16, and is provided only to give lessees practical relief during COVID-19. Therefore, it is not mandatory and empowers the lessee to choose whether or not to use practical simplification.

A lessee making this election must recognize in the accounting the changes resulting from the reductions in the rental payment, directly related to the COVID-19, consistent with the treatment that currently exists in the standard, to reflect a modification that does not mean a change in the lease contract.

Lessees are required to retrospectively apply the amendment, recognizing any differences that arise from initial application in the opening balance of retained earnings at the beginning of the annual reporting period from which the lessee first applies the amendment.

The amendment is applicable to the annual fiscal years beginning on or after June 1, 2020.

The implementation of this amendment had no impact for Banco de Chile and its subsidiaries.

Accounting Standards issuedby the CMF.

Circular No. 2,247. Foreclosedassets or received in lieu of payment. The sale period is extended.

On March 25, 2020, the CMF published this circular, which incorporated modifications to Chapter 10-1 “Assets received or awarded in payment of obligations” of the RAN. This circular is part of the work being done by the CMF in face of the worldwide outbreak of COVID-19 virus.

The transitory standard establishes an additional term of up to 18 months to dispose of the assets, in the case of assets that have been received or awarded lieu of payment from March 1, 2019 to September 30, 2020.

The standard also authorizes banks to make use of this additional period, so that the charge-offs that they must currently carry out at 12 months is carried out in installments, at least a proportion of the value of the property must be charge-off, equivalent to the relationship between the number of months elapsed from the date of receipt and the number of months between that date and that the bank sets for its disposal under the additional term granted.

The Bank used the additional term for those assets that meet the requirements required for the application of this standard, not generating a material impact on the results of the period.

11

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Circular No. 2,248. Equityfor legal and regulatory purposes. Treatment of guarantees in favor of third parties in bilateral compensation agreements.

Regarding the minimum ratios that effective equity must meet with respect to its risk-weighted assets defined in Chapter 12-1 of the Actualized Standards Compilation (“RAN”), dated March 30, 2020, the CMF issued instructions for the treatment of Guarantees constituted in favor of third parties for bilateral compensation contracts, allowing banks may deduct from them, the net fair value of negative offset positions, to determine the asset subject to risk weighting, to the extent that certain conditions relating to the legal basis that protects them and the controls that they maintain over them are met.

These instructions are consistent with the rules of the Basel III Framework, regarding the determination of the net exposures of assets and liabilities covered by legally recognized compensation contracts in the jurisdictions to which the parties are entitled.

The new rules were implemented at the end of March 2020, without generating a significant impact on the indicators of capital adequacy.

Circular No. 2,250. Equityfor legal and regulatory purposes. It allows adding to the additional provisions a proportion of the State guarantees.

In response to the situation faced by financial markets and audited entities as a result of the health crisis caused by the COVID-19 pandemic, on April 20 the CMF published Circular No. 2,250, through which Banks may add to the additional provisions, within the limit of 1.25%, an amount of up to 15% of the guarantees that cover the risk-weighted assets, the guarantees that correspond to endorsements or refinancing granted by the Chilean Treasury, CORFO and FOGAPE.

The new rules were implemented at the end of April 2020, without generating a significant impact on the indicators of capital adequacy on the date of implementation; however, this standard was modified by Circular No. 2,265 dated August 21, 2020.

Circular No. 2,252. Aspectsrelated to the Guarantee Lines COVID-19 of the Guarantee Fund for Small and Medium Entrepreneurs (“FOGAPE”), regardingprovisions and other matters.

On April 30, 2020, the CMF published this circular that regulates aspects related to the FOGAPE Guarantee Lines COVID-19, addressing the following matters:

1) Exceptional measures for the treatment of loan provisions in installments of the commercial portfolio;

2) The classification of the debtors and the calculation of the default;

3) The establishment of procedures to control the eligibility conditions of the debtors;

4) The destination of the financing and;

5) Sending periodic information to the CMF incorporating news regulatory files.

These modifications are valid until October 31, 2021.

12

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Circular No. 2,257. It allowsthe recognition of the mortgage guarantee surplus for the housing in the standard provisions model as a risk mitigator of the groupalcommercial portfolio.

On May 22, 2020, the CMF published Circular No. 2,257 which introduces modifications to Chapter B-1 “Provisions for credit risk” of the Compendium of Accounting Standards for Banks.

Due to the effects that the health crisis caused by the COVID-19 pandemic will have on banking activity and credit risk, the modification allowed the recognition of the mortgage guarantee surplus associated with mortgage loans in the standard model as a mitigator in the standard provisioning model for the groupal commercial portfolio. This is a temporary relaxation, once the new Basel III capital framework has been implemented, the standard provisions models will be reviewed to make them consistent with those used to calculate credit risk-weighted assets.

The application of this modification did not generate a material impact on the results of the period.

Circular No. 2,265. ModifiesRAN chapter 12-1 (APR of bank loans guaranteed by the Chilean Treasury, CORFO and FOGAPE).

On August 21, 2020, the CMF modified chapter 12-1 of the updated compilation of standards (RAN) that corresponds to the Equity for legal and regulatory purposes, with this new treatment, they are incorporated into category 2 of the classification of risk-weighted assets, the amounts of the credits that are guaranteed by the Chilean Treasury, CORFO and FOGAPE, which consequently go from having a weighting for credit risk of 100% to 10%. Consequently, the regulations in circular 2,250 dated April 20 were modified.

The adoption of this standard meant an increase in the solvency ratio of approximately 0.4%.

Circular No. 2,267. Factoringoperations.

On August 31, 2020, the CMF published Circular 2,267, in which it gives instructions regarding the discount of invoices by banks and their factoring subsidiaries, which is currently limited to the assignment of credits originated in the sales of goods or provision of non-financial services, carried out by the natural or legal persons with whom the factoring operation is agreed, or on behalf of whose buyers the payment commitment is assumed, the CMF resolved to allow the discount of invoices from assignees other than their originator , given the safeguards provided by Law No. 19,983 in force today.

The Bank and its subsidiaries have no impact on the implementation of this standard since they have not carried out factoring operations by discounting invoices from assignees other than the originator.

13

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Other instructions issuedby the CMF – Management Letters.

On April 2, 2020, in the context of the circumstances facing the country due to the COVID-19 pandemic and in order to facilitate the implementation by banks of payment flexibilities for its debtors, the CMF by Management Letter temporarily authorized and under certain conditions, exceptional measures to the treatment of the provisions of the credit operations for the credit portfolios evaluated as a group (mortgage, commercial and consumer) that were subject to rescheduling.

The validity of the exceptional period for the treatment of provisions for group portfolios begins on March 18, 2020 and ends on July 31, 2020, both dates inclusive. As a necessary condition to use the relaxations in provisions, the banks must fully evaluate the financial and credit condition of the debtors who will be eligible for the granting of the relaxations conditions. In no case may the treatment include debtors in default in accordance with the provisions regulations. Additionally, the debtors eligible for the special treatment of provisions were those that are up to date or had a default of no more than 30 days in the month in which the rescheduling is performed, during the period of validity.

The exceptional treatment allowed entities to maintain the associated provisions in the standard provision matrix that corresponded to the time of rescheduling. On the other hand, in the case of consumer portfolios, the parameters of Expected Credit Loss (PI and PDI) could be maintained, in accordance with the specific provisions models used by each institution.

In this same area, on July 31, 2020, the CMF extended the transitional measures indicated above until August 31, 2020. The special treatment for the calculation of provisions was extended to the extent that certain conditions will be observed, such as: i) evaluation of the financial and credit situation of eligible debtors, ii) debtors up-to-date in the payment of their obligations or with a default no more than 30 days in the month in which the rescheduling is carried out, iii) a maximum extension period of 3 months for mortgage and commercial loans, iv) in the case of loans with prior rescheduling, the total sum of the extension period cannot exceed 6 months.

On July 17, 2020, the CMF instructed through a Management Letter how institutions should calculate and implement the calculation of provisions for COVID -19 loans, and the conditions under which they are can substitute the credit risk of the direct debtor for the credit quality of the FOGAPE. Said instructions established as a maximum term the end of the year 2020, to constitute all the provisions for this concept. In this context, Banco de Chile recognized the total effect of these provisions at the end of September, recording an accumulated charge to income for the period for Ch$57,866 million before taxes, of which Ch$27,700 million corresponded to the effect of constitution of provisions for deductible.

14

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Other regulations adopted.

Law 21,167

On January 1, 2020, Law 21,167 entered into force, which regulates the forms of payment of the lines of credit associated with bank current accounts. This law established the automatic payment of the overdraft line associated with the current account, which operates by default, unless the client instructs his bank to operate a different payment method that is more comfortable for them.

The implementation of this new law generates a decrease in interest earned and loan volumes.

Law 21,210

On February 24, 2020, Law 21,210 was published in the Official Journal, which modernizes the tax legislation, incorporating modifications to different legal texts, mainly the Tax Code, the Law on Income Tax and the Law on Sales and Services Tax (VAT).

In relation to the tax regime of income tax, the regime with partial credit imputation is maintained.

In terms of expenses necessary to produce the income of companies, a new definition is established, linking it to the interest, development or maintenance of the business, of the sole tax established in article 21 of the Income Law.

In relation to the VAT Law, one of the relevant changes corresponded to the incorporation of certain services related to entertainment, intermediation, software and other items that are carried out through digital platforms.

Another relevant modification refers to the land tax surcharge incorporated in Law 17,235, which taxes all the real estate that is registered in the taxpayer’s name, incorporating the real estate delivered in leasing with purchase option (Leasing).

The implementation of these legal changes will not have a significant impact on the Consolidated Financial Statements of Banco de Chile and its subsidiaries.

15

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Law 21,234

On May 29, 2020, Law 21,234 was published in the Official Journal, effective as of the same date, which modifies and replaces Law 20,009, limiting the liability of payment card holders or users and electronic transactions in the event of loss, theft, robbery or fraud.

This new law applies to users or holders of “Payment Methods” defined as all payment cards (debit, credit and pre-payment cards), whether or not they are issued by entities subject to the supervision of the CMF and electronic transactions, giving it a fairly broad definition, which includes any operations carried out by electronic means that cause charges, credits or money orders in different types of account.

Users or holders of Payment Methods are obliged to send a notice to the respective issuer, as soon as they become aware of a loss, theft, robbery or fraud that affects their payment methods. Immediately after receiving this notice, the issuer must proceed to block it.

In the case of operations subsequent to the notice, the user or owner will be exempt from liability, and the respective issuer must answer for them.

For operations prior to the notice, the user or owner will have a period of 30 business days following the notice, to claim them, being able to refer to operations carried out up to 120 calendar days prior to the date of the notice.

The burden of proof for operations that the user does not know to have authorized will always fall on the issuer, who is also prevented from offering users the purchase of insurance whose coverage corresponds to risks or claims that the issuer must assume in accordance with this law.

The implementation of this new law does not have significant impacts on the Interim Consolidated Financial Statements.

Law 21,236

On June 3, 2020 Law 21,236 was published that regulates Financial Portability, which aims to facilitate people, micro and small businesses to change from one financial service provider to another, or from a financial product or service valid to another new one contracted with the same provider, for deeming it convenient.

This new law came into force on September 8, 2020. Banco Chile and its subsidiaries implemented the necessary measures to comply with the portability law.

16

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

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

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by IASB that are not yet effective as of September 30, 2020, are detailed below:

Accounting standards issued by IASB.

IAS 28 — Investmentsin Associates and Joint Venture, and IFRS 10 — Consolidated Financial Statements.

In September 2014, the IASB published this modification, which clarifies the scope of the profits and losses recognized in a transaction that involves an associate or joint venture, and that this depends on whether the asset sold or contribution constitutes a business. Therefore, the IASB concluded that all gains or losses should be recognized against loss of control of a business. Likewise, the gains or losses that result from the sale or contribution of a subsidiary that does not constitute a business (definition of IFRS 3) to an associate or joint venture should be recognized only to the extent of unrelated interests in the associate or joint venture.

During December 2015, the IASB agreed to set the effective date of this modification in the future, allowing its immediate application.

Banco de Chile and its subsidiaries will have no impact on the Interim Consolidated Financial Statements as a result of the application of this amendment.

Limited Scope Amendmentsand Annual Improvements 2018-2020.

In May 2020, the IASB published a package of amendments of limited scope, as well as the 2018-2020 Annual Improvements, whose changes clarify the wording or correct minor consequences, omissions or conflicts between the requirements of the Standards.

Among other modifications, it contains amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets which specify the costs that an entity should include when evaluating whether a contract will cause losses.

These amendments will be effective as of January 1, 2022 and it is estimated that Banco de Chile and its subsidiaries will not have significant impacts on the Interim Consolidated Financial Statements as a result of the application of these amendments.

17

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

IFRS 9 Financial Instruments,IFRS 7 Financial Instruments: Disclosures and IAS 39 Financial Instruments: Recognition and Measurement IFRS 4 Insurance Contractsand IFRS 16 Leases. Interest Rate Benchmark Reform.

In August 2020, the IASB issued a set of amendments related to phase two of the Interest Rate Benchmark Reform which modifies IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.

The amendments complement the changes issued during 2019 and focus on the effects on the financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate. The amendments in phase two refer to changes that affect the contractual cash flows. A company does not need to write off / adjust the book value of financial instruments for changes, but rather update the effective interest rate to reflect the change to an alternative benchmark. In the case of hedge accounting, a company does not need to discontinue hedge accounting because it makes the changes required by the reform if the hedge meets other hedge accounting criteria. Regarding disclosures, the company must disclose information about the new risks arising from the reform and how it manages the transition to the alternative benchmark rates.

The amendments are effective for annual reporting periods beginning on or after January 1, 2021. Early adoption of modifications is also allowed.

Banco de Chile and its subsidiaries will evaluate the impact on the Financial Statements resulting from the application of this amendment.

Accounting standards issuedby the CMF.

Circular No. 2,243. AmendsCompendium of Accounting Standards for Banks.

On December 20, 2019, the CMF published Circular No. 2,243, which updates the instructions of the Accounting Standards Compendium (CNC) for Banks.

The changes tend to further convergence with IFRS, as well as an improvement in the quality of financial information, to contribute to the financial stability and transparency of the banking system.

The main changes introduced to the CNC correspond to:

1) Incorporation of IFRS 9 with the exception of the Chapter<br>5.5 on impairment of loans classified as “financial assets at amortized cost”. This exception is mainly due to prudential<br>criteria set by the CMF. These criteria have given rise, over time, to the establishment of standard models that the banking institutions<br>must apply to determine the impairment of the loan portfolio (Chapter B-1 of the CNC, for provisions).
2) Changes in the presentation formats of the Statement of<br>Financial Position and Income Statement, when adopting IFRS 9 in replacement of IAS 39.
--- ---
3) Incorporation of new presentation formats for the Statement<br>of Other Comprehensive Income and the Statement of Changes in Equity and guidelines on financing and investment activities for<br>the Statement of Cash Flows.
--- --- 
18

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:
4) Incorporation of a financial report “Management Comments” (according to the IASB Practice<br>Document No. 1), which will complement the information provided by the interim and annual financial statements.
--- ---
5) Modifications of some notes of the financial statements, among which are: Financial assets at amortized<br>cost and Risk management, in order to better comply with the disclosure criteria contained in the IFRS 7. In addition, disclosures<br>about related parties are aligned according to IAS 24.
6) Changes in the accounting plan of Chapter C-3 of the CNC, both in the accounts coding as well as<br>in their description. The foregoing corresponds to the detailed information of the formats for the Statement of Financial Position,<br>the Income Statement and the Statement of Other Comprehensive Income.
--- ---
7) Modification of the criteria for the suspension of the recognition of interest income and UF indexation<br>on an accrual basis, for any credit with a default equal to or greater than 90 days (Chapter B-2 of the CNC). Currently, the suspension<br>of the recognition of interests and UF indexation occurs after 180 days.
--- ---
8) Adaptation of the limitations and precisions to the use of IFRS contained in Chapter A-2 of the<br>CNC.
--- ---

In accordance with that established under the Circular No. 2,249 dated April 20, 2020, the new standard will be applicable from January 1, 2022, with a transition date of January 1, 2021, for purposes of the comparative Financial Statements that must be published from March 2022.

