BANCO DE CHILE

CHILE
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Banco de Chile : (Free translation of Consolidated Financial Statements originally issued in Spanish) (Form 6-K)

07/30/2021 | 08:09am

(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
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: 19
5. Relevant Events: 20
6. Business Segments: 22
7. Cash and Cash Equivalents: 25
8. Financial Assets Held-for-trading: 26
9. Investments under resale agreements and obligations under repurchase agreements: 27
10. Derivative Instruments and Accounting Hedges: 29
11. Loans and Advances to Banks, net: 35
12. Loans to Customers, net: 36
13. Investment Securities: 42
14. Investments in Other Companies: 44
15. Intangible Assets: 46
16. Fixed assets, leased assets and lease liabilities: 48
17. Current Taxes and Deferred Taxes: 53
18. Other Assets: 57
19. Current Accounts and Other Demand Deposits: 58
20. Savings Accounts and Time Deposits: 58
21. Borrowings from Financial Institutions: 59
22. Debt Issued: 60
23. Other Financial Obligations: 63
24. Provisions: 63
25. Other Liabilities: 67
26. Contingencies and Commitments: 68
27. Equity: 73
28. Interest Revenue and Expenses: 76
29. Income and Expenses from Fees and Commissions: 78
30. Net Financial Operating Income: 79
31. Foreign Exchange Transactions, Net: 79
32. Provisions for Loan Losses: 80
33. Personnel Expenses: 81
34. Administrative Expenses: 82
35. Depreciation, Amortization and Impairment: 83
36. Other Operating Income: 84
37. Other Operating Expenses: 85
38. Related Party Transactions: 85
39. Fair Value of Financial Assets and Liabilities: 90
40. Maturity of Assets and Liabilities: 103
41. Subsequent Events: 105

i

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

For the periods ended June 30, 2021 and December 31, 2020

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

(Expressed in million of Chilean pesos)

June December
Notes 2021 2020
MCh$ MCh$
ASSETS
Cash and due from banks 7 2,407,350 2,560,216
Transactions in the course of collection 7 616,932 582,308
Financial assets held-for-trading 8 3,537,495 4,666,156
Investment under resale agreements 9 92,797 76,407
Derivative instruments 10 1,738,135 2,618,004
Loans and advances to banks 11 3,446,995 2,938,991
Loans to customers, net 12 31,577,277 30,190,058
Financial assets available-for-sale 13 2,364,328 1,060,523
Financial assets held-to-maturity 13 127,770 -
Investments in other companies 14 43,588 44,649
Intangible assets 15 66,798 60,701
Property and equipment 16 221,296 217,928
Leased assets 16 112,167 118,829
Current tax assets 17 1,515 22,949
Deferred tax assets 17 381,804 357,945
Other assets 18 579,999 579,467
TOTAL ASSETS 47,316,246 46,095,131
LIABILITIES
Current accounts and other demand deposits 19 17,408,414 15,167,229
Transactions in the course of payment 7 710,418 1,302,000
Obligations under repurchase agreements 9 150,185 288,917
Savings accounts and time deposits 20 7,869,674 8,899,541
Derivative instruments 10 1,782,856 2,841,756
Borrowings from financial institutions 21 4,968,562 3,669,753
Debt issued 22 8,771,310 8,593,595
Other financial obligations 23 218,703 191,713
Lease liabilities 16 108,185 115,017
Current tax liabilities 17 24,218 311
Deferred tax liabilities 17 - -
Provisions 24 730,243 733,911
Other liabilities 25 639,961 565,120
TOTAL LIABILITIES 43,382,729 42,368,863
EQUITY 27
Attributable to Bank's Owners:
Capital 2,418,833 2,418,833
Reserves 703,476 703,206
Other comprehensive income (26,348 ) (51,250 )
Retained earnings:
Retained earnings from previous years 655,478 412,641
Income for the period 324,869 463,108
Less:
Provision for minimum dividends (142,792 ) (220,271 )
Subtotal 3,933,516 3,726,267
Non-controlling interests 1 1
TOTAL EQUITY 3,933,517 3,726,268
TOTAL LIABILITIES AND EQUITY 47,316,246 46,095,131

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

1

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME

for the six-month ended June 30, 2021 and 2020

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

(Expressed in million of Chilean pesos)

June June
Notes 2021 2020
MCh$ MCh$
Interest revenue 28 976,044 995,051
Interest expense 28 (301,770 ) (321,156 )
Net interest income 674,274 673,895
Income from fees and commissions 29 277,194 298,601
Expenses from fees and commissions 29 (54,013 ) (56,622 )
Net fees and commission income 223,181 241,979
Net financial operating income 30 27,180 19,793
Foreign exchange transactions, net 31 39,080 65,193
Other operating income 36 17,328 16,242
Total operating revenues 981,043 1,017,102
Provisions for loan losses 32 (130,871 ) (264,968 )
OPERATING REVENUES, NET OF PROVISIONS FOR LOAN LOSSES 850,172 752,134
Personnel expenses 33 (224,594 ) (214,007 )
Administrative expenses 34 (162,663 ) (171,920 )
Depreciation and amortization 35 (37,768 ) (36,112 )
Impairment 35 (3 ) (867 )
Other operating expenses 37 (16,812 ) (18,920 )
TOTAL OPERATING EXPENSES (441,840 ) (441,826 )
NET OPERATING INCOME 408,332 310,308
Income attributable to associates 14 (2,186 ) 1,575
Income before income tax 406,146 311,883
Income tax 17 (81,277 ) (63,298 )
NET INCOME FOR THE PERIOD 324,869 248,585
Attributable to:
Bank's Owners 27 324,869 248,585
Non-controlling interests - -
Net income per share attributable to Bank's Owners: Ch$ Ch$
Basic net income per share 27 3.22 2.46
Diluted net income per share 27 3.22 2.46

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

2

BANCO DE CHILE AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF

OTHER COMPREHENSIVE INCOME

for the six-month ended June 30, 2020 and 2020,

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

(Expressed in million of Chilean pesos)

June June
Notes 2021 2020
MCh$ MCh$
NET INCOME FOR THE PERIOD 324,869 248,585
OTHER COMPREHENSIVE INCOME THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Net gains (losses) on available-for-sale instruments valuation 13 (48,264 ) 5,862
Net gains (losses) on derivatives held as cash flow hedges 10 82,373 (45,119 )
Subtotal Other comprehensive income before income taxes 34,109 (39,257 )
Income tax relating to the components of other comprehensive income that are reclassified in income for the period (9,207 ) 10,601
Total other comprehensive income items that will be reclassified subsequently to profit or loss 24,902 (28,656 )
OTHER COMPREHENSIVE INCOME THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Adjustment for defined benefit plans 24 370 (91 )
Subtotal other comprehensive income before income taxes 370 (91 )
Income tax relating to the components of other comprehensive income that will not be reclassified to income for the period 17 (100 ) 25
Total other comprehensive income items that will not be reclassified subsequently to profit or loss 270 (66 )
CONSOLIDATED COMPREHENSIVE INCOME FOR THE PERIOD 350,041 219,863
Attributable to:
Bank's Owners 350,041 219,863
Non-controlling interests - -

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 CHANGES IN EQUITY

for the six-month ended June 30, 2021 and 2020

(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, 2019 2,418,833 31,780 671,492 3,827 (81,040 ) 20,612 170,171 593,008 (300,461 ) 3,528,222 1 3,528,223
Retention of profits - - - - - - 242,470 (242,470 ) - - - -
Dividends distributions and paid 27 - - - - - - - (350,538 ) 300,461 (50,077 ) - (50,077 )
Other comprehensive income:
Defined benefit plans adjustment, net - (66 ) - - - - - - - (66 ) - (66 )
Derivatives cash flow hedge

27

- - - - (45,119 ) 12,182 - - - (32,937 ) - (32,937 )
Valuation adjustment on available-for-sale instruments 27 - - - 5,862 - (1,581 ) - - - 4,281 - 4,281
Income for the period 2020 27 - - - - - - - 248,585 - 248,585 - 248,585
Provision for minimum dividends - - - - - - - - (119,099 ) (119,099 ) - (119,099 )
Balances as of June 30, 2020 2,418,833 31,714 671,492 9,689 (126,159 ) 31,213 412,641 248,585 (119,099 ) 3,578,909 1 3,578,910
Other comprehensive income:
Derivatives cash flow hedge, net - - - - 55,477 (14,979 ) - - - 40,498 - 40,498
Valuation adjustment on available-for-sale instruments - - - (8,888 ) - 2,397 - - - (6,491 ) - (6,491 )
Income for the period 2020 - - - - - - - 214,523 - 214,523 - 214,523
Provision for minimum dividends - - - - - - - - (101,172 ) (101,172 ) - (101,172 )

Balances as of December 31, 2020

2,418,833 31,714 671,492 801 (70,682 ) 18,631 412,641 463,108 (220,271 ) 3,726,267 1 3,726,268
Retention of profits 27 - - - - - - 242,837 (242,837 ) - - - -
Dividends distributions and paid 27 - - - - - - - (220,271 ) 220,271 - - -
Other comprehensive income:
Defined benefit plans adjustment, net - 270 - - - - - - - 270 - 270
Derivatives cash flow hedge, net 27 - - - - 82,373 (22,240 ) - - - 60,133 - 60,133
Valuation adjustment on available-for-sale instruments 27 - - - (48,264 ) - 13,033 - - - (35,231 ) - (35,231 )
Income for the period 2021 27 - - - - - - - 324,869 - 324,869 - 324,869
Provision for minimum dividends 27 - - - - - - - - (142,792 ) (142,792 ) - (142,792 )

Balances as of June 30, 2021

2,418,833 31,984 671,492 (47,463 ) 11,691 9,424 655,478 324,869 (142,792 ) 3,933,516 1 3,933,517

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

4

BANCO DE CHILE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

for the periods between January 1 and June 30,

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

(Expressed in million of Chilean pesos)

June June
Notes 2021 2020
MCh$ MCh$
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the period 324,869 248,585
Charges (credits) to income that do not represent cash flows:
Depreciation and amortization 35 37,768 36,112
Impairment 35 3 867
Provision for loans and accounts receivable from customers and owed by banks 32 73,154 200,387
Provision of contingent loans 32 (1,283 ) 11,509
Additional provisions 32 90,000 70,000
Fair value adjustment of financial assets held-for-trading 3,480 (2,129 )
Changes in assets and liabilities by deferred taxes 17 (10,926 ) (4,805 )
(Gain) loss attributable to investments in companies with significant influence, net 14 2,514 (1,253 )
(Gain) loss from sales of assets received in lieu of payment,net (1,325 ) (3,597 )
(Gain) loss on sales of property and equipment, net 36 (8 ) (19 )
Charge-offs of assets received in lieu of payment 37 933 1,898
Other charges (credits) to income that do not represent cash flows (6,190 ) 15,983
Net changes in exchange rate, interest and fees accrued on assets and liabilities (91,379 ) 43,444
Changes in assets and liabilities that affect operating cash flows:
(Increase) decrease in loans and advances to banks, net (508,335 ) (802,279 )
(Increase) decrease in loans to customers (1,308,609 ) (996,736 )
(Increase) decrease in financial assets held-for-trading, net (351,768 ) 239,107
(Increase) decrease in other assets and liabilities (19,526 ) (111,634 )
Increase (decrease) in current account and other demand deposits 2,239,300 1,805,194
Increase (decrease) in transactions from reverse repurchase agreements (133,252 ) (72,178 )
Increase (decrease) in savings accounts and time deposits (1,022,520 ) (1,123,821 )
Sale of assets received in lieu of payment or adjudicated 4,334 9,879
Total cash flows from operating activities (678,766 ) (435,486 )
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in financial assets available-for-sale, net (1,338,423 ) (238,226 )
(Increase) decrease in financial assets held-to-maturity (127,603 ) -
Payments for lease agreements 16 (15,294 ) (13,852 )
Net changes in leased assets 16 (705 ) (559 )
Purchases of property and equipment 16 (17,897 ) (16,547 )
Sales of property and equipment 8 19
Acquisition of intangible assets 15 (14,689 ) (8,938 )
Acquisition of investments in companies 14 (2,616 ) -
Dividends received from investments in companies 14 1,425 1,073
Total cash flows from investing activities (1,515,794 ) (277,030 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of letters of credit (897 ) (1,210 )
Issuance of bonds 22 415,543 814,881
Redemption of bonds (378,135 ) (716,547 )
Dividends paid 27 (220,271 ) (350,538 )
Increase (decrease) in borrowings from foreign financial institutions 61,078 (357,880 )
Increase (decrease) in other financial obligations 27,123 (44,793 )
Increase (decrease) in other obligations with Central Bank of Chile 1,237,800 3,110,600
Payment of other long-term borrowings (118 ) (11,236 )
Total cash flows from financing activities 1,142,123 2,443,277
TOTAL NET (NEGATIVE) POSITIVE CASH FLOWS FOR THE PERIOD (1,052,437 ) 1,730,761
Effect of exchange rate changes 70,337 114,463
Cash and cash equivalents at beginning of period 6,088,115 3,931,371
Cash and cash equivalents at end of period 7 5,106,015 5,776,595
June June
2021 2020
MCh$ MCh$
Operational Cash flow interest:
Interest received 818,462 961,898
Interest paid (165,230 ) (130,096 )

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 FINANCIAL STATEMENTS
(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.

The Bank is a Corporation organized under the laws of the Republic of Chile, regulated by the Chilean Commission for the Financial Market ('CMF'). 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 and financial advisory services.

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

The Consolidated Financial Statements of Banco de Chile, for the period ended June 30, 2021 were approved by the Directors on July 29, 2021.

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:

Decree Law No. 3,538 of 1980, in accordance with the text replaced by the first article of Law No. 21,000 that 'Creates the Financial Market Commission', provides in paragraph 6 of its article 5 that the Market Commission Financiero ('CMF') may 'set the rules for the preparation and presentation of the reports, balance sheets, balance sheets and other financial statements of the audited entities and determine the principles according to which they must keep their accounting'.

In accordance with the current legal framework, banks must use the accounting principles established by the CMF and in everything that is not dealt with by it or is contrary to its instructions, they must adhere to the generally accepted accounting principles, which correspond to the regulations techniques issued by the Colegio de Contadores de Chile AG, coinciding with the International Financial Reporting Standards ('IFRS') agreed by the International Accounting Standards Board ('IASB'). In the event of discrepancies between these generally accepted accounting principles and the accounting criteria issued by the CMF, the latter shall prevail.