Nevertheless, the change in criteria for the suspension of the recognition of interest income and UF indexation on an accrual basis as provided in Chapter B-2, shall be adopted no later than January 1, 2022.

The Bank and its subsidiaries have structured an implementation project and have established various Committees to ensure its implementation. All this in order to comply with the new standards required for the preparation and presentation of the Financial Statements. The effects of applying the rule of suspension of interest and UF indexation at 90 days will not have a significant impact.

19

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Standards related to theimplementation of Basel III.

During 2019, the CMF began the regulatory process for the implementation of Basel III standards in Chile, in accordance with the established on Law No. 21,130 that modernizes banking legislation.

On March 30, 2020, the CMF informs that, in coordination with the Central Bank of Chile, it has resolved to postpone the implementation of the Basel III requirements for one year and maintain the general regulatory framework in force for banking capital requirements until December 2021.

As of the date of issuance of these Interim Financial Statements, the following definitive standards related to this implementation have been published:

Circular 2,270 dated September 11, 2020. Updates Chapter 1-13 “Classification of management and solvency” and introduces to the RAN a new Chapter 21-13 “Evaluation of the adequacy of effective equity of banks”. This standard sets the general criteria and guidelines for the determination of additional equity requirements as a result of the supervision process, called Pillar 2. The new chapter 21-13, which distinguishes 2 processes (1) The capital self-assessment process, in which the banks themselves will determine their internal objective of effective equity, necessary to cover their risks in a horizon of at least three years and (2) The CMF’s assessment of the adequacy of banks’ effective equity to support their risk profile, as determined in the annual supervisory review process. This regulation will be effective immediately. The effective equity self-assessment report to be submitted by banks in 2021 will be based only on credit risk, and the one for 2022 will incorporate market and operational risks. Both reports will have a simplified format. As of 2023, the report with all its sections will be required, considering all the material risks of the institution, including those for which there is no measurement standard.

Circular 2,272 dated September 25, 2020, incorporates Chapter 21-12 “Additional basic capital, articles 66 bis and 66 ter of the general banking law” into the RAN. This standard defines the operating procedures for the calculation, implementation and supervision of additional capital charges, known as capital buffers (Conservation Buffer and a Countercyclical Buffer). Both buffers must be constituted with Common Equity Tier 1 (“CET1”), and its fulfillment will be a requirement to qualify with note A of solvency.

The Conservation Buffer is a fixed charge equal to 2.5% of the APR net of required provisions. The Cyclical Buffer is a variable charge that ranges between 0% and 2.5% of Risk Weighted Assets (RWA) net of required provisions.

This standard will be effective as of December 1, 2020. As of December 1, 2021, the requirement of the Conservation Buffer will be 0.625%, increasing by the same percentage each year, until reaching the regime on December 1, 2024. The same transitory requirement will apply to the maximum value of the Countercyclical Buffer that can be defined by the Chile Central Bank.

20

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

3. New Accounting Pronouncements, continued:

Circular No. 2,273 dated October 5, 2020, incorporates Chapter 21-30 “Relationship between basic capital and total assets” in the RAN. This standard regulates the calculation of the relationship between basic capital and total assets (leverage ratio). The standard introduces improvements both in the measurement of basic capital (numerator) and of the bank’s total assets (denominator). The lower limit of 3% for the leverage ratio was introduced in Chilean banking regulation in the 1997 LGB reform (Article 66). The regulation will be effective as of December 1, 2020, without prejudice to the transitory measures for the calculation of regulatory capital, contemplated in Title V of Chapter 21-1 “Equity for legal and regulatory purposes”, on equity for legal purposes and regulations of the RAN, and the transitory measures for the additional capital requirement for systemically important banks, established in paragraph 7 of Chapter 21-11 of the RAN.

Circular No. 2,274 dated October 8, 2020, incorporates Chapter 21-1 “Equity for legal and regulatory purposes” into the RAN, replacing Chapter 12-1 “Equity for legal and regulatory purposes”. The standard considers the definition of three levels of capital, for which the terminology used by the Basel Committee is used, that is: Common Equity Tier 1 (“CET1”), Additional Tier 1 Capital (“AT1”, capital) and Tier 2 capital. The standard will be effective as of December 1, 2020, without prejudice to the transitory measures that it contemplates. The first adjustment must be made on December 1, 2022, corresponding to 15% of the discounts. This amount will increase to 30% on December 1, 2023 and 65% on December 1, 2024, until reaching full implementation as of December 1, 2025.

4. Changes in Accounting Policies and Disclosures:

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization. The greater uncertainty associated with the effects of this pandemic introduces greater complexity in the development of reliable estimates.

By virtue of the foregoing, during the period ended September 30, the Bank's Management has reviewed the relevant estimates and assumptions related to the credit risk provision models of the group portfolio, performing a recalibration of the probability of Default, giving a greater weight to recessive periods in accordance with the guidelines that the regulator has defined for these purposes, in accordance with IAS 8 Accounting policies and changes in accounting estimates, the impact of this change in the estimate meant a charge to income for the period for Ch$71,051 million before taxes.

During the period ended September 30, 2020, there have been no accounting changes other than the one mentioned above.

21

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

5. Relevant Events:
a) On January 20, 2020, the subsidiary Banchile Administradora<br>General de Fondos S.A. informed that during the Ordinary Session held that day, the Board of Directors appointed Mr. José<br>Luis Vizcarra Villalobos as director, replacing Mr. Joaquín Contardo Silva, who presented resignation to the director position.
--- ---
b) On January 30, 2020, the Board of Directors of Banco de Chile agreed to convene an Ordinary Shareholders<br>Meeting on March 26, 2020 in order to propose, among other matters, the following distribution of profits for the year ended on<br>December 31, 2019:
--- ---
i. Deduct and withhold from the net income of the year, an<br>amount equivalent to the effect of inflation of the paid capital and reserves according to the variation of the Consumer Price<br>Index that occurred between November 2018 and November 2019, amounting to Ch$92,239,840,420, which will be added to retained earnings<br>from previous periods.
--- ---
ii. From the resulting balance, distribute in the form of a<br>dividend 70% of the remaining liquid profit, corresponding to a dividend of Ch$3.47008338564 to each of the 101,017,081,114 shares<br>of the Bank, retaining the remaining 30%.
--- ---

Consequently, it was proposed a distribution as dividend of 59.1% of the profits for the year ended December 31, 2019.

c) On February 21, 2020, Banco de Chile informed that in accordance with the disposed in the articles<br>19 and the following of Law No. 19,913, the Financial Analysis Unit imposed a written admonishment and a fine amounting to UF 800,<br>for not having promptly reported suspicious transactions in accordance with the disposed under numeral 1 of Chapter I of the UAF<br>Circular No. 49 of 2012.
d) On March 12, 2020, in the Ordinary session celebrated that day, the Board of Directors of Banco<br>de Chile agreed to establish a provision for minimum dividends of the net distributable profit that results from reducing or adding<br>to the net income of the corresponding period, the value effect of the monetary unit of paid capital and reserves, as a result<br>of any change in the Consumer Price Index (CPI) between the month prior to the current month and the month of November of the previous<br>year. It was also agreed to maintain the monthly provision at 60% of the income balance thus calculated.
--- ---
e) On March 26, 2020, at the Bank’s Ordinary Shareholders’ Meeting, our shareholders approved<br>the distribution of the dividend No. 208 of $3.47008338564 per share, to be charged to the income obtained during the fiscal year<br>2019.
--- ---

Additionally, the shareholders proceeded to the complete renewal of the Board of Directors, due to the end of the legal and statutory three-year term with respect to the Board of Directors that has ceased in its functions.

22

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

5. Relevant Events, continued:

After the corresponding voting at the aforesaid meeting, the following persons were appointed as the Bank’s Directors for a new three-year term:

Directors: Hernán Büchi Buc
Andrés Ergas Heymann
Alfredo Cutiel Ergas Segal (Independent)
Jaime Estévez Valencia (Independent)
Julio Santiago Figueroa
Pablo Granito Lavín
Álvaro Jaramillo Escallon
Samuel Libnic
Andrónico Luksic Craig
Jean Paul Luksic Fontbona
Francisco Pérez Mackenna
First Alternate Director: Paul Fürst Gwinner (Independent)
Second Alternate Director: Sandra Marta Guazzotti

Moreover, on March 26, 2020, in its Ordinary Session, the Board of Directors of the Bank agreed to the following officer nominations and appointments:

Chairman: Pablo Granifo Lavín
Vice Chairman: Andrónico Luksic Craig
Vice Chairman: Julio Santiago Figueroa
f) On April 20, 2020, the subsidiary Banchile Administradora General de Fondos S.A. reported that<br>in Ordinary Session held that day, the Board was given notice of and accepted the resignation presented by Mr. Francisco Javier<br>Brancoli Bravo to his position as Director of the company. On the occasion of the aforementioned resignation, the Board of Directors<br>agreed to appoint Mr. Paul Javier Fürst Gwinner as the new Director.
--- ---
g) On June 19, 2020, the subsidiary Banchile Corredores de Bolsa S.A. reported that in an Ordinary<br>Session held that day, the Board of Directors appointed Mr. Jorge Antonio Carrasco De Groote as Director, replacing Mr. Fuad Jorge<br>Muvdi Arenas, who presented his resignation from the position of director.
--- ---
h) On September 24, 2020, in Ordinary Session, the Board of Directors<br>accepted the resignation presented by the Principal Director Mr. Alvaro Jaramillo Escallon.
--- ---

Likewise, the Board of Directors appointed Mr. Raúl Anaya Elizalde as Principal Director until the next Ordinary Shareholders’ Meeting.

23

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

5. Relevant Events, continued:
i) During March 2020, the World Health Organization (“WHO”) described the outbreak of<br>the new strain of coronavirus (“COVID-19”) as a pandemic. The global spread of this disease has forced the authorities<br>to take drastic sanitary and financial measures to contain and mitigate its effects on global health and economic activity.
--- ---

On this basis, on March 18, 2020 the Government decreed a Constitutional State of Exception defined as State of Catastrophe due to “State of Public Calamity” for the entire national territory, as well as has adopted various sanitary measures such as isolation or quarantine of general populations, localities and people determined; sanitary cords; sanitary customs and other protection measures.

For their part, the Government and the Central Bank of Chile have implemented a set of fiscal and financial measures aimed to mitigate COVID-19’s impact on the economy, and to ensure the proper functioning of the financial system. Among the measures implemented by the Central Bank to deliver liquidity to the economy and support the flow of credit, are the establishment of the Conditional Credit Facility to Increase Placements (FCIC by its Spanish initials), as a special financial line for banking companies complemented by the activation of a “Liquidity Credit Line” (LCL) for which a limit equivalent to the Average Reserve Requirement in national currency of each entity is defined. The FCIC is available to banking companies that have commercial and consumer loans, subject to the granting by them of sufficient collateral guarantees in favor of the Central Bank. The limit for the FCIC line is up to 15% of the base portfolio (sum of commercial and consumer loans), which was expanded with the establishment of a second program announced during the month of June called FCIC2 with similar financial conditions to the first, aimed at deepening and extending commercial credit to respond to the prolongation of the health emergency caused by COVID-19. As of September 30, the Bank has made use of these financing facilities for an amount of Ch$3,110,774 million. To access the FCIC, the Bank has established guarantees in favor of the Central Bank of Chile for a total amount of approximately Ch$2,243,170 million, corresponding to commercial loans of the individual portfolio of high credit quality for Ch$1,649,890 million, and fixed income securities for an approximate amount of Ch$593,280 million. In the case of the LCL, the guarantee provided corresponds to the legal banking reserve held by the Bank.

As of March, the Bank proactively offered its clients that, complying with the parameters and commercial and credit risk conditions previously defined by the Bank itself, including having maintained a good payment behavior prior to the current situation, the possibility of opting for financial relief plans, in response to the extraordinary prevailing economic and financial situation. For its part, the CMF subsequently adopted measures tending to temporary flexibility for the treatment of provisions for credit risk of group portfolios for the period between March 18, 2020 and July 31, 2020. This exceptional treatment allowed the operations granted as part of the relief plan in the payment of installments to certain clients who met the eligibility requirements determined by the Bank, to maintain the associated allowances in the standard matrix (mortgage and commercial) that corresponds at the time of reprogramming. In the case of consumer portfolios, the Expected Credit Loss parameters may be maintained, in accordance with the internal provisions models used.

On July 31, the CMF resolved to extend until August 31, 2020 the special treatment of provisions for credit risk of the group portfolios mentioned above, as long as the following conditions were observed: i) evaluation of the financial and credit situation of the debtors, ii) debtors up-to-date in the payment of their obligations or with a default no more than 30 days in the month in which the rescheduling is carried out, iii) a maximum extension period of 3 months for mortgage and commercial loans, iv) in the case of loans with prior rescheduling, the total sum of the extension period cannot exceed 6 months.

24

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

5. Relevant Events, continued:

During April 2020, the Guarantee Fund for Small Entrepreneurs (FOGAPE), announced the increase of its capital by up to US$3,000 million, in order to guarantee financing of up to US$25,000 million. The objective of this initiative has been to facilitate access to working capital loans for individuals and legal entities with annual sales of less than UF 1,000,000 affected by the COVID-19 pandemic. The guarantee coverage of these loans - differentiated according to sales tranche - is between 60% and 85% of financing, after applying a deductible that may not exceed 5% of the guaranteed amount. From the beginning of the program and until September 30, 2020, the Bank has carried out 37,114 operations for an aggregate amount of Ch$1,800,137 million. For such purposes, the Bank established the parameters, requirements, and conditions, in addition to those provided in the respective Fogape COVID-19 regulations, to resolve the requests made to it, and the financing amounts that would be granted based on the above, taking into consideration, among other aspects, the levels of sale and the circumstance indicated below. Additionally, the Administration Regulation applicable to the COVID-19 guarantee lines considers the option of refinancing any principal amortization of preexisting commercial loans that mature in the 6 months following the moment of granting the financing with the COVID-19 Guarantee.

As of September 30, 2020, the Bank has granted credit facilities to its clients under the conditions and requirements mentioned above for an approximate amount of Ch$619,505 million.

Within this context, our Bank has carried out several measures, along with executing contingency plans, in order to: (i) safeguard the health of clients and employees, including the temporary suspension of operation of some branches, (ii) ensure the operational continuity of our services and mitigate potential operational risks, and (iii) strengthen our service remote channels and the implementation of remote working for a large group of our employees.

While the potential impact of the pandemic on our operating results remains is difficult to quantify, it is possible to anticipate that factors such as: (i) economic contraction, (ii) low interest rates for a long period of time, (iii) deflationary pressures owed to lowered domestic demand, (iv) increased unemployment, (v) total or partial quarantines affecting commercial activities, and (vi) mobility restrictions that will have an adverse effect on our operating revenues, loan loss provisions and operating expenses. Although these effects will be significant, it is not possible to determine their magnitude since they will depend on the duration and depth of the pandemic.

As a result of the prospective analysis of the economic and financial effects associated with the spread of COVID-19, both domestically and internationally, the Bank proceeded to recalibrate its provision models for the group assessment portfolios in September in a manner consistent with the evolution of economic activity. Said recalibration generated an impact on the results of the period for Ch$71,051 million before tax as indicated in Note No. 4. Additionally, in accordance with current policy on the matter, the Bank has established additional incremental provisions for Ch$27,000 million during this fiscal year, thus totaling Ch$240,252 million as of September 30, 2020.

25

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

6. Business Segments:

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

Retail: This segment focuses on individuals and small and medium-sized companies (SMEs) with annual sales<br>up to UF 70,000, where the product offering focuses primarily on consumer loans, commercial loans, checking accounts, credit cards,<br>credit lines and mortgage loans.
Wholesale: This segment focused on corporate clients and large companies, whose annual revenue exceed UF 70,000,<br>where the product offering focuses primarily on commercial loans, checking accounts and liquidity management services, debt instruments,<br>foreign trade, derivative contracts and leases.
--- ---
Treasury: This segment includes the associated revenues to the management of the investment portfolio and<br>the business of financial transactions and currency trading.
--- ---

Transactions with customers carried out by the Treasury are reflected in the respective aforementioned segments. These products are highly transaction-focused and include foreign exchange transactions, derivatives and financial instruments in general, among others.

Subsidiaries: Corresponds to the businesses generated by the companies controlled by the Bank, which carry out<br>activities complementary to the bank business. The companies that comprise this segment are:

Entity

- Banchile Administradora General<br>de Fondos S.A.
- Banchile Asesoría<br>Financiera S.A.
--- ---
- Banchile Corredores de Seguros<br>Ltda.
--- ---
- Banchile Corredores de Bolsa<br>S.A.
--- ---
- Banchile Securitizadora S.A.
--- ---
- Socofin S.A.
--- --- 
26

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

6. Business Segments, continued:

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

● The net interest margin of loans and deposits is obtained<br>aggregating the net financial margins of each individual operation of credit and uptake made by the bank. For these purposes,<br>the volume of each operation and its contribution margin are considered, which in turn corresponds to the difference between the<br>effective rate of the customer and the internal transfer price established according to the term and currency of each operation.<br>Additionally, the net margin includes the result of interest and indexation from the accounting hedges.
● The capital and its financial impacts on outcome have been assigned to each segment based on the<br>risk-weighted assets.
--- ---
● Operational expenses are reflected at the level of the different functional areas of the Bank.<br>The allocation of expenses from functional areas to business segments is done using different allocation criteria, at the level<br>of the different concepts and expense items.
--- ---

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

For the periods ended September 30, 2020 and 2019, there was no income from transactions with a customer or counterparty that accounted for 10% or more of the Bank’s total revenues.

27

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

6. Business Segments, continued:

The following table presents the income by segment for the periods ended September 30, 2020 and 2019 for each of the segments defined above:

Retail Wholesale Treasury Subsidiaries Subtotal Consolidation<br> adjustment Total
September September September September September September September September September September September September September September
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Net interest<br> income ) ) ) )
Net commissions income<br> (loss) ) ) ) )
Financial and exchange<br> operations results ) )
Other<br> operating income ) )
Total operating revenue ) )
Provision for loan<br> losses ) ) ) ) ) ) ) ) ) )
Depreciation and amortization ) ) ) ) ) ) ) ) ) ) ) )
Other operating expenses ) ) ) ) ) ) ) ) ) ) ) )
Income<br> attributable to associates ) ) )
Income<br> before income taxes
Income<br> taxes ) )
Income<br> after income taxes

All values are in US Dollars.

The following table presents assets and liabilities of the periods ended September 30, 2020 and December 31, 2019 by each segment defined above:

Retail Wholesale Treasury Subsidiaries Subtotal Consolidation adjustment Total
September December September December September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Assets ) )
Current and deferred taxes
Total assets
Liabilities ) )
Current and deferred taxes
Total liabilities

All values are in US Dollars.

28

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

7. Cash and Cash Equivalents:
(a) The detail of the balances included under cash and cash<br>equivalents and their reconciliation with the Statement of Cash Flows at the end of each period are detailed as follows:
--- ---
September December
2020 2019
MCh MCh
Cash and due from banks:
Cash (*)
Deposit in Chilean Central Bank (*)
Deposits in other domestic banks
Deposits abroad
Subtotal - Cash and due from banks
Net transactions in the course of collection )
Highly liquid financial instruments (**)
Repurchase agreements (**)
Total cash and cash equivalents

All values are in US Dollars.

(*) Amounts in cash funds and in Central Bank are regulatory<br>reserve deposits that the Bank must maintain as a monthly average.
(**) It corresponds to negotiation instruments and repurchases<br>contracts that meet the definition of cash and cash equivalents.
--- ---
(b) Transactions in course of settlement:
--- ---

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

September December
2020 2019
MCh MCh
Assets
Documents drawn on other banks (clearing)
Funds receivable
Subtotal - assets
Liabilities
Funds payable ) )
Subtotal - liabilities ) )
Net transactions in the course of settlement )

All values are in US Dollars.

29

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

8. Financial Assets Held-for-trading:

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

September December
2020 2019
MCh MCh
Instruments issued by the Chilean Government and Central Bank of Chile
Central Bank of Chile bonds
Central Bank of Chile promissory notes
Other instruments issued by the Chilean Government and Central Bank
Other instruments issued in Chile
Bonds from other domestic companies
Bonds from domestic banks
Deposits in domestic banks
Other instruments issued in Chile
Instruments issued Abroad
Instruments from foreign governments or central banks
Other instruments issued abroad
Mutual fund investments
Funds managed by related companies
Funds managed by third-party
Total

All values are in US Dollars.

Under “Instruments issued by the Chilean Government and Central Bank of Chile” are classified instruments sold under repurchase agreements to customers and financial instruments, by an amount of Ch$201,211 million as of September 30, 2020 (Ch$15,243 million as of December 31, 2019). Repurchase agreements had a 3 days average expiration as of period-end 2020 (3 days in December 2019). Additionally, under this line are maintained instruments to comply with the requirements for the constitution of the technical reserve for an amount equivalent to Ch$3,050,000 million.

Moreover, under this same item, other financial instruments are maintained as collateral guaranteeing the derivative transactions executed through Comder Contraparte Central S.A. for an amount of Ch$5,000 as of September 30, 2020 (Ch$57,639 million as of December 31, 2019).

“Other instruments issued in Chile” include instruments sold under repurchase agreements with customers and financial instruments amounting to Ch$62,091 million as of September 30, 2020 (Ch$251,158 million as of December 31, 2019). The repurchase agreements have an average expiration of 6 days as of period-end 2020 (7 days in December 2019).

Additionally, the Bank holds financial investments in mortgage finance bonds issued by itself in the amount of Ch$5,956 million as of September 30, 2020 (Ch$8,029 million as of December 31, 2019), which are presented as a reduction of the liability line item “Debt issued”.

30

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

9. Investments under resale agreements and obligations under<br>repurchase agreements:
(a) Rights arising from resale repurchase agreements: The Bank<br>provides financing to its customers through repurchase agreements and securities lending, in which the financial instrument serves<br>as collateral. As of September 30, 2020 and December 31, 2019, the detail is as follows:
--- ---
Up to 1 month Over 1 month<br> and up to 3 months Over 3 months <br>and up to 12 months Over 1 year<br> and up to 3 years Over 3 years<br> and up to 5 years Over 5 years Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
September December September December September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Instruments issued by the Chilean Governments and Central Bank of Chile
Central Bank bonds
Central Bank promissory notes
Other instruments issued by the Chilean Government and Central Bank of Chile
Subtotal
Other Instruments issued in Chile
Deposit promissory notes from domestic banks
Mortgage bonds from domestic banks
Bonds from domestic banks
Deposits in domestic banks
Bonds from other Chilean companies
Other instruments issued in Chile
Subtotal
Instruments issued by foreign institutions
Instruments from foreign governments or Central Bank
Other instruments
Subtotal
Mutual fund investments
Funds managed by related companies
Funds managed by third-party
Subtotal
Total

All values are in US Dollars.

Securitiesreceived:

The Bank and its subsidiaries have received financial instruments that they can sell or give as collateral in case the owner of these instruments enters into default or in bankruptcy. As of September 30, 2020, the fair value of the instruments received amounts to Ch$55,034 million (Ch$142,370 million as of December, 2019).

31

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

9. Investments under resale agreements and obligationsunder repurchase agreements, continued:
(b) Obligations arising from repurchase agreements: The<br>Bank obtains financing by selling financial instruments and agreeing to repurchase them in the future, plus interest at a prefixed<br>rate. As of September 30, 2020 and December 31, 2019, the repurchase agreements are the following:
--- ---
Up to 1 month Over 1 month<br> and up to 3 months Over 3 months<br> and up to 12 months Over 1 year<br> and up to 3 years Over 3 years<br> and up to 5 years Over 5 years Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
September December September December September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Instruments issued by the Chilean Governments and Central Bank of Chile
Central Bank bonds
Central Bank promissory notes
Other instruments issued by the Chilean Government and Central Bank of Chile
Subtotal
Other Instruments issued in Chile
Deposit promissory notes from domestic banks
Mortgage bonds from domestic banks
Bonds from domestic banks
Deposits in domestic banks
Bonds from other Chilean companies
Other instruments issued in Chile
Subtotal
Instruments issued by foreign institutions
Instruments from foreign governments or central bank
Other instruments issued by foreing
Subtotal
Mutual fund investments
Funds managed by related companies
Funds managed by third-party
Subtotal
Total

All values are in US Dollars.

Securitiessold:

The fair value of the financial instruments delivered as collateral by the Bank and its subsidiaries, in sales transactions with repurchase agreement and securities lending as of September 30, 2020 amounts to Ch$283,771 million (Ch$305,593 million in December 2019). In the event that the Bank and its subsidiaries enter into default or bankruptcy, the counterparty is authorized to sell or deliver these investments as collateral.

32

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

10. Derivative Instruments and Accounting Hedges:
(a) As of September 30, 2020 and December 31,<br>2019, the Bank’s portfolio of derivative instruments is detailed as follows:
--- ---
Notional amount of contract with final expiration date in Fair Value
As of September 30, 2020 Up to 1 month Over <br>1 month<br> and up to<br> 3 months Over <br>3 months<br> and up to<br> 12 months Over<br> 1 year<br> and up to<br> 3 years Over <br>3 year<br> and up to<br> 5 years Over<br> 5 years Total Assets Liabilities
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Derivatives held for hedging purposes
Interest rate swap and cross currency swap
Interest rate swap
Total derivatives held for hedging purposes
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap
Total derivatives held as cash flow hedges
Trading derivatives
Currency forward
Interest rate swap
Interest rate swap and cross currency swap
Call currency options
Put currency options
Total trading derivatives
Total

All values are in US Dollars.

33

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

10. Derivative Instruments and Accounting Hedges, continued:
(a) Portfolio of derivative instruments, continued:
--- ---
Notional amount of contract with final expiration date in Fair Value
As of December 31, 2019 Up to 1 month Over<br> 1 month<br> and up to<br> 3 months Over<br> 3 months<br> and up to<br> 12 months Over<br> 1 year<br> and up to<br> 3 years Over<br> 3 year<br> and up to<br> 5 years Over <br>5 years Total Assets Liabilities
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Derivatives held for hedging purposes
Interest rate swap and cross currency swap
Interest rate swap
Total derivatives held for hedging purposes
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap
Total derivatives held as cash flow hedges
Trading derivatives
Currency forward
Interest rate swap
Interest rate swap and cross currency swap
Call currency options
Put currency options
Total trading derivatives
Total

All values are in US Dollars.

34

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

10. Derivative Instruments and Accounting Hedges, continued:
(b) Fair value Hedges:
--- ---

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

Below is a detail of the hedged elements and instruments under fair value hedges as of September 30, 2020 and December 31, 2019:

September December
2020 2019
MCh MCh
Hedge element
Commercial loans
Corporate bonds
Hedge instrument
Cross currency swap
Interest rate swap

All values are in US Dollars.

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

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

35

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

10. Derivative Instruments and Accounting Hedges, continued:
(c) Cash flow Hedges, continued:
(c.2) Below are the cash flows from bonds issued abroad objects of this hedge and the cash flows of the<br>asset part of the derivative instrument:
--- ---
Over<br> 1 month and <br>up to 3 months Over<br> 3 months and<br> up to 12 months Over<br> 1 year and<br> up to 3 years Over<br> 3 years and <br>up to 5 years Over<br> 5 years Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
December September December September December September December September December September December September December
2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Hedge element
Outflows:
Corporate<br> Bond ) ) ) ) ) ) ) ) ) ) )
Corporate Bond HKD ) ) ) ) ) ) ) ) ) ) )
Corporate Bond PEN ) ) ) ) ) ) ) ) ) ) )
Corporate Bond CHF ) ) ) ) ) ) ) ) )
Corporate Bond ) ) ) ) ) ) ) ) ) ) )
Obligation ) ) ) ) ) ) ) ) ) )
Corporate Bond ) ) ) ) ) ) ) ) ) ) ) )
Corporate Bond AUD ) ) ) ) ) ) ) ) ) ) ) )
Corporate Bond NOK ) ) ) ) ) ) ) ) ) )
Hedge<br> instrument
Inflows:
Cross Currency Swap
Cross Currency Swap<br> HKD
Cross Currency Swap<br> PEN
Cross Currency Swap<br> CHF
Cross Currency Swap
Cross Currency Swap
Cross Currency Swap
Cross Currency Swap<br> AUD
Cross Currency Swap<br> NOK
Net<br> cash flows

All values are in Euros.

36

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

10. Derivative Instruments and Accounting Hedges, continued:
(c) Cash flow Hedges, continued:
--- ---
(c.2) Below are the cash flows from underlying assets and the cash flows of the liability part of the<br>derivative instrument:
--- ---
Over<br> 1 month and up to 3 months Over<br> 3 months and up to 12 months Over<br> 1 year and up to 3 years Over<br> 3 years and up to 5 years Over<br> 5 years Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
December September December September December September December September December September December September December
2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Hedge element
Inflows:
Cash flows<br> in CLF
Hedge<br> instrument
Outflows:
Cross Currency Swap<br> HKD ) ) ) ) ) ) ) ) ) ) ) )
Cross Currency Swap<br> PEN ) ) ) ) ) ) ) ) ) ) )
Cross Currency Swap ) ) ) ) ) ) ) ) ) ) ) )
Cross Currency Swap ) ) ) ) ) ) ) ) ) ) )
Cross Currency Swap<br> CHF ) ) ) ) ) ) ) ) )
Cross Currency Swap ) ) ) ) ) ) ) ) ) ) ) )
Cross Currency Swap<br> AUD ) ) ) ) ) ) ) ) ) ) ) )
Cross Currency Swap<br> NOK ) ) ) ) ) ) ) ) ) ) )
Net<br> cash flows

All values are in Japanese Yen.

37

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

10. Derivative Instruments and Accounting Hedges, continued:
(c) Cash flow Hedges, continued:
--- ---

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

(c.3) The unrealized results generated during the period 2020 by those derivative contracts that conform<br>the hedging instruments in this cash flow hedging strategy, have been recorded with charge to equity amounting to Ch$17,075 million<br>(charge to equity of Ch$82,385 million in September 30, 2019). The net effect of taxes charge to equity amounts to Ch$12,465 million<br>(net charge to equity of Ch$60,141 million equity during the period September 2019).

The accumulated balance for this concept as of September 30, 2020 corresponds to a charge in equity amounted to Ch$98,115 million (charge to equity of Ch$81,040 million as of December 2019).

(c.4) The effect of the cash flow hedging derivatives that offset the result of the hedged instruments<br>corresponds to a credit to income of Ch$67,572 million during the period 2020 (credit to results for Ch$27,685 million during the<br>September 2019 period).
(c.5) As of September 30, 2020 and 2019, it not exist inefficiency in cash flow hedge, because both,<br>hedge item and hedge instruments, are mirrors of each other, it means that all variation of value attributable to rate and revaluation<br>components are netted totally.
--- ---
(c.6) As of September 30, 2020 and 2019, the Bank does not have hedges of net investments in foreign<br>business.
--- --- 
38

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

11. Loans and Advances to Banks, net:
(a) At the end of each reporting period, the balances presented in the item “Loans and advances<br>to Banks” are as follows:
--- ---
September December
--- --- --- --- ---
2020 2019
MCh MCh
Domestic Banks
Interbank loans of liquidity
Provisions for loans to domestic banks )
Subtotal
Foreign Banks
Interbank loans commercial
Credits with third countries
Chilean exports trade loans
Provisions for loans to foreign banks ) )
Subtotal
Central Bank of Chile
Central Bank deposits
Other Central Bank credits
Subtotal
Total

All values are in US Dollars.

(b) The changes in provisions of the credits owed by the banks, during the periods 2020 and 2019, are summarized as follows:
Bank’s Location
--- --- --- --- --- --- ---
Detail Chile Abroad Total
MCh MCh MCh
Balance as of January 1, 2019
Provisions established
Provisions released ) ) )
Balance as of September 30, 2019
Provisions established
Provisions released ) )
Balance as of December 31, 2019
Provisions established
Provisions released ) ) )
Balance as of September 30, 2020

All values are in US Dollars.