The notes to the Consolidated Financial Statements contain additional information to that presented in the Consolidated Statement of Financial Position, in the Consolidated Statement of Income, Consolidated Statement of Other Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows. They provide narrative descriptions or disaggregation of such statements in a clear, relevant, reliable and comparable way.

(b) Basis of preparation:
(b.1) These Interim Consolidated Financial Statements are presented according to Chapter C-2 of the Compendium of Accounting Standards, issued by the CMF.
(b.2) The following table details the entities in which the Bank has control and are part of this consolidated financial statements:
Interest Owned
Direct Indirect Total
Functional June December June December June December
RUT Subsidiaries Country Currency 2021 2020 2021 2020 2021 2020
% % % % % %
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
(*) Company in the process of early dissolution. See Note No. 5 b).

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 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. The estimates refer to:

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

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

During the period ended June 30, 2021, there have been no changes in the estimates made.

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

Given the activities to which the Bank and its subsidiaries are engaged, the transactions of the Bank do not have a cyclical or seasonal nature. For this reason, specific breakdowns in these notes to the Interim Consolidated Financial Statements for the six-month period ended June 30, 2021 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 in the accounting and an account receivable is recorded under Loans to Customers, reflected at their present value. 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.

The monthly variation of the UF for the contracts established in said monetary unit should be treated as a new measurement, therefore 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 2021.

9

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

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

3. New Accounting Pronouncements:

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

Standards and interpretations that 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 IASB and the CMF, which have been adopted by the Bank and its subsidiaries, are detailed below:

Accounting standards issued by IASB.

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

In August 2020, the IASB issued a set of amendments related to phase 2 of the Benchmark Reform of Interbank Offering Rates (IBOR) and other benchmark interest rates amending 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 has been working on the transition of reference rates, implementing an action plan that includes, among other aspects, identifying the main exposures and risks related to the LIBOR transition, developing products linked to the new reference rate, reviewing of current contracts and renegotiation with some of our clients, which will allow us to face the challenges imposed by the changes in the reference rates.

IFRS 16 Leases. Extends the one-year term of Covid-19-related lease concessions.

In March 2021, the IASB published modifications to IFRS 16 that allow the accounting of concessions or rental facilities due to the effect of the pandemic declared by Covid-19 to be extended until June 30, 2022. The original amendment to IFRS 16 was issued in May 2020 and applied to lease contract facilities that reduce only lease payments due until June 30, 2021.

The implementation of this amendment has no had material impact on 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:

Other instructions issued by the CMF - Letters to Management.

By letter to Management dated April 23, 2021, the CMF reported transitory measures for the exceptional treatment of loan allowances in the commercial portfolio, in order to facilitate the implementation of payment alternatives for debtors who meet certain requirements.

The conditions for using the flexibility measures for the treatment of allowances are:

- Fully evaluate the financial and credit condition of the debtors who will be eligible for the granting of the flexibilization conditions. It is not allowed to include debtors in default in accordance with the regulations.
- Debtors who are up to date or have a default of no more than 30 days at the time of rescheduling.
- Grace periods or postponement credits, of this measure or another, may not add up to more than 6 consecutive months.
- Banks must have special consideration with those debtors who have availed themselves of previous postponement measures, and must have demonstrated a good behavior in the payment of their installments during the period between postponements.

In the case of grace periods or postponement credits, and depending on the methodology used in accounting for provisions (standard or internal method) for the group portfolio, the computation of arrears and the expected loss parameters will remain constant until that the payment system is normalized. Once the payment deferral period has elapsed and if the debtor does not pay the next obligation to be due, it must be recognized in the next installment of default to the one found in the standard matrix or in the corresponding provision model at the time of flexibilization in order to recognize their credit risk.

In the case of debtors evaluated on an individual basis, their risk category will be maintained at the time of rescheduling until the payment regime is normalized, which does not prevent that for the grace periods and deferral credit from being reclassified to the corresponding category, in the event of signs of worsening in the debtor's ability to pay and other variables considered in the internal methods.

Postponements or rescheduling, in its different modalities, including those that allow to lower the financial burden of the debtors, as long as they comply with the indicated conditions, will not be considered forced renegotiations and therefore, will not lead to the classification of said debtors in default.

The validity of the exceptional period for the treatment of provisions is until July 31, 2021.

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:

Other regulations adopted.

Law No. 21,320

On April 20, 2021, Law No. 21,320 that modifies consumer protection law (Law No. 19,496), prohibiting and limiting certain extrajudicial debt collection actions was enacted. Among other matters, this new law (i) limits the number and type of out-of-court collection measures, (ii) requires keeping detailed records of such actions up to two years after they have been initiated, and (iii) prohibits continuing with out-of-court collection actions once a collection has been initiated in court.

In the Bank's opinion, this legislation could affect its ability to recover non-performing loans from the loan portfolio granted to individuals and SMEs, affect portfolio expenses, as well as increase collection costs.

Law No. 21,342

On June 1, 2021, Law No. 21,342 was published in the Official Newspaper, which established the obligation to implement an occupational health safety protocol for the gradual and safe return of employees to their workplace within the framework of the health alert decreed on the occasion of the Covid-19 disease. The aforementioned law established, among other matters, the obligation to contract mandatory insurance in favor of employees who carry out their work in-person, to finance or reimburse the costs of hospitalization and rehabilitation of the employees associated with the Covid-19 disease, in the terms and scope indicated in said standard. The implementation of this law has no material impact for Banco de Chile and its subsidiaries.

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

The following is a summary of new standards, interpretations and improvements to the International Financial Reporting Standards issued by IASB that are not yet effective as of June 30, 2021, are detailed below:

Accounting standards issued by IASB.

IAS 28 - Investments in 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.

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:

Limited Scope Amendments and 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 costs include those that are directly related to the contract and may be costs incremental performance of that contract (for example, direct labor and materials), or an allocation of other costs that are directly related to the performance of contracts (for example, the allocation of the depreciation charge for an item of property, plant and equipment used to fulfill the contract).

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.

IAS 1 Presentation of Financial Statements and IFRS Practice Statement No. 2. Accounting Policy Disclosures.

In February 2021, the IASB published amendments to IAS 1 to require companies to disclose material information on accounting policies, the foregoing in order to improve the disclosures of their accounting policies and provide useful information to investors and other users of financial statements.

To help entities apply the amendments to IAS 1, the Board also amended IFRS Practice Statement No. 2 to illustrate how an entity can judge whether accounting policy information is material to its financial statements.

The amendments to IAS 1 will be effective for Financial Statement presentation periods beginning on or after January 1, 2023. Early application is permitted. If an entity applies those amendments to prior periods, it must disclose that fact.

The application of this amendment will not generate material impacts on the disclosure of accounting policies in the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Definition of Accounting Estimate.

In February 2021, the IASB incorporated changes to the definition of accounting estimates contained in IAS 8, the amendments to IAS are intended to help entities distinguish changes in accounting estimates from changes in accounting policies.

The amendments to IAS 8 will be effective for Financial Statement presentation periods beginning on or after January 1, 2023. Early application is permitted.

The application of this amendment will not have an impact on the Interim Consolidated Financial Statements of Banco de Chile and its subsidiaries.

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:

IAS 12 Income Tax.

In May 2021 the IASB published amendments to IAS 12, to specify how companies should account for deferred taxes on transactions such as leases and decommissioning obligations.