39

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

12. Loans to Customers, net:
(a.i) Loans to Customers:
--- ---

As of September 30, 2020 and December 31, 2019, the portfolio of loans is composed as follows:

As of September 30, 2020
Assets before allowances Allowances established
Normal Portfolio Substandard Portfolio Non-Complying Portfolio Total Individual Provisions Group Provisions Deductible Fogape Guarantee Total Net assets
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Commercial loans
Commercial loans ) ) ) )
Foreign trade loans ) ) )
Current account debtors ) ) )
Factoring transactions ) ) )
Student loans ) )
Commercial lease transactions ^(1)^ ) ) )
Other loans and accounts receivable ) ) )
Subtotal ) ) ) )
Mortgage loans
Letters of credit ) )
Endorsable mortgage loans ) )
Other residential lending ) )
Credit from ANAP
Residential lease transactions
Other loans and accounts receivable ) )
Subtotal ) )
Consumer loans
Consumer loans in installments ) )
Current account debtors ) )
Credit card debtors ) )
Consumer lease transactions ^(1)^ ) )
Other loans and accounts receivable ) )
Subtotal ) )
Total ) ) ) )

All values are in US Dollars.

(1) In this item, the Bank finances its clients the acquisition of real estate and chattels through<br>financial lease agreements. As of September 30, 2020 Ch$796,598 million correspond to finance leases on real estate and Ch$780,797<br>million correspond to finance leases on chattels. 
40

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

12. Loans to Customers net, continued:
(a.i) Loans to Customers, continued:
--- ---
As of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- ---
Assets before allowances Allowances established
Normal Portfolio Substandard Portfolio Non-Complying Portfolio Total Individual Provisions Group Provisions Total Net assets
MCh MCh MCh MCh MCh MCh MCh MCh
Commercial loans
Commercial loans ) ) )
Foreign trade loans ) ) )
Current account debtors ) ) )
Factoring transactions ) ) )
Student loans ) )
Commercial lease transactions (1) ) ) )
Other loans and accounts receivable ) ) )
Subtotal ) ) )
Mortgage loans
Letters of credit ) )
Endorsable mortgage loans ) )
Other residential lending ) )
Credit from ANAP
Residential lease transactions
Other loans and accounts receivable ) )
Subtotal ) )
Consumer loans
Consumer loans in installments ) )
Current account debtors ) )
Credit card debtors ) )
Consumer lease transactions (1) ) )
Other loans and accounts receivable ) )
Subtotal ) )
Total ) ) )

All values are in US Dollars.

(1) In this item, the Bank finances its clients the acquisition of real estate and chattels through<br>financial lease agreements. As of December 31, 2019 Ch$779,383 million correspond to finance leases on real estate and Ch$839,837<br>million correspond to finance leases on chattels. 
41

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

12. Loans to Customers, net, continued:
(a.ii) Impaired Portfolio:
--- ---

As of September 30, 2020 and December 31, 2019, the Bank presents the following details of normal and impaired portfolio:

Assets<br> before Allowances Allowances<br> established
Normal<br> Portfolio Impaired<br> Portfolio Total Individual<br> Provisions Group<br> Provisions Deductible<br> Fogape Guarantee Total Net<br> assets
September December September December September December September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Commercial<br> loans ) ) ) ) ) ) )
Mortgage loans ) ) ) )
Consumer<br> loans ) ) ) )
Total ) ) ) ) ) ) )

All values are in US Dollars.

42

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

12. Loans to Customers, continued:
(b) Credit risk provisions:

The changes in credits risk provisions, during the period 2020 and 2019, are summarized as follows:

Commercial Mortgage Consumer
Individual Group Deductible Fogape Guarantee Group Group Total
MCh MCh MCh MCh MCh MCh
Balance as of January 1, 2019
Charge-offs ) ) ) ) )
Sales or transfers of credits ) )
Allowances established
Allowances released
Balance as of September 30, 2019
Charge-offs ) ) ) ) )
Sales or transfers of credits
Allowances established
Allowances released
Balance as of December 31, 2019
Charge-offs ) ) ) ) )
Sales or transfers of credits ) )
Allowances established
Allowances released
Balance as of September 30, 2020

All values are in US Dollars.

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

Otherdisclosures:

1. As of September 30, 2020 and December 31, 2019, the Bank and its subsidiaries have made sales of<br>loan portfolios. The effect in income is no more than 5% of net income before taxes, as described in Note No. 12 letter (e).
2. As of September 30, 2020 and December 31, 2019, the Bank and its subsidiaries derecognized 100%<br>of its portfolio of loans sold and on which all or substantially all of the risks and benefits associated to these financial assets<br>have been transferred (see Note No. 12 letter (e)).
--- ---
3. As of September 30, 2020, under the Commercial Loans item, operations are maintained that guarantee<br>obligations maintained with the Central Bank of Chile as part of the Loan Increase Conditional Credit Facility (FCIC by its Spanish<br>initials) program for an approximate amount of Ch$1,649,890 million (see Note No. 5 letter (i)).
--- --- 
43

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

12. Loans to Customers, continued:
(c) Finance lease contracts:
--- ---

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

Total receivable Unearned income Net balance receivable (*)
September December September December September December
2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh
Within one year ) )
From 1 to 2 years ) )
From 2 to 3 years ) )
From 3 to 4 years ) )
From 4 to 5 years ) )
After 5 years ) )
Total ) )

All values are in US Dollars.

^^

(*) The net balance receivable does not include past-due portfolio totaling Ch$4,311 million as of<br>September 30, 2020 (Ch$6,674 million as of December 2019).

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

(d) Purchase of loan portfolio:

During the period ended September 30, 2020 and the year ended 2019 has not purchases portfolio loans.

44

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

12. Loans to Customers, continued:
(e) Sale or transfer of loans from the loan portfolio:

During the periods 2020 and 2019 there have been operations of sale or transfer of the loan portfolio according to the following:

As of September 30, 2020
Carrying amount Allowances Sale price Effect on income (loss) gain (*)
MCh MCh MCh MCh
Sale of current loans )
Sale of written – off loans
Total )

All values are in US Dollars.

As of September 30, 2019
Carrying amount Allowances Sale price Effect on income (loss) gain (*)
MCh MCh MCh MCh
Sale of current loans )
Sale of written – off loans
Total )

All values are in US Dollars.

(*) See Note No. 30.
(f) Securitization of own assets:
--- ---

During the period 2020 and the year ended 2019, there is no securitization transactions executed involving its own assets.

45

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

13. Investment Securities:

As of September 30, 2020 and December 31, 2019, investment securities classified as available-for-sale and held-to-maturity are detailed as follows:

September 2020 December 2019
Available-<br> for-sale Held-to- maturity Total Available-<br>for -sale Held-to- maturity Total
MCh MCh MCh MCh MCh MCh
Instruments issued by the Chilean Government and Central Bank of Chile
Bonds issued by the Central Bank of Chile
Promissory notes issued by the Central Bank of Chile
Other instruments of the Chilean Government and the Central Bank of Chile
Other instruments issued in Chile
Deposit promissory notes from domestics banks
Mortgage bonds from domestic banks
Bonds from domestic banks
Deposits from domestic banks
Bonds from other Chilean companies
Promissory notes issued by other Chilean companies
Other instruments issued in Chile
Instruments issued Abroad
Instruments from foreign governments or Central Banks
Other instruments
Total

All values are in US Dollars.

46

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

13. Investment Securities, continued:

Instruments of the Government and the Central Bank of Chile include instruments sold under repurchase agreements to clients and financial institutions for an amount of Ch$15,864 million in September 2020. The repurchase agreements have an average maturity of 2 days in September 2020. As of December 31, 2019 there is no amount for this concept.

Under the same item, instruments that guarantee margins for cleared derivatives transactions are classified through Comder Contraparte Central S.A. for an amount of Ch$52,574 million as of September 30, 2020.

Instruments given as collateral as part of the Conditional Credit Facility to Increase Placements (FCIC by its Spanish initials) granted by the Central Bank of Chile in the amount of Ch$593,280 million as of September 30, 2020 are classified under Instruments of Other National Institutions (see Note No. 5 letter (i)).

Under the instruments issued abroad mainly include bonds of local companies issued abroad.

As of September 30, 2020, the portfolio of financial assets available-for-sale includes an accumulated unrealized gain of Ch$2,430 million (accumulated unrealized gain of Ch$3,827 million in December 2019), recorded as an equity valuation adjustment.

During the period 2020 and 2019, there is no evidence of impairment of financial assets available-for-sale.

Gross profits and losses realized on the sale of available-for-sale investments as of September 30, 2020 and 2019 are shown in Note No. 30 “Net Financial Operating Income”. The changes on results at the end of each period are as fallow:

September September
2020 2019
MCh MCh
Unrealized gains
Realized gains reclassified to income ) )
Subtotal )
Income tax on other comprehensive income )
Net effect in equity )

All values are in US Dollars.

47

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

14. Investments in Other Companies:
(a) Investments in other companies include investments of Ch$48,984 million as of September 30, 2020<br>(Ch$50,758 million as of December 31, 2019), as follows:
--- ---
Investment
--- --- --- --- --- --- --- --- --- --- --- --- ---
Ownership Interest Equity Assets Income
September December September December September December September September
2020 2019 2020 2019 2020 2019 2020 2019
Company Shareholder % % MCh MCh MCh MCh MCh MCh
Associates
Transbank S.A. Banco de Chile 26.16 26.16 )
Soc. Operadora de Tarjetas de Crédito Nexus S.A. Banco de Chile 29.63 29.63
Administrador Financiero del Transantiago S.A. Banco de Chile 20.00 20.00
Redbanc S.A. Banco de Chile 38.13 38.13 )
Centro de Compensación Automatizado S.A. Banco de Chile 33.33 33.33
Sociedad Imerc OTC S.A. Banco de Chile 12.33 12.33 )
Sociedad Interbancaria de Depósitos de Valores S.A. Banco de Chile 26.81 26.81
Sociedad Operadora de la Cámara de Compensación de Pagos de Alto Valor S.A. Banco de Chile 15.00 15.00
Subtotal Associates )
Joint Ventures
Servipag Ltda. Banco de Chile 50.00 50.00
Artikos Chile S.A. Banco de Chile 50.00 50.00
Subtotal Joint Ventures
Subtotal )
Investments valued at cost (1)
Bolsa de Comercio de Santiago S.A. Banchile Corredores de Bolsa
Banco Latinoamericano de Comercio Exterior S.A. (Bladex) Banco de Chile
Bolsa Electrónica de Chile S.A. Banchile Corredores de Bolsa
Sociedad de Telecomunicaciones Financieras Interbancarias Mundiales (Swift) Banco de Chile
CCLV Contraparte Central S.A. Banchile Corredores de Bolsa
Subtotal
Total )

All values are in US Dollars.

(1) Income from investments valorized at cost, corresponds to income recognized on cash basis<br>(dividends). 
48

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

14. Investments in Other Companies, continued:
(b) The change of investments in companies registered under the equity method in the periods of 2020<br>and 2019, are as follows:
--- ---
September September
--- --- --- --- ---
2020 2019
MCh MCh
Initial book value
Acquisition of investments in companies
Participation on income in companies with significant influence and joint control )
Dividends receivable
Dividends Minimum
Dividends received ) )
Others
Total

All values are in US Dollars.

(c) During the period ended as of September 30, 2020 and 2019 no impairment has incurred in these investments. 
49

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

15. Intangible Assets:
(a) As of September 30, 2020 and December 31, 2019 intangible assets are composed as follows:
--- ---
Useful Life Average remaining amortization Gross balance Accumulated Amortization Net balance
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Years Years Years Years MCh MCh MCh MCh MCh MCh
Other Intangible Assets:
Software or computer programs 6 6 5 5 ) )
Total ) )

All values are in US Dollars.

50

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

15. Intangible Assets, continued:
(b) The change of intangible assets as of September 30, 2020 and December 31, 2019 are as follows:
Software or computer programs
--- --- --- --- ---
September December
2020 2019
MCh MCh
Gross Balance
Balance as of January 1,
Acquisition
Disposals/ write-downs ) )
Reclassification ) )
Impairment (*) )
Total
Accumulated Amortization
Balance as of January 1, ) )
Amortization for the period (*) ) )
Disposals/ write-downs
Reclassification
Total ) )
Balance Net

All values are in US Dollars.

(*) See Note No. 35 Depreciation, amortization and impairment.
(c) As of September 30, 2020 and December 31, 2019, the Bank maintains the following amounts with technological<br>developments:
--- ---
Commitment Amount
September December
Detail 2020 2019
MCh MCh
Software and licenses

All values are in US Dollars.

51

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

16. Fixed assets, leased assets and lease liabilities:

^^

(a) The properties and equipment as of September 30, 2020 and December 31, 2019 are composed as follows:
Useful Life Average remaining depreciation Gross balance Accumulated Depreciation Net balance
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Years Years Years Years MCh MCh MCh MCh MCh MCh
Type of property and equipment:
Land and Buildings 26 26 20 21 ) )
Equipment 5 5 4 4 ) )
Others 7 7 4 4 ) )
Total ) )

All values are in US Dollars.

52

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

16. Fixed assets, leased assets and lease liabilities, continued:
(b) The changes in properties and equipment as of September 30, 2020 and December 31, 2019 are as follows:
September 2020
--- --- --- --- --- --- --- --- ---
Land and Buildings Equipment Others Total
MCh MCh MCh MCh
Gross Balance
Balance as of January 1, 2020
Additions
Disposals/write-downs/Sales ) ) ) )
Impairment (*) (***) ) )
Total
Accumulated Depreciation
Balance as of January 1, 2020 ) ) ) )
Depreciation charges of the period (*) (**) ) ) ) )
Sales and disposals of the period
Total ) ) ) )
Balance as of September 30, 2020

All values are in US Dollars.

December 2019
Land and Buildings Equipment Others Total
MCh MCh MCh MCh
Gross Balance
Balance as of January 1, 2019
Reclassification ) ) )
Additions
Disposals/write-downs/Sales ) ) ) )
Impairment losses (***) ) ) ) )
Total
Accumulated Depreciation
Balance as of January 1, 2019 ) ) ) )
Reclassification
Depreciation charges of the year (**) ) ) ) )
Sales and disposals of the year
Transfers )
Total ) ) ) )
Balance as of December 31, 2019

All values are in US Dollars.

(*) See Note No.35 Depreciation, Amortization and Impairment.
(**) This amount does not include the depreciation of the year of the Investment Properties, amount<br>is included in “Other Assets” for Ch$268 million (Ch$359 million as of December 2019).
--- ---
(***) This amount does not include charge-offs of Property and Equipment of Ch$867 million (Ch$949 million<br>as of December 2019).
--- --- 
53

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

16. Fixed assets, leased assets and lease liabilities, continued:
(c) The composition of the rights over leased assets as of September 30, 2020 and December 31, 2019<br>is as follows:
--- ---
Gross Balance Accumulated Depreciation Net Balance
September December September December September December
2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh
Categories
Buildings ) )
Floor space for ATMs ) )
Improvements to leased properties ) )
Total ) )

All values are in US Dollars.

(d) The changes of the rights over leased assets as of September 30, 2020 and December 31, 2019 is<br>as follows:
September 2020
--- --- --- --- --- --- --- --- ---
Buildings Floor space for ATMs Improvements to leased properties Total
MCh MCh MCh MCh
Gross Balance
Balance as of January 1, 2020
Additions
Write-downs ) ) ) )
Remeasurement ) )
Total
Accumulated Depreciation
Balance as of January 1, 2020 ) ) ) )
Depreciation of the period (*) ) ) ) )
Write-downs
Total ) ) ) )
Balance as of  September  30, 2020

All values are in US Dollars.

(*) See Note No.35 Depreciation, Amortization and Impairment. 
54

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

16. Fixed assets, leased assets and lease liabilities, continued:
December 2019
Buildings Floor space for ATMs Improvements to leased properties Total
MCh MCh MCh MCh
Gross Balance
Balance as of January 1, 2019
Reclassification
Additions
Write-downs ) )
Total
Accumulated Depreciation
Balance as of January 1, 2019
Reclassification ) )
Depreciation of the year ) ) ) )
Write-downs
Total ) ) ) )
Balance as of  December 31, 2019

All values are in US Dollars.

(e) The following are the future maturities of the lease liabilities as of September 30, 2020 and December<br>31, 2019:
September 2020
--- --- --- --- --- --- --- ---
Up to <br>1 month Over <br>1 month<br> and up to<br> 3 months Over <br>3 months<br> and up to<br> 12 months Over<br> 1 year<br> and up to<br> 3 years Over <br>3 years<br> and up to<br> 5 years Over<br> 5 years Total
Lease associated to: MCh MCh MCh MCh MCh MCh MCh
Buildings
ATMs
Total

All values are in US Dollars.

December 2019
Up to<br> 1 month Over <br>1 month<br> and up to<br> 3 months Over<br> 3 months<br> and up to<br> 12 months Over<br> 1 year<br> and up to<br> 3 years Over<br> 3 years<br> and up to<br> 5 years Over <br>5 years Total
Lease associated to: MCh MCh MCh MCh MCh MCh MCh
Buildings
ATMs
Total

All values are in US Dollars.

55

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

16. Fixed assets, leased assets and lease liabilities, continued:

The Bank and its subsidiaries maintain contracts with certain renewal options and for which there is reasonable certainty that said option shall be carried out. In such cases, the lease period used to measure the liability and assets corresponds to an estimate of future renewals.

The changes of the obligations for lease liabilities and the flows for the periods 2020 and 2019 are as follows:

Total cash flow for the period
Lease liability MCh
Balances as of January 1, 2019
Liabilities for new lease agreements
Interest expenses
Payments of capital and interests )
Others
Balances as of September 30, 2019
Liabilities for new lease agreements
Interest expenses
Payments of capital and interests )
Others
Balances as of December 31, 2019
Liabilities for new lease agreements
Interest expenses
Payments of capital and interests )
Remeasurement )
Derecognized contracts )
Others
Balances as of September 30, 2020

All values are in US Dollars.

(f) The future cash flows related to short-term lease agreements in effect as of September 30, 2020<br>correspond to Ch$8,589 million (Ch$8,611 as of December 31, 2019). 
56

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

17. Current Taxes and Deferred Taxes:
(a) Current Taxes:
--- ---

The Bank and its subsidiaries at the end of each period, have constituted a First Category Income Tax Provision, which was determined based on current tax regulations, and has been reflected in the Statement of Financial Position net of taxes to be recovered or payable, as applicable, as of September 30, 2020 and December 31, 2019, according to the following detail:

September December
2020 2019
MCh MCh
Income tax
Less:
Monthly prepaid taxes ) )
Credit for training expenses ) )
Others ) )
Total )
Tax rate % %

All values are in US Dollars.

September December
2020 2019
MCh MCh
Current tax assets
Current tax liabilities ) )
Total tax payable, net )

All values are in US Dollars.

(b) Income Tax:

The effect of the tax expense during the periods between January 1 and September 30, 2020 and 2019, are broken down as follows:

September September
2020 2019
MCh MCh
Income tax expense:
Current year tax
Tax Previous year ) )
Subtotal
(Credit) Charge for deferred taxes:
Origin and reversal of temporary differences ) )
Subtotal ) )
Others )
Net charge to income for income taxes

All values are in US Dollars.

57

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

17. Current and Deferred Taxes, continued:
(c) Reconciliation of effective tax rate:
--- ---

The following is a reconciliation of the income tax rate to the effective rate applied to determine the Bank’s income tax expense as of September 30, 2020 and 2019:

September 2020 September 2019
Tax rate Tax rate
% MCh % MCh
Income tax calculated on net income before tax 27.00 27.00
Additions or deductions (1.44 ) ) (1.64 ) )
Price-level restatement (4.52 ) ) (3.59 ) )
Other 0.80 0.04
Effective rate and income tax expense 21.84 21.81

All values are in US Dollars.

The effective rate for income tax for the period 2020 is 21.84% (21.81% in September 2019).

58

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

17. Current and Deferred Taxes, continued:
(d) Effect of deferred taxes on income and equity:
--- ---

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

Effect on
Balances as of December 31, 2019 Income Equity Balances as of September 30, 2020
MCh MCh MCh MCh
Debit Differences:
Allowances for loan losses
Personnel provisions )
Staff vacations provisions
Accrued interests adjustments from impaired loans
Staff severance indemnities provision )
Provision of credit cards expenses
Provision of accrued expenses
Leasing )
Incomes received in advance )
Other adjustments
Total Debit Differences
Credit Differences:
Depreciation and price-level restatement of property and equipment
Adjustment for valuation of financial assets available-for-sale )
Transitory assets
Loans accrued to effective rate )
Prepaid expenses )
Other adjustments
Total Credit Differences )
Deferred, Net

All values are in US Dollars.

59

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

17. Current and Deferred Taxes, continued:
(d) Effect of deferred taxes on income and equity, continued:
--- ---

The effects of deferred taxes on assets, liabilities and income as of September 30, 2019 and December 31, 2019, are as follows:

Balance as of December 31, Effect on Balance as of September 30, Effect on Balance as of December 31,
2018 Income Equity 2019 Income Equity 2019
MCh MCh MCh MCh MCh MCh MCh
Debit differences:
Allowances for loan losses
Personnel provisions )
Staff vacations provisions
Accrued interest adjustments from impaired loans
Staff severance indemnities provision ) )
Provisions of credit card expenses ) )
Provisions of accrued expenses )
Adjustment for valuation financial assets available-for-sale )
Leasing )
Incomes received in advance )
Other adjustments )
Total Debit Differences ) )
Credit differences:
Depreciation of property and equipment and investment properties
Adjustment for valuation financial assets available-for-sale )
Transitory assets )
Loans accrued to effective rate ) )
Prepaid expenses ) )
Other adjustments )
Total Credit Differences ) )
Total, Net )

All values are in US Dollars.

60

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

18. Other Assets:
(a) Item composition:
--- ---

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

September December
2020 2019
MCh MCh
Assets held for leasing (*)
Assets received or awarded as payment (**)
Assets awarded at judicial sale
Assets received in lieu of payment
Provision for assets received in lieu of payment or awarded ) )
Subtotal
Other Assets
Deposits by derivatives margin
Trading and brokerage (***)
Prepaid expenses
Other accounts and notes receivable
Investment properties
Commissions receivable
Servipag available funds
VAT receivable
Recoverable income taxes
Accounts receivable for sale of assets received in lieu of payment
Rental guarantees
Pending transactions
Materials and supplies
Assets recovered from leasing for sale
Others
Subtotal
Total

All values are in US Dollars.

(*) These correspond to property and equipment to be given under finance lease.
(**) Assets received in lieu of payment are assets received as payment of customers’ past-due<br>debts. The assets acquired must not exceed the aggregate 20% of the Bank’s effective equity. These assets currently represent<br>0.0150% % (0.0341% as of December 31, 2019) of the Bank’s effective equity.
--- ---

The assets awarded at judicial sale are not subject to the aforementioned margin. These properties are assets available for sale and is expected to be completed the sale within one year from the date the asset is received or acquired. In the event that said assets are not sold within one year, it must be written-off. The assets that have been received in payment or are awarded between March 1, 2019 until September 30, 2020, have an additional term of up to eighteen months for their disposal, also allowing these assets to be written-off proportionally to the number of months between the date of receipt and that fixed by the banks for their disposal.

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

(***) This item mainly includes simultaneous operations carried out by the subsidiary Banchile Corredores<br>de Bolsa S.A. 
61

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

18. Other Assets, continued:
(b) The changes of the provision for assets received in lieu of payment during the periods 2020 and<br>2019 are as follows:
--- ---
Provision for assets received in lieu of payment MCh
--- --- ---
Balance as of January 1, 2019
Provisions used )
Provisions established
Provisions released
Balance as of September 30, 2019
Provisions used )
Provisions established
Provisions released
Balance as of December 31, 2019
Provisions used )
Provisions established
Provisions released
Balance as of September 30, 2020

All values are in US Dollars.

19. Current Accounts and Other Demand Deposits:

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

September December
2020 2019
MCh MCh
Current accounts
Other demand deposits
Other deposits and sight accounts
Total

All values are in US Dollars.

20. Savings Accounts and Time Deposits:

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

September December
2020 2019
MCh MCh
Time deposits
Term savings accounts
Other term balances payable
Total

All values are in US Dollars.

62

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

21. Borrowings from Financial Institutions:

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

September December
2020 2019
MCh MCh
Domestic banks
Banco do Brasil
Banco de Crédito e Inversiones
Banco  Santander
Subtotal domestic banks
Foreign banks
Foreign trade financing
Citibank N.A.
Bank of America
Wells Fargo Bank
Toronto Dominion Bank
The Bank of Nova Scotia
Zürcher Kantonalbank
Bank of New York Mellon
Commerzbank AG
DZ Bank Frankfurt
Sumitomo Mitsui Banking
Standard Chartered Bank
JP Morgan Chase Bank
ING Bank
Others
Borrowings and other obligations
Wells Fargo Bank
Deutsche Bank Trust Company Americas
Bank of America
Citibank N.A.
Others
Subtotal foreign banks
Chilean Central Bank (*)
Total

All values are in US Dollars.

(*) Measures established by the Central Bank to deliver liquidity to the economy and support the flow<br>of credit to households and companies, among which are the Conditional Credit Facility to Increase Placements (FCIC by its Spanish<br>initials) and the Liquidity Credit Line (LCL). See Note No. 5 letter (i). 
63

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

22. Debt Issued:

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

September December
2020 2019
MCh MCh
Mortgage bonds
Bonds
Subordinated bonds
Total

All values are in US Dollars.

During the period ended as of September 30, 2020, Banco de Chile issued bonds by an amount of Ch$814,881 million, from which corresponds to Short-Term Bonds and Current Bonds by an amount of Ch$560,698 million and Ch$254,183 million respectively, according to the following details:

Short-term Bonds

Counterparty Currency Annual interest rate % Issued date Maturity date
Citibank N.A. 2.00 07/01/2020 07/07/2020
Citibank N.A. 1.95 09/01/2020 09/04/2020
Citibank N.A. 1.91 13/01/2020 13/04/2020
Citibank N.A. 1.87 14/01/2020 14/04/2020
Citibank N.A. 1.91 29/01/2020 31/07/2020
Citibank N.A. 1.91 29/01/2020 31/07/2020
Citibank N.A. 1.86 29/01/2020 29/05/2020
Citibank N.A. 1.85 30/01/2020 01/06/2020
Citibank N.A. 1.85 03/02/2020 03/06/2020
Citibank N.A. 1.55 08/04/2020 05/06/2020
Citibank N.A. 1.30 13/04/2020 12/05/2020
Citibank N.A. 1.30 13/04/2020 13/05/2020
Citibank N.A. 1.30 13/04/2020 13/05/2020
Citibank N.A. 1.55 16/04/2020 16/06/2020
Citibank N.A. 1.55 16/04/2020 18/06/2020
Citibank N.A. 1.61 17/04/2020 21/08/2020
Wells Fargo Bank 1.60 17/04/2020 21/08/2020
Wells Fargo Bank 1.50 22/04/2020 14/08/2020
Wells Fargo Bank 1.45 24/04/2020 29/01/2021
Wells Fargo Bank 1.30 29/04/2020 29/10/2020
Citibank N.A. 0.45 18/05/2020 20/07/2020
Citibank N.A. 0.45 18/05/2020 20/07/2020
Total as of September 30, 2020

All values are in US Dollars.

64

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

22. Debt Issued, continued:

Current Bonds Long-Term

Serie Currency Amount MCh Terms Years Annual issue rate % Issue date Maturity date
BCHIEM0817 UF 7 0.80 06/01/2020 06/01/2027
BCHIEL0717 UF 8 0.72 04/02/2020 04/02/2028
BONO AUD AUD 15 2.65 02/03/2020 02/03/2035
Subtotal Others currency
Total as of September 30, 2020

All values are in US Dollars.

Subordinated bonds

During the period ended September 30, 2020, there were no subordinated bonds, issued.

65

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

22. Debt Issued, continued:

During the year ended as of December 31, 2019, Banco de Chile issued bonds by an amount of Ch$2,625,176 million, from which corresponds to Short-Term Bonds, Current Bonds and Subordinated Bonds by an amount of Ch$944,413 million, Ch$1,465,406 and Ch$215,357 million respectively, according to the following details:

Short-term Bonds

Counterparty Currency Annual interest rate % Issued date Maturity date
Citibank N.A. 2.91 04/01/2019 04/04/2019
Wells Fargo Bank 2.85 17/01/2019 24/04/2019
Citibank N.A. 2.80 22/01/2019 22/04/2019
Citibank N.A. 2.67 04/04/2019 02/07/2019
Citibank N.A. 2.67 09/04/2019 09/08/2019
Citibank N.A. 2.66 11/04/2019 11/07/2019
Wells Fargo Bank 2.68 11/04/2019 11/10/2019
Citibank N.A. 2.66 12/04/2019 22/07/2019
Wells Fargo Bank 2.67 12/04/2019 12/09/2019
Citibank N.A. 2.67 29/04/2019 29/10/2019
Wells Fargo Bank 2.60 30/04/2019 30/07/2019
Citibank N.A. 2.61 17/05/2019 18/11/2019
Citibank N.A. 2.59 23/05/2019 22/08/2019
Bank of America 2.50 21/06/2019 22/08/2019
Wells Fargo Bank 2.50 24/06/2019 25/07/2019
Citibank N.A. 2.40 24/06/2019 15/10/2019
Citibank N.A. 2.50 25/06/2019 05/08/2019
Citibank N.A. 2.51 28/06/2019 01/08/2019
Citibank N.A. 2.38 11/07/2019 09/10/2019
Citibank N.A. 2.25 09/08/2019 12/11/2019
Wells Fargo Bank 2.03 13/08/2019 08/05/2020
Citibank N.A. 2.20 22/08/2019 21/11/2019
Wells Fargo Bank 2.20 10/09/2019 09/12/2019
Wells Fargo Bank 2.20 11/09/2019 16/12/2019
Wells Fargo Bank 2.20 11/09/2019 10/12/2019
Citibank N.A. 2.10 07/10/2019 07/01/2020
Citibank N.A. 2.07 09/10/2019 09/01/2020
Citibank N.A. 2.00 24/10/2019 29/01/2020
Bank of America 2.00 24/10/2019 24/01/2020
Citibank N.A. 2.00 25/10/2019 03/02/2020
Citibank N.A. 1.91 04/11/2019 13/01/2020
Citibank N.A. 1.97 12/11/2019 12/02/2020
Citibank N.A. 2.05 22/11/2019 07/08/2020
Citibank N.A. 2.05 22/11/2019 07/08/2020
Citibank N.A. 2.07 04/12/2019 07/08/2020
Citibank N.A. 2.05 09/12/2019 09/04/2020
Wells Fargo Bank 2.04 09/12/2019 05/06/2020
Wells Fargo Bank 2.04 11/12/2019 27/03/2020
Citibank N.A. 2.03 30/12/2019 20/07/2020
Wells Fargo Bank 2.10 30/12/2019 15/12/2020
Total as of December 31, 2019

All values are in US Dollars.