IAS 12 Income Tax specifies how a company accounts for income tax, including deferred tax, which represents tax to be paid or recovered in the future. In certain circumstances, companies are exempt from recognizing deferred taxes when they first recognize assets or liabilities. Prior to the amendment, there was some uncertainty as to whether the exemption applied to transactions such as leases and decommissioning obligations, transactions for which companies recognize both an asset and a liability.

The amendments clarify that the exemption does not apply and that companies are required to recognize deferred taxes on such transactions. The purpose of the amendments is to reduce the diversity in reporting deferred tax on leases and decommissioning obligations.

The modifications are effective for the periods of presentation of the Financial Statements that begin as of January 1, 2023, early application is allowed.

The implementation of this amendment will have no material impact on Banco de Chile and its subsidiaries.

Accounting standards issued by the CMF.

Circular No. 2,243. Amends Compendium 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 seek achieve greater 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 5.5 on impairment of loans classified as 'financial assets at amortized cost'. This exception is mainly due to prudential criteria set by the CMF. These criteria have given rise, over time, to the establishment of standard models that the banking institutions 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 Financial Position and Income Statement, when adopting IFRS 9 in replacement of IAS 39.
3) Incorporation of new presentation formats for the Statement of Other Comprehensive Income and the Statement of Changes in Equity and guidelines on financing and investment activities for the Statement of Cash Flows.

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:
4) Incorporation of a financial report 'Management Comments' (according to the IASB Practice 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 cost and Risk management, in order to better comply with the disclosure criteria contained in the IFRS 7. In addition, disclosures 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 in their description. The foregoing corresponds to the detailed information of the formats for the Statement of Financial Position, 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 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 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 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 application of the rule of suspension of the recognition of interest and UF indexation on an accrual basis after 90 days of default will not have a significant impact on the Interim Consolidated Financial Statements.

Standards related to the implementation 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. The new Law adopts the international standards in banking regulation and supervision.

On March 30, 2020, the CMF reported that, in coordination with the Central Bank of Chile, it 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.

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:

On December 1, 2020, the CMF finalized the process of issuing the necessary regulations for the implementation of the new capital framework. The culmination of this regulatory process, which began with the first standard in public consultation in August 2019, represents a relevant step in strengthening the solvency and stability of the financial system. The new capital framework will allow for a more solid and robust banking system, a fundamental condition to face the impacts of the economic downturn with better tools.

The new standards, in addition to increasing the capitalization levels of Chilean banks; facilitate access to new and better sources of financing; harmonize the requirements between subsidiaries of foreign banks and local banks; and they contribute to the internationalization process of Chilean banking.

As of the date of issuance of these Interim Consolidated Financial Statements, the CMF has issued the following circulars related to the Basel III regulations:

Circular 2,270. Issued on September 11, 2020, the CMF issued the standard that sets the general criteria and guidelines for the determination of additional equity requirements as a result of the supervision process, called Pillar 2.

This standard updates Chapter 1-13 'Management and solvency classification' and introduces the new Chapter 21-13 'Evaluation of the adequacy of effective equity of banks' to the RAN.

This standard also establishes that the effective equity self-assessment report to be submitted by banks during this year will be based only on credit risk, and the one for 2022 will additionally incorporate market and operational risks. The first two 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.

Circular No. 2,272. Issued on September 25, 2020, the CMF published the regulations that define the operating procedures for the calculation, implementation and supervision of additional capital charges, known as capital buffers (Conservation Buffer and a Countercyclical Buffer).

This rule incorporates Chapter 21-12 'Additional basic capital, articles 66 bis and 66 ter of the LGB' into the RAN.

This rule also establishes that, 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.

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:

Circular No. 2,273. Issued on October 5, 2020, the CMF issued the rule that 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). Incorporates Chapter 21-30 'Relationship between basic capital and total assets' into the RAN.

This standard is 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' of the RAN.

Circular No. 2,274. Issued on October 8, 2020, the CMF established the guidelines for calculating equity for legal and regulatory purposes, debugging items of low quality or whose value is uncertain in a settlement scenario and sets prudential rules for concentration, in accordance with the current legal framework. Incorporates Chapter 21-1 'Equity for legal and regulatory purposes' replacing Chapter 12-1 'Equity for legal and regulatory purposes' into the RAN.

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.

Circular No. 2,276. Issued on November 2, 2020, the CMF, with the prior favorable agreement of the Central Bank of Chile, established the dispositions that have as a reference framework the evaluation methodology established by the Basel Committee on Banking Supervision and international practice, considered for the identification and treatment of banks classified as systemically important at the local level. It incorporates into the RAN Chapter 21-11 'Factors and methodology for banks or group of banks rated as systemically important and requirements that may be imposed as a result of this rating'.

The requirements derived from the first application may be gradually established. The initial charge in December 2021 will be 0% and will increase by 25% each year until reaching the regime in December 2025.

Circular No. 2,279. Issued on November 24, 2020, the CMF incorporated Chapter 21-2 into the RAN, which contains the minimum requirements and conditions that preference shares and bonds with no fixed maturity term must satisfy in article 55 bis of the General Banking Act and Chapter 21-3 of the RAN which contains the minimum requirements and conditions that subordinate bonds must satisfy in article 55 of the General Banking Act, this chapter repeals and replaces chapter 9-6 of the RAN. These regulations came into effect on December 1, 2020, the date on which banks must determine the level of capital AT1 and T2 that is applicable, in accordance with the provisions of the regulations.

During the first year of application, subordinated bonds and voluntary provisions may be computed as equivalent to AT1 instruments, with a limit of 1.5% of the RWA net of required provisions. From the second year on, the substitution limit will progressively decrease (by 0.5%) to reach 0% in 4 years.

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:

Circular No. 2,280. Issued on December 1, 2020, corresponds to the definitive norm related to the standardized methodology for computing ORWAs, incorporating chapter 21-8 to the RAN. The dispositions of this new Chapter consider the methodology established by the Basel Committee on Banking Supervision as a reference framework.

For the computation of operational risk, a single standard method is established, in accordance with the recommendations of the aforementioned Committee, not allowing the use of proprietary methodologies referred to in the second paragraph of article 67 for this type of risk.

The regulations entered into force on December 1, 2020. Also, it was established that until December 1, 2021, assets weighted by operational risk are equal to 0.

Circular No. 2,281. Issued on December 1, 2020, it corresponds to the definitive regulations related to the determination of the Credit Risk-Weighted Assets, incorporating chapter 21-6 to the RAN.

As set out in the Article 67 of the LGB, it is up to the CMF to establish standardized methodologies to cover the relevant risks of banking companies, among which is credit risk, with a prior favorable agreement from the Central Bank of Chile.

This new standard includes a transitory provision, which establishes that the computation of assets weighted by credit risk is carried out in accordance with the current dispositions of Title II of Chapter 12-1 of the RAN, until November 30, 2021; The new methodology must be applied as of December 1, 2021.

Circular No. 2,282. Issued on December 1, 2020, this standard incorporated the new Chapter 21-7 on the determination of MRWA into the RAN.

For the application of the provisions of this new Chapter, which will be in force as of December 1, 2020, a transitional disposition is contemplated that considers a market risk weight equal to zero until December 1, 2021.

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:

Circular No. 2,283. On December 1, 2020, the CMF published the definitive regulation related to the promotion of market discipline and transparency through the disclosure of information requirements from banking entities (Pillar 3), incorporating Chapter 21-20 into the Updated Compilation of Standards (RAN).

The information referred to in this new Chapter is effective as of December 1, 2022 and must be published for the first time in 2023 with information regarding the January-March quarter of said year.

Circular No. 2,284. Issued on December 31, 2020, through this circular the CMF creates a file 'Rating of systemically important banks' (R11), related to the measurement of the systemic importance index and dated January 26, 2021, through Circular No. 2,286. The instructions for the preparation of the new R11 file are supplemented.

Circular No. 2,288. Issued on April 27, 2021, through this circular, the CMF creates the files 'Solvency limits and effective equity' (R01), 'Regulatory capital instruments' (R02), 'Credit risk-weighted assets' (R06), 'Market risk-weighted assets' (R07) and 'Operational risk-weighted assets' (R08).

Circular Letter No. 1,207. Issued on April 28, 2021, the CMF specified that the subordinated bonds and additional provisions that are accounted for as equivalent to preferred shares or bonds without a fixed maturity term according to the third transitory article of Law No. 21,130, must be adapted to the limits established in literals c) and d) of article 66 of the General Banking Law.

Circular N°2,290. Issued on May 28, 2021, through this circular, the CMF specifies the implementation calendar of the new Risk System files incorporated into the Information Systems Manual (MSI by its Spanish initials) and additionally adjusts the size of some fields of the R01, R07 and R08 files.

4. Changes in Accounting Policies and Disclosures:

During the period ended June 30, 2021, no significant accounting changes have occurred that affect the presentation of these Interim Consolidated Financial Statements.

19

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 28, 2021, the Board of Directors of Banco de Chile agreed to convene an Ordinary Shareholders Meeting on March 25, 2021 in order to propose, among other matters, the following distribution of profits for the year ended on December 31, 2020:
i. Deduct and withhold from the net income of the year, an amount equivalent to the effect of inflation of the paid capital and reserves according to the variation of the Consumer Price Index that occurred between November 2019 and November 2020, amounting to Ch$95,989,016,547 which will be added to retained earnings from previous periods.
ii. From the resulting balance, distribute in the form of a dividend 60% of the remaining liquid profit, corresponding to a dividend of Ch$2.18053623438 to each of the 101,017,081,114 shares of the Bank, retaining the remaining 40%.

Consequently, it proposed the distribution as a dividend of 47.6% of the profits for the year ended December 31, 2020.

b) On February 4, 2021, the subsidiary Banchile Securitizadora S.A. in an Extraordinary Shareholders' meeting agreed on the early dissolution of this subsidiary, as previously approved by the Financial Market Commission.
c) On March 25, 2021, at the Bank's Ordinary Shareholders' Meeting, the shareholders proceeded to make the definitive appointment of Mr. Raúl Anaya Elizalde as Titular Director of Banco de Chile, a position that he will hold until the next renewal of the Board of Directors. Additionally, on the same date, the Board approved the distribution of dividend No. 209, corresponding to Ch$2.18053623438 per share, payable against the profit for the year 2020.
d) On April 7, 2021, the subsidiary Banchile Administradora General de Fondos S.A. reported as an essential fact that on that date Mr. Paul Javier Fürst Gwinner, submitted his resignation from the position of Director of the company.
e) In the context of the COVID-19 pandemic declared in March 2020 by the World Health Organization ('WHO'), this year, on March 13, 2021 the Government of Chile decided on June 25, 2021 to extend the State of Constitutional Exception, thus allowing maintaining a series of sanitary measures, including mobility restrictions and quarantines in the national territory. Additionally, a mass vaccination plan has continued to be rapidly implemented in order to mitigate and control the spread of the pandemic. As of the date of issuance of these Financial Statements, more than 78% of the target population has completed their vaccination process.

The Government and the Central Bank of Chile have maintained countercyclical measures, which have contributed to a gradual recovery in activity. At the fiscal level, the government has announced transfers equivalent to 9 points of GDP, which has been complemented by indirect measures (including resources to finance Fogape-Covid credits and the employment protection law, among others) that mobilize resources for a similar amount. On February 3, 2021, Law No. 21,307 was published in the official newspaper, which modifies the Guarantee Fund for Small and Medium-sized Entrepreneurs (Fogape) in order to promote the reactivation and recovery of the economy, which modifies the Decree Law No. 3,472, of 1980, of the

20

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

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

5. Relevant Events, continued:

Ministry of Finance, which creates the Guarantee Fund for Small Entrepreneurs (Reactive Fogape). Since the beginning of the program and until June 30, 2021, the Bank has carried out 19,870 operations for an aggregate amount of Ch$1,063,951 million.

For its part, the Central Bank of Chile has maintained a series of unconventional measures, among which the establishment of the Loan Increase Conditional Credit Facility program (FCIC by its Spanish initials) a special financial line for banking companies complemented with the activation of a 'Liquidity Credit Line' (LCL) and purchases of bonds in the financial market, among others. As of June 30, 2021, the Bank has made use of these financing facilities for an amount of Ch$4,348,677 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$3,622,885 million, corresponding to commercial placements of the individual portfolio of high credit quality for Ch$2,198,879 million, and securities of fixed income for an approximate amount of Ch$1,424,006 million. In the case of the LCL, the guarantee provided corresponds to the reserve held by the Bank.

Additionally, the National Congress approved three reforms to the constitution that allowed withdrawals of up to 10% of the resources available in the individual capitalization accounts, which allowed an aggregate withdrawal equivalent to approximately US$49,322 million, a situation that has brought pressure on prices of goods and services, increased liquidity levels for natural and legal persons, and decreased delinquency levels in the banking industry.

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

Even though the impact of the pandemic on our operating results has been significant and its effects will persist even over time, its magnitude will depend on the duration and depth of the effects of the pandemic, as well as the impact on structural variables, including the trend growth of the economy, increase in investment and employment levels. Additionally, in accordance with the current policy on the matter, the Bank has established additional incremental provisions for Ch$90,000 million during this fiscal year, thus totaling Ch$410,252 million as of June 30, 2021.

21

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

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

Subsidiaries: Corresponds to the businesses generated by the companies controlled by the Bank, which carry out activities complementary to the bank business. The companies that comprise this segment are:
Entity
- Banchile Administradora General de Fondos S.A.
- Banchile Asesoría Financiera S.A.
- Banchile Corredores de Seguros Ltda.
- Banchile Corredores de Bolsa S.A.
- Banchile Securitizadora S.A. (*)
- Socofin S.A.
(*) Company in the process of early dissolution. See Note No. 5 b).

22

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

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

For the periods ended June 30, 2021 and 2020 there was no income from transactions with a customer or counterparty that accounted for 10% or more of the Bank's total revenues.