66

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

22. Debt Issued, continued:

Current Bonds Long-Term

Serie Currency Terms<br> Years Annual issue rate % Issue date Maturity date
BCHIEC0817 UF 5 1.55 30/01/2019 30/01/2024
BCHIED1117 UF 5 1.54 14/03/2019 14/03/2024
BCHIED1117 UF 5 1.45 19/03/2019 19/03/2024
BCHIED1117 UF 5 1.45 20/03/2019 20/03/2024
BCHIDW1017 UF 2 0.93 09/05/2019 09/05/2021
BCHIDW1017 UF 2 0.57 24/06/2019 24/06/2021
BCHIEH0917 UF 7 1.04 01/07/2019 01/07/2026
BCHIEB1117 UF 4 0.83 01/07/2019 01/07/2023
BCHIEH0917 UF 7 1.00 02/07/2019 02/07/2026
BCHIEI1117 UF 7 0.66 19/07/2019 19/07/2026
BCHIEI1117 UF 7 0.51 30/07/2019 30/07/2026
BCHIEI1117 UF 7 0.45 01/08/2019 01/08/2026
BCHICC0815 UF 12 0.54 05/08/2019 05/08/2031
BCHICA1015 UF 11 0.54 05/08/2019 05/08/2030
BCHICB1215 UF 11 0.44 07/08/2019 07/08/2030
BCHIEI1117 UF 7 0.30 07/08/2019 07/08/2026
BCHIEI1117 UF 7 0.28 08/08/2019 08/08/2026
BCHICB1215 UF 11 0.45 08/08/2019 08/08/2030
BCHIEI1117 UF 7 0.29 08/08/2019 08/08/2026
BCHIBV1015 UF 10 0.37 20/08/2019 20/08/2029
BCHIEV1117 UF 10 0.34 05/09/2019 05/09/2029
BCHIEK1117 UF 13 1.38 11/12/2019 11/12/2032
Subtotal UF
BONO JPY 20 1.00 14/05/2019 14/05/2039
BONO HKD HKD 12 2.90 19/07/2019 19/07/2031
BONO AUD AUD 20 3.50 28/08/2019 28/08/2039
BONO PEN PEN 15 5.40 04/09/2019 04/09/2034
BONO AUD AUD 15 3.13 09/09/2019 09/09/2034
BONO NOK NOK 10 3.50 07/11/2019 07/11/2029
BONO AUD AUD 20 3.55 11/11/2019 11/11/2039
BONO JPY 10 1.00 19/11/2019 19/11/2029
Subtotal Others currency
Total as of December 31, 2019

All values are in Japanese Yen.

Subordinated bonds

Serie Currency Amount MCh Terms Years Annual issue rate % Issue date Maturity date
UCHI-J1111 UF 23 1.05 20/08/2019 20/08/2042
UCHI-J1111 UF 23 1.04 20/08/2019 20/08/2042
UCHI-J1111 UF 23 0.99 21/08/2019 21/08/2042
UCHI-I1111 UF 21 0.96 24/09/2019 24/09/2040
Total as of December 31, 2019

All values are in US Dollars.

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

67

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

23. Other Financial Obligations:

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

September December
2020 2019
MCh MCh
Other Chilean obligations
Public sector obligations
Total

All values are in US Dollars.

24. Provisions:
(a) At the end of each period, this item is composed as follows:
--- ---
September December
--- --- ---
2020 2019
MCh MCh
Provisions for minimum dividends (*)
Provisions for personnel benefits and payroll expenses
Provisions for contingent loan risks
Provisions for contingencies:
Additional loan provisions (**)
Country risk provisions
Other provisions for contingencies
Total

All values are in US Dollars.

(*) See Note No. 27 letter (c).
(**) As of September 30, 2020, Ch$27,000 million have been established<br>for additional provisions. See Note No. 24 letter (b).
--- --- 
68

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

24. Provisions, continued:
(b) The following table shows the changes in provisions and accrued expenses during the periods 2020<br>and 2019:
--- ---
Minimum dividends Personnel benefits and payroll Contingent loan Risks Additional loan provisions Country risk provisions and other contingencies Total
--- --- --- --- --- --- --- --- --- --- --- ---
MCh MCh MCh MCh MCh MCh
Balances as of January 1, 2019
Provisions established
Provisions used ) ) )
Provisions released
Balances as of  September 30, 2019
Provisions established
Provisions used ) )
Provisions released ) ) )
Balances as of December 31, 2019
Provisions established
Provisions used ) ) )
Provisions released
Balances as of September 30, 2020

All values are in US Dollars.

(c) Provisions for personnel benefits and payroll:
September December
--- --- ---
2020 2019
MCh MCh
Staff accrued vacation provision
Provisions for performance bonuses
Staff severance indemnities
Other personnel benefits provision
Total

All values are in US Dollars.

69

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

24. Provisions, continued:
(d) Staff severance indemnities:
--- ---
(i) Changes in the staff severance indemnities:
--- ---
September September
--- --- --- --- ---
2020 2019
MCh MCh
Present value of the obligations at the beginning of the period
Increase in provision
Benefit paid ) )
Effect of change in actuarial factors
Total

All values are in US Dollars.

(ii) Net benefits expenses:
September September
--- --- --- ---
2020 2019
MCh MCh
Increase (Decrease)  in provisions )
Interest cost of benefits obligations
Effect of change in actuarial factors
Net benefit expenses

All values are in US Dollars.

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

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

September 30, <br> 2020 December 31,<br> 2019
% %
Discount rate 2.31 3.17
Salary increase rate 4.04 4.42
Payment probability 99.99 99.99

The most recent actuarial valuation of the staff severance indemnities provision was carried out during the second quarter of 2020.

70

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

24. Provisions, continued:
(e) Changes in compliance bonuses provision:
--- ---
September September
--- --- --- --- ---
2020 2019
MCh MCh
Balances as of January 1
Net provisions established
Provisions used ) )
Total

All values are in US Dollars.

(f) Changes in staff accrued vacation provision:
September September
--- --- --- --- ---
2020 2019
MCh MCh
Balances as of January 1
Net provisions established
Provisions used ) )
Total

All values are in US Dollars.

(g) Employee benefits share-based provision:

As of September 30, 2020 and 2019, the Bank and its subsidiaries do not have a stock-based compensation plan.

(h) Contingent loan provisions:

As of September 30, 2020 the Bank and its subsidiaries maintain contingent loan provisions by an amount of Ch$78,597 million (Ch$57,042 million at December 2019). See Note No. 26 letter (d).

71

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

25. Other Liabilities:

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

September December
2020 2019
MCh MCh
Accounts and notes payable
Income received in advance (*)
Dividends payable
Other liabilities
Documents intermediated (**)
Cobranding
VAT debit
Securities unliquidated
Insurance payments
Outstanding transactions
Others
Total

All values are in US Dollars.

(*) In relation to the Strategic Alliance Framework Agreement,<br>on June 4, 2019, Banco de Chile received the payment from the Insurance Companies for an amount of Ch$149,061 million, which was<br>recorded according to IFRS 15. The related income is recognized over time, depending on compliance with the associated performance<br>obligation.
(**) This item mainly includes financing of simultaneous operations<br>performed by subsidiary Banchile Corredores de Bolsa S.A.
--- --- 
72

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

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

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

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

September December
2020 2019
MCh MCh
Contingent loans
Guarantees and sureties
Confirmed foreign letters of credit
Issued letters of credit
Bank guarantees
Undrawn credit lines
Other credit commitments
Transactions on behalf of third parties
Documents in collections
Third-party resources managed by the Bank:
Financial assets managed on behalf of third parties
Other assets managed on behalf of third parties
Financial assets acquired on its own behalf
Other assets acquired on its own behalf
Custody of securities
Securities held in safe custody in the Bank and subsidiaries
Securities held in safe custody in other entities
Total

All values are in US Dollars.

73

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

26. Contingencies and Commitments, continued:
(b) Lawsuits and legal proceedings:
--- ---
(b.1) Normal judicial contingencies in the industry:
--- ---

At the date of issuance of these Interim Consolidated Financial Statements, there are legal actions filed against the Bank related with the ordinary course operations. As of September 30, 2020 the Bank maintain provisions for judicial contingencies amounting to Ch$251 million (Ch$237 million as of December 2019), which are part of the item “Provisions” in the Interim Statement of Financial Position.

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

As of September 30, 2020
2020 2021 2022 2023 2024 Total
MCh MCh MCh MCh MCh MCh
Legal contingencies

All values are in US Dollars.

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

As of September 30, 2020 and December 31, 2019 there are not significant lawsuits in court that affect or may affect these Interim Consolidated Financial Statements.

74

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

26. Contingencies and Commitments, continued:
(c) Guarantees granted by operations:
--- ---
i. In subsidiary Banchile Administradora General de FondosS.A.:
--- ---

In compliance with Article No, 12 of Law No. 20,712, Banchile Administradora General de Fondos S.A., has designated Banco de Chile as the representative of the beneficiaries of the guarantees it has established, and in such role the Bank has issued bank guarantees totaling UF 3,758,100, maturing January 8, 2021 (UF 3,090,000, maturing on January 10, 2020 as of December 2019). The subsidiary took a policy with Mapfre Seguros Generales S.A. for the Real State Funds by a guaranteed amount of UF 867,000.

As of September 30, 2020 and December 31, 2019 the Bank has not guaranteed mutual funds.

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

For the purposes of ensuring correct and complete compliance with all of its obligations as broker-dealer entity, in conformity with the provisions from Article No. 30 and subsequent of Law No. 18,045 on Securities Markets, the subsidiary established a guarantee in an insurance policy for UF 20,000, insured by Mapfre Seguros, that matures April 22, 2022, whereby the Securities Exchange of the Santiago Stock Exchange was appointed as the subsidiary’s creditor representative.

September December
2020 2019
Guarantees: MCh MCh
Shares delivered to cover simultaneous forward sales transactions:
Santiago Securities Exchange, Stock Exchange
Electronic Chilean Securities Exchange, Stock Exchange
Fixed income securities to guarantee CCLV system, Santiago Securities Exchange, Stock Exchange
Shares delivered to guarantee equity lending, Santiago Securities Exchange, Stock Exchange
Total

All values are in US Dollars.

75

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

26. Contingencies and Commitments, continued:
(c) Guarantees granted, continued:
--- ---
ii. In subsidiary Banchile Corredores de Bolsa S.A., continued:
--- ---

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

Banchile Corredores de Bolsa S.A. keeps an insurance policy current with Chubb Seguros Chile S.A. that expires April 2, 2021, this considers matters of employee fidelity, physical losses, falsification or adulteration, and currency fraud with a coverage amount equivalent to US$20,000,000.

It also provided a bank guarantee No. 3610198 in the amount of UF 253,800 for the benefits of investors in portfolio management contracts. This bank guarantee is revaluated in UF to fixed term, non-endorsable and has a maturity date of January 8, 2021.

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

76

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

26. Contingencies and Commitments, continued:
(c) Guarantees granted, continued:
--- ---
iii. In subsidiary Banchile Corredores de Seguros Ltda.:
--- ---

According to established in article No. 58, letter D of D.F.L. 251, as of September 30, 2020 the entity maintains two insurance policies with effect from April 15, 2020 to April 14, 2021 which protect it against of potential damages caused by infractions of the law, regulations and complementary rules that regulate insurance brokers, especially when the non-compliance comes from acts, errors or omissions of the broker, its representatives, agents or dependents that participate in the intermediation.

The policies contracted are:

Matter insured Amount Insured (UF)
Errors and omissions liability policy 500
Civil liability policy 60,000
(d) Provisions for contingencies loans:
--- ---

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

September December
2020 2019
MCh MCh
Undrawn credit lines
Bank guarantees provision
Guarantees and sureties provision
Letters of credit provision
Other credit commitments
Total

All values are in US Dollars.

77

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

26. Contingencies and Commitments, continued:
(e) By Exempt Resolution No. 270 dated October 30, 2014, the Superintendency of Securities and Insurance<br>(current Commission for the Financial Market) imposed a fine of UF 50,000 to Banchile Corredores de Bolsa S.A. for violations of<br>the second paragraph of article 53 of the Securities Market Law, said company filed a claim with the competent Civil Court requesting<br>the annulment of the fine. On December 10, 2019, a judgement in the case was issued reducing the fine to the amount of UF 7,500.<br>The judgment indicated has been subject to cassation appeals filed by both parties, which are pending before the Court of Appeals<br>of Santiago.
--- ---

The company has not made provisions considering that the Bank’s legal advisors in charge of the procedure estimate that there are solid grounds that the claim filed by Banchile Corredores de Bolsa S.A. can be accepted.

27. Equity:
(a) Capital:
--- ---
(i) Authorized, subscribed and paid shares:
--- ---

As of September 30, 2020, the paid-in capital of Banco de Chile is represented by 101,017,081,114 registered shares (101,017,081,114 shares as of December 31, 2019), with no par value, subscribed and fully paid.

(ii) Shares:
(ii.1) The following table shows the changes in share from December 31, 2018 to September 30, 2020:
--- ---
Total
--- --- ---
OrdinaryShares
Total shares as of December 31, 2018 101,017,081,114
Total shares as of December 31, 2019 101,017,081,114
Total shares as of September 30, 2020 101,017,081,114
(b) Approval and payment of dividends:
--- ---

At the Bank Ordinary Shareholders’ Meeting held on March 26, 2020 it was approved the distribution and payment of dividend No. 208 of Ch$3.47008338564 per share of the Banco de Chile, with charged to the net distributable income for the year 2019. The amount of the dividend paid in year 2020 amounted to Ch$350,538 million.

At the Bank Ordinary Shareholders’ Meeting held on March 28, 2019 it was approved the distribution and payment of dividend No. 207 of Ch$3.52723589646 per share of the Banco de Chile, with charged to the net distributable income for the year ended as of December 31, 2018. The amount of the dividend paid in year 2019 amounted to Ch$356,311 million.

78

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

27. Equity, continued:
(c) Provision for minimum dividends:

The Board of Directors of Banco de Chile agreed for the purposes of minimum dividends, to establish a provision of 60% of the net income resulting from reducing or adding to the net income for the corresponding period, the value effect of the monetary unit of paid capital and reserves, as a result of any change in the Consumer Price Index (CPI) between the month prior to the current month and the month of November of the previous year. The amount to be reduced of the liquid income for the period ended as of September 30, 2020 amounted to Ch$53,572 million.

As indicated, as of September 30, 2020, the amount of the net income determined in accordance with the preceding paragraph is equivalent to Ch$283,251 million (Ch$500,768 million as of December 31, 2019). Consequently, the Bank recorded a provision for minimum dividends under “Provisions” as of September 30, for an amount of Ch$169,951 million (Ch$300,461 million in December 2019), which reflects as a counterpart an equity reduction for the same amount in the item “Retained earnings”.

(d) Earnings per share:
(i) Basic earnings per share:
--- ---

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

(ii) Diluted earnings per share:

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

79

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

27. Equity, continued:

Accordingly, the basic and diluted earnings per share as of September 30, 2020 and 2019 were determined as follows:

September September
2020 2019
Basic earnings per share:
Net profits attributable to ordinary equity holders of the bank (in million Chilean pesos) 336,823 445,863
Weighted average number of ordinary shares 101,017,081,114 101,017,081,114
Earning per shares (in Chilean pesos) 3.33 4.41
Diluted earnings per share:
Net profits attributable to ordinary equity holders of the bank (in million Chilean pesos) 336,823 445,863
Weighted average number of ordinary shares 101,017,081,114 101,017,081,114
Assumed conversion of convertible debt — —
Adjusted number of shares 101,017,081,114 101,017,081,114
Diluted earnings per share (in Chilean pesos) 3.33 4.41

As of September 30, 2020 and 2019, the Bank does not have instruments that generate dilutive effects.

(e) Other comprehensive income:

This item includes the following concepts:

The adjustment of cash flow hedge derivatives comprises the portion of income recorded in equity resulting from changes in fair value due to changes in market factors. During the period 2020 it was made a charge to equity for Ch$17,075 million (charge to equity of Ch$82,385 million in 2019). The income tax effect presented a credit to equity of Ch$4,610 million (credit of Ch$22,244 million in September 2019).

The valuation adjustment of investments available for sale originates from fluctuations in the fair value of such portfolio, with a charge or credit to equity. During the period 2020, it was made a charge to equity for Ch$1,397 million (credit of Ch$20,867 million during the year 2019). The deferred tax effect meant a credit to equity of Ch$378 million (charge to equity of Ch$5,652 million in September 2019).

(f) Retained earnings from previous years:

During the year 2020, the Ordinary Shareholders Meeting of Banco de Chile agreed to deduct and withhold from the 2019 liquid income, an amount equivalent to the value effect of the monetary unit of paid capital and reserves according to the variation in the Consumer Price Index occurred between November 2018 and November 2019, amounting to Ch$92,240 million. Additionally, the Board determined to withhold 30% of the remaining liquid income, equivalent to Ch$150,230 million.