23

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 June 30, 2021 and 2020 for each of the segments defined above:

Retail Wholesale Treasury Subsidiaries Subtotal

Consolidation

adjustment

Total
June June June June June June June June June June June June June June
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Net interest income 473,309 491,971 196,294 190,279 4,675 (7,552 ) (117 ) (1,871 ) 674,161 672,827 113 1,068 674,274 673,895
Net commissions income (loss) 127,261 150,924 29,988 27,092 (873 ) (1,127 ) 73,685 72,794 230,061 249,683 (6,880 ) (7,704 ) 223,181 241,979
Financial and exchange operations results 4,542 7,055 30,550 30,061 17,235 31,091 13,965 17,778 66,292 85,985 (32 ) (999 ) 66,260 84,986
Other operating income 12,317 9,954 6,338 6,945 - - 1,197 1,459 19,852 18,358 (2,524 ) (2,116 ) 17,328 16,242
Total operating revenue 617,429 659,904 263,170 254,377 21,037 22,412 88,730 90,160 990,366 1,026,853 (9,323 ) (9,751 ) 981,043 1,017,102
Provision for loan losses (89,612 ) (175,227 ) (41,588 ) (89,716 ) - - 329 (25 ) (130,871 ) (264,968 ) - - (130,871 ) (264,968 )
Personnel expenses (142,191 ) (138,013 ) (43,770 ) (39,551 ) (1,197 ) (987 ) (37,444 ) (35,464 ) (224,602 ) (214,015 ) 8 8 (224,594 ) (214,007 )
Administrative expenses (125,542 ) (133,863 ) (30,179 ) (31,892 ) (165 ) (153 ) (16,092 ) (15,755 ) (171,978 ) (181,663 ) 9,315 9,743 (162,663 ) (171,920 )
Depreciation and amortization (30,976 ) (29,441 ) (4,002 ) (3,628 ) (17 ) (11 ) (2,773 ) (3,032 ) (37,768 ) (36,112 ) - - (37,768 ) (36,112 )
Other operating expenses (9,163 ) (8,075 ) (7,153 ) (10,919 ) (556 ) (595 ) 57 (198 ) (16,815 ) (19,787 ) - - (16,815 ) (19,787 )
Total operating expenses (307,872 ) (309,392 ) (85,104 ) (85,990 ) (1,935 ) (1,746 ) (56,252 ) (54,449 ) (451,163 ) (451,577 ) 9,323 9,751 (441,840 ) (441,826 )
Income attributable to associates (3,156 ) 893 597 310 32 34 341 338 (2,186 ) 1,575 - - (2,186 ) 1,575
Income before income taxes 216,789 176,178 137,075 78,981 19,134 20,700 33,148 36,024 406,146 311,883 - - 406,146 311,883
Income taxes (81,277 ) (63,298 )
Income after income taxes 324,869 248,585

The following table presents assets and liabilities of the periods ended June 30, 2021 and December 31, 2020 by each segment defined above:

Retail Wholesale Treasury Subsidiaries Subtotal

Consolidation

adjustment

Total
June December June December June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Assets 19,911,432 18,800,897 11,243,826 10,811,021 15,092,423 15,400,139 784,488 830,910 47,032,169 45,842,967 (99,242 ) (128,730 ) 46,932,927 45,714,237
Current and deferred taxes 383,319 380,894
Total assets 47,316,246 46,095,131
Liabilities 15,453,970 13,647,952 9,671,960 9,980,003 17,704,553 18,208,458 627,270 660,869 43,457,753 42,497,282 (99,242 ) (128,730 ) 43,358,511 42,368,552
Current and deferred taxes 24,218 311
Total liabilities 43,382,729 42,368,863

24

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 equivalents and their reconciliation with the Statement of Cash Flows at the end of each period are detailed as follows:
June December
2021 2020
MCh$ MCh$
Cash and due from banks:
Cash (*) 1,021,825 615,842
Deposit in Chilean Central Bank (*) 210,618 641,890
Deposits in other domestic banks 38,456 14,506
Deposits abroad 1,136,451 1,287,978
Subtotal - Cash and due from banks 2,407,350 2,560,216
Net transactions in the course of collection (93,486 ) (719,692 )
Highly liquid financial instruments (**) 2,735,408 4,212,719
Repurchase agreements (**) 56,743 34,872
Total cash and cash equivalents 5,106,015 6,088,115
(*) Amounts in cash funds and in Central Bank are regulatory reserve deposits that the Bank must maintain as a monthly average.
(**) It corresponds to negotiation instruments and repurchases 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:

June December
2021 2020
MCh$ MCh$
Assets
Documents drawn on other banks (clearing) 122,084 123,267
Funds receivable 494,848 459,041
Subtotal - assets 616,932 582,308
Liabilities
Funds payable (710,418 ) (1,302,000 )
Subtotal - liabilities (710,418 ) (1,302,000 )
Net transactions in the course of settlement (93,486 ) (719,692 )

25

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:

June December
2021 2020
MCh$ MCh$
Instruments issued by the Chilean Government and Central Bank of Chile
Central Bank of Chile bonds 1,143 3,186
Central Bank of Chile promissory notes 2,914,982 4,006,490
Other instruments issued by the Chilean Government and Central Bank 65,965 149,616
Other instruments issued in Chile
Bonds from other domestic companies - 5,396
Bonds from domestic banks 12,817 5,494
Deposits in domestic banks 139,210 93,905
Other instruments issued in Chile 1,328 1,003
Instruments issued Abroad
Instruments from foreign governments or central banks - -
Other instruments issued abroad 12 164
Mutual fund investments
Funds managed by related companies 402,038 400,902
Funds managed by third-party - -
Total 3,537,495 4,666,156

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$37,900 million as of June 30, 2021 (Ch$217,614 million as of December 31, 2020). Repurchase agreements have a 1 day average expiration at the end of June 2021 (4 days at the year-end 2020). 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$2,833,000 million as of June 30, 2021 (Ch$2,986,000 million in December 2020).

Under 'Other instruments issued in Chile' are included instruments sold under repurchase agreements with customers and financial instruments amounting to Ch$107,657 million as of June 30, 2021 (Ch$52,809 million as of December 31, 2020). The repurchase agreements have an average expiration of 5 days as of period-end 2021 (9 days in December 2020).

Additionally, the Bank holds financial investments in mortgage finance bonds issued by itself in the amount of Ch$4,365 million as of June 30, 2021 (Ch$5,156 million as of December 31, 2020), which are presented as a reduction of the liability line item 'Debt issued'.

26

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 repurchase agreements:
(a) Rights arising from resale repurchase agreements: The Bank provides financing to its customers through repurchase agreements and securities lending, in which the financial instrument serves as collateral. As of June 30, 2021 and December 31, 2020, the detail is as follows:
Up to
1 month
Over
1 month
and up to
3 months
Over
3 months
and up to
12 months
Over
1 year
and up to
3 years
Over
3 years
and up to
5 years
Over
5 years
Total
June December June December June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
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 - 10,006 - - - - - - - - - - - 10,006
Subtotal - 10,006 - - - - - - - - - - - 10,006
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 45,784 29,089 24,359 20,591 22,654 16,721 - - - - - - 92,797 66,401
Subtotal 45,784 29,089 24,359 20,591 22,654 16,721 - - - - - - 92,797 66,401
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 45,784 39,095 24,359 20,591 22,654 16,721 - - - - - - 92,797 76,407

Securities received:

The Bank and its subsidiaries have received financial instruments that they can sell or give as collateral in case the owner of these instruments enters into default or in bankruptcy. As of June 30, 2021, the fair value of the instruments received amounts to Ch$87,356 million (Ch$82,585 million as of December, 2020).

27

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 repurchase agreements, continued:
(b) Obligations arising from repurchase agreements: The Bank obtains financing by selling financial instruments and agreeing to repurchase them in the future, plus interest at a prefixed rate. As of June 30, 2021 and December 31, 2020, the repurchase agreements are the following:
Up to
1 month
Over
1 month
and up to
3 months
Over
3 months
and up to
12 months
Over
1 year
and up to
3 years
Over
3 years
and up to
5 years
Over
5 years
Total
June December June December June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
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 37,899 183,083 - - - - - - - - - - 37,899 183,083
Other instruments issued by the Chilean Government and Central Bank of Chile 3,697 47,763 - - - - - - - - - - 3,697 47,763
Subtotal 41,596 230,846 - - - - - - - - - - 41,596 230,846
Other Instruments issued in Chile
Deposit promissory notes from domestic banks - - - - - - - - - - - - - -
Mortgage bonds from domestic banks - - - - - - - - - - - - - -
Bonds from domestic banks - - - - - - - - - - - - - -
Deposits in domestic banks 107,629 57,648 44 43 - - - - - - - - 107,673 57,691
Bonds from other Chilean companies - - - - - - - - - - - - - -
Other instruments issued in Chile 588 380 - - - - - - - - - - 588 380
Subtotal 108,217 58,028 44 43 - - - - - - - - 108,261 58,071
Instruments issued by foreign institutions
Instruments from foreign governments or central bank - - - - - - - - - - - - - -
Other instruments issued by foreing - - - - 328 - - - - - - - 328 -
Subtotal - - - - 328 - - - - - - - 328 -
Mutual fund investments
Funds managed by related companies - - - - - - - - - - - - - -
Funds managed by third-party - - - - - - - - - - - - - -
Subtotal - - - - - - - - - - - - - -
Total 149,813 288,874 44 43 328 - - - - - - - 150,185 288,917

Securities sold:

The fair value of the financial instruments delivered as collateral by the Bank and its subsidiaries, in sales transactions with repurchase agreement and securities lending as of June 30, 2021 amounts to Ch$149,271 million (Ch$288,523 million in December 2020). 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.

28

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 June 30, 2021 and December 31, 2020, the Bank's portfolio of derivative instruments is detailed as follows:
Notional amount of contract with final expiration date in Fair Value

Up to 1 month

Over 1 month and up to 3 months Over 3 months and up to 12 months

Over 1 year and up to 3 years

Over 3 year and up to 5 years

Over 5 years

Total

Assets

Liabilities

MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
As of June 30, 2021
Derivatives held for hedging purposes
Interest rate swap and cross currency swap - - 3,428 - - - 3,428 - 1,119
Interest rate swap - - - - - 2,672 2,672 - 595
Total derivatives held for hedging purposes - - 3,428 - - 2,672 6,100 - 1,714
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap - - 202,174 141,478 218,514 682,072 1,244,238 86,508 35,638
Total derivatives held as cash flow hedges - - 202,174 141,478 218,514 682,072 1,244,238 86,508 35,638
Trading derivatives
Currency forward 6,663,591 3,982,949 6,885,339 999,058 86,006 16,148 18,633,091 241,788 198,692
Interest rate swap 1,482,348 2,385,483 9,377,725 10,085,867 6,314,147 10,255,895 39,901,465 635,703 649,400
Interest rate swap and cross currency swap 311,588 754,894 3,288,590 5,898,694 4,111,682 5,529,380 19,894,828 772,960 896,358
Call currency options 7,371 7,675 31,831 109 - - 46,986 858 533
Put currency options 5,379 6,993 38,990 - - - 51,362 318 521
Total trading derivatives 8,470,277 7,137,994 19,622,475 16,983,728 10,511,835 15,801,423 78,527,732 1,651,627 1,745,504
Total 8,470,277 7,137,994 19,828,077 17,125,206 10,730,349 16,486,167 79,778,070 1,738,135 1,782,856

29

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

Up to 1 month

Over 1 month and up to 3 months Over 3 months and up to 12 months

Over 1 year and up to 3 years

Over 3 year and up to 5 years

Over 5 years

Total

Assets

Liabilities

MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
As of December 31, 2020
Derivatives held for hedging purposes
Interest rate swap and cross currency swap - - - 5,031 - - 5,031 - 1,646
Interest rate swap - - - - - 29,508 29,508 - 4,873
Total derivatives held for hedging purposes - - - 5,031 - 29,508 34,539 - 6,519
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap - - 164,330 171,925 213,811 667,391 1,217,457 51,062 65,172
Total derivatives held as cash flow hedges - - 164,330 171,925 213,811 667,391 1,217,457 51,062 65,172
Trading derivatives
Currency forward 7,320,775 5,754,021 7,753,967 823,355 60,193 26,340 21,738,651 551,964 637,186
Interest rate swap 1,516,969 2,797,327 10,330,399 12,705,904 6,658,095 10,180,750 44,189,444 1,167,416 1,189,828
Interest rate swap and cross currency swap 439,244 809,124 3,459,603 5,892,574 3,442,030 4,850,644 18,893,219 845,831 940,646
Call currency options 10,581 25,382 34,294 1,657 - - 71,914 269 306
Put currency options 9,605 20,470 26,893 427 - - 57,395 1,462 2,099
Total trading derivatives 9,297,174 9,406,324 21,605,156 19,423,917 10,160,318 15,057,734 84,950,623 2,566,942 2,770,065
Total 9,297,174 9,406,324 21,769,486 19,600,873 10,374,129 15,754,633 86,202,619 2,618,004 2,841,756

30

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 June 30, 2021 and December 31, 2020:

June December
2021 2020
MCh$ MCh$
Hedge element
Commercial loans 3,428 5,031
Corporate bonds 2,672 29,508
Hedge instrument
Cross currency swap 3,428 5,031
Interest rate swap 2,672 29,508
(c) Cash flow Hedges:
(c.1) The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates and foreign exchange of foreign banks obligations and bonds issued abroad in US Dollars, Hong Kong dollars, Swiss Franc, Japanese Yens, Peruvian Sol, Australian Dollars, Euros and Norwegian kroner. The cash flows of the cross currency swaps equal the cash flows of the hedged items, which modify uncertain cash flows to known cash flows derived from a fixed interest rate.

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

31

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 asset part of the derivative instrument:
Up to 1 month Over 1 month and
up to 3 months
Over 3 months and
up to 12 months
Over 1 year and
up to 3 years
Over 3 years and
up to 5 years
Over 5 years Total
June December June December June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Hedge element
Outflows:
Corporate Bond EUR - - - - (1,466 ) (1,473 ) (2,932 ) (2,946 ) (43,826 ) (44,037 ) (50,834 ) (51,871 ) (99,058 ) (100,327 )
Corporate Bond HKD (1,020 ) - (4,821 ) - (7,903 ) (13,352 ) (91,518 ) (90,988 ) (80,666 ) (78,369 ) (277,806 ) (269,894 ) (463,734 ) (452,603 )
Corporate Bond PEN - - (749 ) (775 ) (749 ) (775 ) (2,996 ) (3,098 ) (2,996 ) (3,098 ) (39,360 ) (41,484 ) (46,850 ) (49,230 )
Corporate Bond CHF - - - - (815 ) (829 ) (92,816 ) (94,332 ) (119,234 ) (121,182 ) - - (212,865 ) (216,343 )
Corporate Bond USD - - - - (1,562 ) (1,515 ) (3,124 ) (3,030 ) (3,124 ) (3,030 ) (40,605 ) (40,140 ) (48,415 ) (47,715 )
Obligation USD (209 ) (202 ) (79 ) (76 ) (161,769 ) (157,455 ) - - - - - - (162,057 ) (157,733 )
Corporate Bond JPY - - - - (35,058 ) (2,115 ) (3,329 ) (38,110 ) (3,329 ) (3,472 ) (182,646 ) (191,351 ) (224,362 ) (235,048 )
Corporate Bond AUD - - (2,488 ) (970 ) (2,441 ) (3,928 ) (9,862 ) (9,100% ) (9,860 ) (9,799 ) (207,356 ) (206,991 ) (232,007 ) (231,484 )
Corporate Bond NOK - - - - (2,330 ) (2,275 ) (4,659 ) (4,550 ) (4,659 ) (4,550 ) (73,218 ) (71,491 ) (84,866 ) (82,866 )
Hedge instrument
Inflows:
Cross Currency Swap EUR - - - - 1,466 1,473 2,932 2,946 43,826 44,037 50,834 51,871 99,058 100,327
Cross Currency Swap HKD 1,020 - 4,821 - 7,903 13,352 91,518 90,988 80,666 78,369 277,806 269,894 463,734 452,603
Cross Currency Swap PEN - - 749 775 749 775 2,996 3,098 2,996 3,098 39,360 41,484 46,850 49,230
Cross Currency Swap CHF - - - - 815 829 92,816 94,332 119,234 121,182 - - 212,865 216,343
Cross Currency Swap USD - - - - 1,562 1,515 3,124 3,030 3,124 3,030 40,605 40,140 48,415 47,715
Cross Currency Swap USD 209 202 79 76 161,769 157,455 - - - - - - 162,057 157,733
Cross Currency Swap JPY - - - - 35,058 2,115 3,329 38,110 3,329 3,472 182,646 191,351 224,362 235,048
Cross Currency Swap AUD - - 2,488 970 2,441 3,928 9,862 9,100% 9,860 9,799 207,356 206,991 232,007 231,484
Cross Currency Swap NOK - - - - 2,330 2,275 4,659 4,550 4,659 4,550 73,218 71,491 84,866 82,866
Net cash flows - - - - - - - - - - - - - -