80

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

28. Interest Revenue and Expenses:
(a) On the closing date of the Financial Statement, the interest and indexation income, excluding hedge results, are composed as<br>follows:
--- ---
September 2020 September 2019
--- --- --- --- --- --- --- --- ---
Interest UF Indexation Prepaid fees Total Interest UF Indexation Prepaid fees Total
MCh MCh MCh MCh MCh MCh MCh MCh
Commercial loans
Consumer loans
Residential mortgage loans
Financial investment
Repurchase agreements
Loans to banks
Other interest and indexation revenue
Total

All values are in US Dollars.

The amount of interest recognized on a received basis for impaired portfolio in the period 2020 amounts to Ch$2,923 million (Ch$3,409 million in September 2019).

(b) At the each period end, the stock of interest and UF indexation not recognized in incomes is the<br>following:
September 2020 September 2019
--- --- --- --- --- --- ---
Interest UF Indexation Total Interest UF Indexation Total
MCh MCh MCh MCh MCh MCh
Commercial loans
Residential mortgage loans
Consumer loans
Total

All values are in US Dollars.

81

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

28. Interest Revenue and Expenses, continued:
(c) At each period end, interest and UF indexation expenses<br>excluding hedge results, are detailed as follows:
--- ---
September 2020 September 2019
--- --- --- --- --- --- ---
Interest UF Indexation Total Interest UF Indexation Total
MCh MCh MCh MCh MCh MCh
Savings accounts and time deposits
Debt securities issued
Other financial obligations
Repurchase agreements
Obligations with banks
Demand deposits
Lease liabilities
Other interest and indexation expenses
Total

All values are in US Dollars.

(d) As of September 30, 2020 and 2019, the Bank uses cross currency and interest rate swaps to hedge<br>its position on movements on the fair value of corporate bonds and commercial loans and cross currency swaps to hedge the risk<br>of variability of obligations flows with foreign banks and bonds issued in foreign currency.
September 2020 September 2019
--- --- --- --- --- --- --- --- --- --- --- --- ---
Income Expense Total Income Expense Total
MCh MCh MCh MCh MCh MCh
Gain from fair value accounting hedges
Loss from fair value accounting hedges ) ) ) )
Gain from cash flow accounting hedges
Loss from cash flow accounting hedges ) ) ) ) ) )
Net gain on hedge items
Total ) ) ) )

All values are in US Dollars.

(e) At each period end, the summary of interest is as follows:
September September
--- --- --- --- ---
2020 2019
MCh MCh
Interest revenue
Interest expense ) )
Subtotal interest income
Net gain (loss) from accounting hedges ) )
Total net interest income

All values are in US Dollars.

82

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

29. Income and Expenses from Fees and Commissions:

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

September September
2020 2019
MCh MCh
Commission income
Debit and credit card services
Investments in mutual funds and others
Use of distribution channel and access to customers
Collections and payments
Portfolio management
Fees for insurance transactions
Guarantees and letters of credit
Trading and securities management
Brand use agreement
Lines of credit and overdrafts
Financial advisory services
Other commission earned
Total commissions income
Commission expenses
Fees for card transactions ) )
Interbank transactions ) )
Collections and payments ) )
Securities transactions ) )
Sales force ) )
Other commission ) )
Total commissions expenses ) )

All values are in US Dollars.

83

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

30. Net Financial Operating Income:

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

September September
2020 2019
MCh MCh
Financial assets held-for-trading
Sale of available-for-sale instruments
Net income on other transactions )
Sale of loan portfolios (Note No.12 (e))
Trading derivative )
Total

All values are in US Dollars.

31. Foreign Exchange Transactions, Net:

Net foreign exchange transactions are detailed as follows:

September September
2020 2019
MCh MCh
Gain from accounting hedges
Indexed foreign currency )
Exchange difference, net
Total

All values are in US Dollars.

84

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

32. Provisions for Loan<br>Losses:

The change registered in income during the periods 2020 and 2019 due to provisions, are summarized as follows:

Loans to customers
Loans and advance to banks Commercial Loans Mortgage Loans Consumer Loans Subtotal Contingent Loans Total
September September September September September September September September September September September September September September
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Provisions established:
- Individual provisions ) ) ) ) ) ) )
- Group provisions ) ) ) ) ) ) ) ) ) ) ) )
Provisions established, net ) ) ) ) ) ) ) ) ) ) ) )
Provisions released:
- Individual provisions
- Group provisions
Provisions realeased, net
Provision, net ) ) ) ) ) ) ) ) ) ) ) )
Provisions for deductible of guarantees fogape COVID-19 ) ) )
Additional provisions ) ) )
Recovery of written-off assets
Provision for loan losses, net ) ) ) ) ) ) ) ) ) ) ) )

All values are in US Dollars.

During the period ended September 30, 2020, the CMF has issued specific regulations for the constitution of provisions (See Note No. 3). Additionally, the Bank has made changes to the variables used in group provisions calculation (See Note No. 4).

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

85

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

33. Personnel Expenses:

Salaries and personnel expenses during the periods 2020 and 2019 are as follows:

September September
2020 2019
MCh MCh
Remunerations
Bonuses and incentives
Variable compensation
Gratifications
Lunch and health benefits
Staff severance indemnities
Training expenses
Other personnel expenses
Total

All values are in US Dollars.

86

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

34. Administrative Expenses:

This item is composed as follows:

September September
2020 2019
MCh MCh
General administrative expenses
Information technology and communications
Maintenance and repair of property and equipment
External advisory services and professional services fees
Office supplies
Surveillance and securities transport services
Insurance premiums
Energy, heating and other utilities
External service of financial information
Expenses for short-term leases and low value
Postal box, mail, postage and home delivery services
Legal and notary expenses
External service of custody of documentation
Donations
Representation and travel expenses
Other expenses of obligations for lease agreements
Other general administrative expenses
Subtotal
Outsource services
Credit pre-evaluation
External technological developments expenses
Data processing
Certification and technology testing
Other
Subtotal
Board expenses
Board of Directors Compensation
Other Board expenses
Subtotal
Marketing expenses
Advertising
Subtotal
Taxes, payroll taxes and contributions
Contribution to the banking regulator
Real estate contributions
Patents
Other taxes
Subtotal
Total

All values are in US Dollars.

87

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

35. Depreciation, Amortization and Impairment:
(a) The amounts corresponding to charges to results for depreciation and amortization during the periods<br>2020 and 2019, are detailed as follows:
--- ---
September September
--- --- ---
2020 2019
MCh MCh
Depreciation and amortization
Depreciation of property and equipment (Note No. 16 (b))
Depreciation of leased assets (Note No. 16 (d))
Amortization of intangibles assets (Note No. 15 (b))
Total

All values are in US Dollars.

(b) As of September 30, 2020 and 2019 the impairment expenses is composed as follows:
September September
--- --- ---
2020 2019
MCh MCh
Impairment
Impairment of property and equipment (Note No. 16 (b))
Impairment of intangible assets (Note No. 15 (b))
Impairment of leased assets
Total

All values are in US Dollars.

88

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

36. Other Operating Income:

During the periods 2020 and 2019, the Bank and its subsidiaries present other operating income, according to the following:

September September
2020 2019
MCh MCh
Income for assets received in lieu of payment
Income from sale of assets received in lieu of payment
Other income
Subtotal
Release of provisions for contingencies
Country risk provisions
Other provisions for contingencies
Subtotal
Other income
Release of provisions and expense recovery
Rental investment properties
Reimbursements for insurance policies
Recovery from correspondent banks
Income from sale leased assets
Tax management income
Credit/debit card income
Revaluation of prepaid monthly payments
Fiduciary and trustee commissions
Gain on sale of fixed assets
Others
Subtotal
Total

All values are in US Dollars.

89

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

37. Other Operating Expenses:

During the periods 2020 and 2019, the Bank and its subsidiaries present other operating expenses, according to the following:

September September
2020 2019
MCh MCh
Provisions and expenses for assets received in lieu of payment
Charge-off assets received in lieu of payment
Provisions for assets received in lieu of payment
Maintenance expenses of assets received in lieu of payment
Subtotal
Provisions for contingencies
Country risk provisions
Other provisions
Subtotal
Other expenses
Write-offs for operating risks
Leasings operational expenses
Card administration
Correspondent banks
Expenses for charge-off leased assets recoveries
Credit life insurance
Contribution to other organisms
Civil lawsuits
Others
Subtotal
Total

All values are in US Dollars.

90

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

38. Related Party Transactions:

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

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

91

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

38. Related Party Transactions, continued:
(a) Loans with related parties:
--- ---

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

Productive and<br> Services Companies (*) Investment and Commercial <br>Companies (**) Individuals (***) Total
September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh
Loans and accounts receivable:
Commercial loans
Residential mortgage loans
Consumer loans
Gross loans
Allowance for loan losses ) ) ) ) ) ) ) )
Net loans
Contingent loans:
Guarantees and sureties
Letters of credits
Banks guarantees
Undrawn credit lines
Other contingencies loans
Total contingent loans
Provision for contingencies loans ) ) ) ) ) ) ) )
Contingent loans, net
Amount covered by guarantee:
Mortgage
Warrant
Pledge
Others (****)
Total collateral

All values are in US Dollars.

92

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

38. Related Party Transactions, continued:
(a) Loans with related parties, continued:
--- ---
(*) For these effects are considered productive companies, those that meet the following conditions:
--- ---
i) They engage in production activities and generate a separate<br>flow of income.
--- ---
ii) Less than 50% of their assets are financial assets held-for-trading or investments.
--- ---

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

(**) Investment companies and commercial include those legal entities that do not meet the conditions<br>for productive companies or services providers and are profit-oriented.
(***) Individuals include key members of the management and correspond to those who directly or indirectly<br>have authority and responsibility for planning, administrating and controlling the activities of the organization, including directors.<br>This category also includes their family members who influence or are influenced by such individuals in their interactions with<br>the organization.
--- ---
(****) These guarantees mainly correspond to shares and other financial guarantees.
--- ---
(b) Other assets and liabilities with related parties:
--- ---
September December
--- --- ---
2020 2019
MCh MCh
Assets
Cash and due from banks
Transactions in the course of collection
Financial assets held-for-trading
Derivative instruments
Investment instruments
Other assets
Total
Liabilities
Demand deposits
Transactions in the course of payment
Obligations under repurchase agreements
Savings accounts and time deposits
Derivative instruments
Borrowings with banks
Lease liabilities
Other liabilities
Total

All values are in US Dollars.

93

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

38. Related Party Transactions, continued:
(c) Income and expenses from related party transactions (*):
September 2020 September 2019
--- --- --- --- ---
Income Expense Income Expense
MCh MCh MCh MCh
Type of income or expense recognized
Interest and revenue expenses
Fees and commissions income
Net Financial Operating Income
Derivative instruments (**)
Other financial operations
Released or established of provision for credit risk
Operating expenses
Other income and expenses

All values are in US Dollars.

(*) This detail does not constitute a Statement of Comprehensive<br>Income for related party transactions since the assets with these parties are not necessarily equal to liabilities and each item<br>reflects total income and expense and not those corresponding to exact transactions.
(**) The outcome of derivative operations is presented net at<br>each related counterparty level. Additionally, this line includes operations with local counterpart banks (unrelated) which have<br>been novated by Comder Contraparte Central S.A. (Related entity) for centralized clearing purposes, which generated a net gain<br>of Ch$33,811 million as of September 30, 2020 (net gain of Ch$72,863 million as of September 30, 2019).
--- ---
(d) Contracts with related parties:
--- ---

During the period ended September 30, 2020, the Bank has signed, renewed or amended the contractual terms and conditions of the following contracts with related parties that do not correspond to the ordinary transactions with clients in general, for above UF 1,000:

Company name Concept or service description
Sistemas Oracle de Chile S.A Licensing services, support renewal and implementation of hardware and software.
Canal 13 S.A. Advertising service
Nexus S.A. Credit card operation services
Artikos S.A. Development services for electronic invoicing
Fundación Libertad y Desarrollo Economic reports
Servipag Ltda. Collection services
Universidad del Desarrollo Research projects
Ionix Spa Technical assistance service and platform support
Bolsa de Comercio de Santiago Information services for custodians
Servicios de Infraestructura de Mercado OTC S.A. Platform services for electronic signature of financial derivatives contracts
Redbanc S.A. Electronic Transfer Services (EFT) 
94

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

38. Related Party Transactions, continued:
(e) Directors’ remunerations and payments to key management<br>personnel:
September September
--- --- ---
2020 2019
MCh MCh
Personnel remunerations
Short-term benefits
Severance pay
Directors’ remunerations and fees (*)
Total

All values are in US Dollars.

(*) It includes fees paid to members of the Advisory Committee<br>of Banchile Corredores de Seguros Ltda, of Ch$10 million (Ch$10 million in September 2019).

Fees paid to the advisors of the Board of Directors amount to Ch$90 million in September 2019, as of September 30, 2020, there is no amount for this concept. The travel and other related expenses amount to Ch$18 million (Ch$52 million in September 2019).

Composition of key personnel:

No. of executives
September September
2020 2019
Position
CEO 1 1
CEOs of subsidiaries 6 5
Division Managers 13 13
Directors Bank and subsidiaries 21 21
Total 41 40 
95

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities:

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

Within the established framework includes the Product Control Unit, which is independent of the business areas and reports to the Financial Management and Control Division Manager. This function befall to the Financial Control and Treasury Manager, through the Financial Risk Information and Control Section, is responsible for independent verification of price and results of trading (including derivatives) and investment operations and all fair value measurements.

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

(i) Industry standard valuation.

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

(ii) Quoted prices in active markets.

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

(iii) Valuation techniques.

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

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

96

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(iv) Fair value adjustments.
--- ---

Part of the fair value process considers three adjustments to the market value, calculated based on the market parameters, including; a liquidity adjustment, a Bid/Offer adjustment and an adjustment is made for credit risk of derivatives (CVA and DVA). The calculation of the liquidity adjustment considers the size of the position in each factor, the particular liquidity of each factor, the relative size of Banco de Chile with respect to the market, and the liquidity observed in transactions recently carried out in the market. In turn, the Bid/Offer adjustment, represents the impact on the valuation of an instrument depending on whether the position corresponds to a long (bought) or a short (sold).To calculate this adjustment is used the direct quotes from active markets or indicative prices or derivatives of similar assets depending on the instrument, considering the Bid, Mid and Offer, respectively. Finally, the adjustment made for CVA and DVA for derivatives corresponds to the credit risk recognition of the issuer, either of the counterparty (CVA) or of Banco de Chile (DVA).

Liquidity value adjustments are made to trading instruments (including derivatives) only, while Bid / Offer adjustments are made for trading instruments and available for sale. Adjustments for CVA / DVA are carried out only for derivatives.

(v) Fair value control.

A process of independent verification of prices and rates is executed daily, in order to control that the market parameters used by Banco de Chile in the valuation of the financial instruments relating to the current state of the market and from them the best estimate derived of the fair value. The objective of this process is to control that the official market parameters provided by the respective business area, before being entered into the valuation, are within acceptable ranges of differences when compared to the same set of parameters prepared independently by the Financial Risk Information and Control Section. As a result, value differences are obtained at the level of currency, product and portfolio. In the event significant differences exist, these differences are scaled according to the amount of individual materiality of each market factor and aggregated at the portfolio level, according to the grouping levels within previously defined ranges. These ranges are approved by the Finance, International and Financial Risk Committee.

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

97

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(vi) Judgmental analysis and information to Management.
--- ---

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

(a) Hierarchy of instrument valued at Fair value:

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

Level 1: These are financial instruments whose fair value is<br>calculated at quoted prices (unadjusted) in extracted from liquid and deep markets. For these instruments there are quotes or<br>prices (return internal rates, quote value, price) the observable market, so that assumptions are not required to determine the<br>value.

In this level, the following instruments are considered: currency futures, debt instruments issued Chilean Central Bank and Treasury, which belong to benchmarks, mutual fund investments and equity shares.