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, continued:
(c) Cash flow Hedges, continued:
(c.2) Below are the cash flows from underlying assets and the cash flows of the liability part of the derivative instrument:
Up to 1 month Over 1 month and
up to 3 months
Over 3 months and
up to 12 months
Over 1 year and
up to 3 years
Over 3 years and
up to 5 years
Over 5 years Total
June December June December June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Hedge element
Inflows:
Cash flows in CLF 161 160 4,089 280 220,295 186,116 181,178 213,673 249,719 246,244 754,671 741,654 1,410,113 1,388,127
Hedge instrument
Outflows:
Cross Currency Swap HKD (161 ) (160 ) (3,565 ) - (5,656 ) (9,035 ) (72,472 ) (72,728 ) (77,746 ) (76,073 ) (210,894 ) (206,514 ) (370,494 ) (364,510 )
Cross Currency Swap PEN - - (50 ) (48 ) (49 ) (49 ) (198 ) (194 ) (198 ) (194 ) (32,619 ) (31,965 ) (33,114 ) (32,450 )
Cross Currency Swap JPY - - - - (38,516 ) (4,195 ) (6,741 ) (40,526 ) (6,732 ) (6,596 ) (204,619 ) (201,852 ) (256,608 ) (253,169 )
Cross Currency Swap USD - - - - (168,943 ) (165,634 ) (1,342 ) (1,311 ) (1,344 ) (1,317 ) (38,076 ) (37,584 ) (209,705 ) (205,846 )
Cross Currency Swap CHF - - - - (4,023 ) (3,929 ) (93,270 ) (91,923 ) (115,590 ) (114,409 ) - - (212,883 ) (210,261 )
Cross Currency Swap EUR - - - - (1,954 ) (1,912 ) (3,894 ) (3,805 ) (44,851 ) (44,464 ) (46,053 ) (45,439 ) (96,752 ) (95,620 )
Cross Currency Swap AUD - - (474 ) (232 ) (517 ) (738 ) (1,984 ) (1,939 ) (1,983 ) (1,942 ) (155,692 ) (152,709 ) (160,650 ) (157,560 )
Cross Currency Swap NOK - - - - (637 ) (624 ) (1,277 ) (1,247 ) (1,275 ) (1,249 ) (66,718 ) (65,591 ) (69,907 ) (68,711 )
Net cash flows - - - - - - - - - - - - - -

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:
(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 2021 by those derivative contracts that conform the hedging instruments in this cash flow hedging strategy, have been recorded with credit to equity amounting to Ch$82,373 million (charge to equity of Ch$45,119 million in June 30, 2020). The net effect of taxes credit to equity amounts to Ch$60,133 million (net charge to equity of Ch$32,937 million equity during the period June 2020).

The accumulated balance for this concept as of June 30, 2021 corresponds to a credit in equity amounted to Ch$11,691 million (charge to equity of Ch$70,682 million as of December 2020).

(c.4) The effect of the cash flow hedging derivatives that offset the result of the hedged instruments corresponds to a charge to income of Ch$18,802 million during the period 2021 (credit to results for Ch$107,463 million during the period June 2020).
(c.5) As of June 30, 2021 and 2020, it not exist inefficiency in cash flow hedge, because both, hedge item and hedge instruments, are mirrors of each other, it means that all variation of value attributable to rate and revaluation components are netted totally.
(c.6) As of June 30, 2021 and 2020, the Bank does not have hedges of net investments in foreign business.

34

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 to Banks' are as follows:
June December
2021 2020
MCh$ MCh$
Domestic Banks
Interbank loans of liquidity - 260,002
Provisions for loans to domestic banks - (140 )
Subtotal - 259,862
Foreign Banks
Interbank loans commercial 157,965 185,858
Credits with third countries - 167
Chilean exports trade loans 89,449 113,596
Provisions for loans to foreign banks (419 ) (525 )
Subtotal 246,995 299,096
Central Bank of Chile
Central Bank deposits 3,200,000 2,380,033
Other Central Bank credits - -
Subtotal 3,200,000 2,380,033
Total 3,446,995 2,938,991
(b) The changes in provisions of the credits owed by the banks, during the periods 2021 and 2020, are summarized as follows:
Bank's Location
Detail Chile Abroad Total
MCh$ MCh$ MCh$
Balance as of January 1, 2020 54 704 758
Provisions established - - -
Provisions released (54 ) (234 ) (288 )
Balance as of June 30, 2020 - 470 470
Provisions established 140 55 195
Provisions released - - -
Balance as of December 31, 2020 140 525 665
Provisions established - - -
Provisions released (140 ) (106 ) (246 )
Balance as of June 30, 2021 - 419 419

35

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 June 30, 2020 and December 31, 2020, the portfolio of loans is composed as follows:

As of June 30, 2021
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 14,454,959 131,822 393,711 14,980,492 (182,911 ) (144,197 ) (327,108 ) 14,653,384
Foreign trade loans 1,169,329 13,682 19,065 1,202,076 (37,425 ) (2,432 ) (39,857 ) 1,162,219
Current account debtors 116,146 3,533 2,403 122,082 (2,395 ) (6,346 ) (8,741 ) 113,341
Factoring transactions ,578 2,531 466 450,575 (9,857 ) (806 ) (10,663 ) 439,912
Student loans 54,924 - 2,547 57,471 - (4,309 ) (4,309 ) 53,162
Commercial lease transactions (1) 1,511,013 44,157 26,589 1,581,759 (6,734 ) (5,423 ) (12,157 ) 1,569,602
Other loans and accounts receivable 99,354 469 15,231 115,054 (6,863 ) (5,891 ) (12,754 ) 102,300
Subtotal 17,853,303 196,194 460,012 18,509,509 (246,185