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

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

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

98

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
Level 2: They are financial instruments whose fair value is<br>calculated based on prices other than in quoted in Level 1 that are observable for the asset or liability, directly (that is,<br>as prices or internal rates of return) or indirectly (that is, derived from prices or internal rates of return from similar instruments).<br>These categories include:
a) Quoted prices for similar assets or liabilities in active markets.
--- ---
b) Quoted prices for identical or similar assets or liabilities in markets that are not active.
--- ---
c) Inputs data other than quoted prices that are observable for the asset or liability.
--- ---
d) Inputs data corroborated by the market.
--- ---

At this level there are mainly derivatives instruments, debt issued by banks, debt issues of Chilean and foreign companies, issued in Chile or abroad, mortgage claims, financial brokerage instruments and some issuances by the Central Bank of Chile and the General Treasury of the Republic, which do not belong to benchmarks.

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

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

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

99

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

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

Valuation Techniques and Inputs for Level 2 Instrument:

Type of Financial<br><br> <br>Instrument Valuation Method Description: Inputs and Sources
Local Bank and<br><br> <br>Corporate Bonds Discounted cash<br><br> <br>flows model Prices (internal rates of return) are provided by third party<br> price providers that are widely used in the Chilean market.<br><br> <br><br><br> <br>Model is based on a Base Yield (Central Bank Bonds) and issuer<br> spread.<br><br> <br><br><br> <br>The model is based on daily prices and risk/maturity similarities<br> between<br><br> <br>Instruments.
Offshore Bank and<br><br> <br>Corporate Bonds Prices are provided by third party price providers that are<br> widely used in the Chilean market.<br><br> <br><br><br> <br>Model is based on daily prices.
Local Central Bank<br><br> <br>and Treasury Bonds Prices (internal rates of return) are provided by third party<br> price providers that are widely used in the Chilean market.<br><br> <br><br><br> <br>Model is based on daily prices.
Mortgage<br><br> <br>Notes Prices (internal rates of return) are provided by third party<br> price providers that are widely used in the Chilean market.<br><br> <br><br><br> <br>Model is based on a Base Yield (Central Bank Bonds) and issuer<br> spread.<br><br> <br><br><br> <br>The model takes into consideration daily prices and risk/maturity<br> similarities between instruments.
Time<br><br> <br>Deposits Prices (internal rates of return) are provided by third party<br> price providers that are widely used in the Chilean market.<br><br> <br><br><br> <br>Model is based on daily prices and considers risk/maturity similarities<br> between instruments.
Cross Currency Swaps,<br><br> <br>Interest Rate Swaps,<br><br> <br>FX Forwards, Inflation<br><br> <br>Forwards Forward Points, Inflation forecast and local swap rates are<br> provided by market brokers that are widely used in the Chilean market.<br><br> <br><br><br> <br>Offshore rates and spreads are obtained from third party price<br> providers that are widely used in the Chilean market.<br><br> <br><br><br> <br>Zero Coupon rates are calculated by using the bootstrapping<br>method over swap rates.
FX Options Black-Scholes<br><br> <br>Model Prices for volatility surface estimates are obtained from market brokers that are widely used in the Chilean market. 
100

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
Level 3: These are financial instruments whose fair value is determined<br>using non-observable inputs data neither for the assets or liabilities under analysis nor for similar instruments. An adjustment<br>to an input that is significant to the entire measurement can result in a fair value measurement classified within Level 3 of<br>the fair value hierarchy, if the adjustment uses significant non-observable data entry.

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

Valuation Techniques and Inputs for Level 3 Instrument:

Type of<br><br> <br>Financial<br><br> <br>Instrument Valuation Method Description: Inputs and Sources
Local Bank and<br><br> <br>Corporate Bonds Discounted cash<br><br> <br>flows model Since inputs for these types of securities are not observable by the market, we model interest rate of returns for them based on a Base Yield (Central Bank Bonds) and issuer spread. These inputs (base yield and issuer spread) are provided on a daily basis by third party price providers that are widely used in the Chilean market.
Offshore Bank and Corporate Bonds Discounted cash<br><br> <br>flows model Since inputs for these types of securities are not<br>observable by the market, we model interest rate of returns for them based on a Base Yield (US-Libor) and issuer spread. These<br>inputs (base yield and issuer spread) are provided on a weekly basis by third party price providers that are widely used in the<br>Chilean market. 
101

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(b) Level chart:
--- ---

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

Level 1 Level 2 Level 3 Total
September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh
Financial Assets
Financial assets held-for-trading
From the Chilean Government and Central Bank
Other instruments issued in Chile
Instruments issued abroad
Mutual fund investments
Subtotal
Derivative contracts for trading purposes
Forwards
Swaps
Call Options
Put Options
Futures
Subtotal
Hedge derivative contracts
Fair value hedge (Swap)
Cash flow hedge (Swap)
Subtotal
Financial assets available-for-sale (1)
From the Chilean Government and Central Bank
Other instruments issued in Chile
Instruments issued abroad
Subtotal
Total
Financial Liabilities
Derivative contracts for trading purposes
Forwards
Swaps
Call Options
Put Options
Futures
Subtotal
Hedge derivative contracts
Fair value hedge (Swap)
Cash flow hedge (Swap)
Subtotal
Total

All values are in US Dollars.

(1) As of September 30, 2020, 94% of instruments of Level 3<br>have denomination “Investment Grade”. Also, 100% of total of these financial instruments correspond to domestic issuers. 
102

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(c) Level 3 reconciliation:
--- ---

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

September 2020
Balance as of January 1, <br>2020 Gain (Loss) Recognized in Income (1) Gain (Loss) Recognized in Equity (2) Purchases Sales Transfer from Level 1<br> and 2 Transfer to Level 1 and<br> 2 Balance<br>as of September 30,<br> 2020
MCh MCh MCh MCh MCh MCh MCh MCh
Financial Assets
Financial assets held-for-trading:
Other instruments issued in Chile ) )
Subtotal ) )
Available-for-Sale Instruments:
Other instruments issued in Chile ) )
Subtotal ) )
Total ) ) )

All values are in US Dollars.

December  2019
Balance as of January 1,<br> 2019 Gain (Loss) Recognized in Income (1) Gain (Loss) Recognized in Equity (2) Purchases Sales Transfer from <br>Level 1 and 2 Transfer to <br>Level 1 and 2 Balance<br>as of December 31, 2019
MCh MCh MCh MCh MCh MCh MCh MCh
Financial Assets
Financial assets held-for-trading:
Other instruments issued in Chile ) ) )
Subtotal ) ) )
Available-for-Sale Instruments:
Other instruments issued in Chile ) )
Subtotal ) )
Total ) ) )

All values are in US Dollars.

^^

(1) Recorded in income under item “Net financial operating<br>income”.
(2) Recorded in equity under item “Other Comprehensive<br>Income”.
--- --- 
103

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(d) Sensitivity of instruments classified in Level 3 to<br>changes in key assumptions of models:
--- ---

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

As of September 30, 2020 As of December 31, 2019
Level 3 Sensitivity to changes in key assumptions of models Level 3 Sensitivity to changes in key assumptions of models
MCh MCh MCh MCh
Financial Assets
Financial assets held-for-trading
Other instruments issued in Chile ) )
Subtotal ) )
Available-for- Sale Instruments
Other instruments issued in Chile ) )
Subtotal ) )
Total ) )

All values are in US Dollars.

With the purpose to determine the sensitivity of the financial investments to changes in significant market factors, the Bank has made alternative calculations at fair value, changing those key parameters for the valuation and which are not directly observable in screens. In the case of the financial assets listed in the table above, which correspond to Bank Bonds and Corporate Bonds, it was considered that, since there are no current observables prices, the input prices will be based on brokers’ quotes. The prices are usually calculated as a base rate plus a spread. For Local Bonds it was determined to apply a 10% impact on the price, while for the Off Shore Bonds (associated with national issuers as of December 31, 2019 and September 30, 2020) it was determined to apply a 10% impact only on the spread, since the base rate is covered by interest rate swaps instruments in the so-called accounting hedges. The 10% impact is considered a reasonable move taking into account the market performance of these instruments and comparing it against the bid / offer adjustment that is provisioned by these instruments.

104

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(e) Other assets and liabilities:
--- ---

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

Book Value Estimated Fair Value
September December September December
2020 2019 2020 2019
MCh MCh MCh MCh
Assets
Cash and due from banks
Transactions in the course of collection
Investments under resale agreements
Subtotal
Loans and advances to banks
Domestic banks
Central Bank of Chile
Foreign banks
Subtotal
Loans to customers, net
Commercial loans
Residential mortgage loans
Consumer loans
Subtotal
Total
Liabilities
Current accounts and other demand deposits
Transactions in the course of payment
Obligations under repurchase agreements
Savings accounts and time deposits
Borrowings from banks
Other financial obligations
Subtotal
Debt Issued
Letters of credit for residential purposes
Letters of credit for general purposes
Bonds
Subordinate bonds
Subtotal
Total

All values are in US Dollars.

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

105

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(f) Levels of other assets and liabilities:
--- ---

The following table shows the estimated fair value of financial assets and liabilities not valued at their fair value, as of September 30, 2020 and December 31, 2019:

Level 1 Estimated Fair Value Level 2 Estimated Fair Value Level 3 Estimated Fair Value Total Estimated Fair Value
September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh
Assets
Cash and due from banks
Transactions in the course of collection
Investments under resale agreements
Subtotal
Loans and advances to banks
Domestic banks
Central Bank
Foreign banks
Subtotal
Loans to customers, net
Commercial loans
Residential mortgage loans
Consumer loans
Subtotal
Total
Liabilities
Current accounts and other demand deposits
Transactions in the course of payment
Obligations under repurchase agreements
Savings accounts and time deposits
Borrowings from banks
Other financial obligations
Subtotal
Debt Issued
Letters of credit for residential purposes
Letters of credit for general purposes
Bonds
Subordinated bonds
Subtotal
Total

All values are in US Dollars.

106

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. Fair Value of Financial Assets and Liabilities, continued:
(f) Levels of other assets and liabilities, continued:
--- ---

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

● Short-term<br> assets and liabilities: For assets and liabilities with short-term maturity, it is assumed<br> that the book values approximate to their fair value. This assumption is applied to the<br> following assets and liabilities:
Assets: Liabilities:
--- ---
-    Cash<br> and deposits in banks -    Current<br> accounts and other demand deposits
-    Transactions<br> in the course of collection -    Transactions<br> in the course of payments
-    Investments<br> under resale agreements -    Obligations<br> under repurchase agreements
-    Loans<br> and advance to domestic banks
● Loans<br> to Customers and Advance to foreign banks: Fair value is determined by using the discounted<br> cash flow model and internally generated discount rates, based on internal transfer rates<br> derived from our internal transfer price process. Once the present value is determined,<br> we deduct the related loan loss allowances in order to incorporate the credit risk associated<br> with each contract or loan. As we use internally generated parameters for valuation purposes,<br> we categorize these instruments in Level 3.
--- ---
● Letters<br> of Credit and Bonds: In order to determine the present value of contractual cash flows,<br> we apply the discounted cash flow model by using market interest rates that are available<br> in the market, either for the instruments under valuation or instruments with similar<br> features that fit valuation needs in terms of currency, maturities and liquidity. The<br> market interest rates are obtained from third party price providers widely used by the<br> market. As a result of the valuation technique and the quality of inputs (observable)<br> used for valuation, we categorize these financial liabilities in Level 2.
--- ---
● Saving<br> Accounts, Time Deposits, Borrowings from Financial Institutions, Subordinated Bonds and<br> Other borrowings financial: The discounted cash flow model is used to obtain the present<br> value of committed cash flows by applying a bucket approach and average adjusted discount<br> rates that derived from both market rates for instruments with similar features and our<br> internal transfer price process. As we use internally generated parameters and/or apply<br> significant judgmental analysis for valuation purposes, we categorize these financial<br> liabilities in Level 3.
--- --- 
107

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

39. FairValue of Financial Assets and Liabilities, continued:
(g) Offsetting<br>of financial assets and liabilities:
--- ---

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

Below are detail the contracts susceptible to offset:

Fair Value Negative Fair Value of <br>contracts with right to <br>offset Positive Fair Value of<br> contracts with right to <br>offset Financial Collateral Net Fair Value
September December September December September December September December September December
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
MCh MCh MCh MCh MCh MCh MCh MCh MCh MCh
Derivative financial assets ) ) ) ) ) )
Derivative financial liabilities ) ) ) ) ) )

All values are in US Dollars.

108

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

40. Maturity<br>of Assets and Liabilities:

The table below details the main financial assets and liabilities grouped in accordance with their remaining maturity, including accrued interest as of September 30, 2020 and December 31, 2019, respectively. As these are for trading and available-for-sale instruments are included at their fair value:

As of September 30, 2020
Up to 1 month Over 1 month and up to 3 months Over 3 month and up to 12 months Subtotal up to 1 year Over 1 year and up to 3 years Over 3 year and up to 5 years Over 5 years Subtotal over 1 year Total
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Assets
Cash and due from banks
Transactions in the course of collection
Financial Assets held-for-trading
Investments under resale agreements
Derivative instruments
Loans and advances to banks (*)
Loans to customers (*)
Financial assets available-for-sale
Financial assets held-to-maturity
Total financial assets

All values are in US Dollars.

As of December 31, 2019
Up to 1 month Over 1 month and up to 3 months Over 3 month and up to 12 months Subtotal up to 1 year Over 1 year and up to 3 years Over 3 year and up to 5 years Over 5 years Subtotal over 1 year Total
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Assets
Cash and due from banks
Transactions in the course of collection
Financial Assets held-for-trading
Investments under resale agreements
Derivative instruments
Loans and advances to banks (*)
Loans to customers (*)
Financial assets available-for-sale
Financial assets held-to-maturity
Total financial assets

All values are in US Dollars.

(*) These<br>balances are presented without deduction of their respective provisions, which amount to Ch$766,224 million (Ch$685,418 million<br>in December 2019) for loans to customers and Ch$499 million (Ch$758 million in December 2019) for borrowings from financial institutions. 
109

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

40. Maturityof Assets and Liabilities, continued:
As of September 30, 2020
--- --- --- --- --- --- --- --- --- ---
Up to 1 month Over 1 month and up to 3 months Over 3 month and up to 12 months Subtotal up to 1 year Over 1 year and up to 3 years Over 3 year and up to 5 years Over 5 years Subtotal over 1 year Total
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Liabilities
Current accounts and other demand deposits
Transactions in the course of payment
Obligations under repurchase agreements
Savings accounts and time deposits (**)
Derivative instruments
Borrowings from financial institutions
Debt issued:
Mortgage bonds
Bonds
Subordinate bonds
Other financial obligations
Lease liabilities
Total financial liabilities

All values are in US Dollars.

As of December 31, 2019
Up to 1 month Over 1 month and up to 3 months Over 3 month and up to 12 months Subtotal up to 1 year Over 1 year and up to 3 years Over 3 year and up to 5 years Over 5 years Subtotal over 1 year Total
MCh MCh MCh MCh MCh MCh MCh MCh MCh
Liabilities
Current accounts and other demand deposits
Transactions in the course of payment
Obligations under repurchase agreements
Savings accounts and time deposits (**)
Derivative instruments
Borrowings from financial institutions
Debt issued:
Mortgage bonds
Bonds
Subordinate bonds
Lease liabilities
Other financial obligations
Total financial liabilities

All values are in US Dollars.

(**) Excludes<br>term saving accounts, which amount to Ch$318,615 million (Ch$239,850 million in December 2019). 
110

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

(Free translation of Interim Consolidated Financial Statements originally issued in Spanish)

41. Subsequent<br>Events:

In Management’s opinion, there are no significant subsequent events that affect or could affect the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries between September 30, 2020 and the date of issuance of these Interim Consolidated Financial Statements.

/s/ Héctor Hernández G. /s/ Eduardo Ebensperger O.
Héctor Hernández G.<br><br> <br>General Accounting Manager Eduardo Ebensperger O.<br><br> <br>Chief Executive Officer

111

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →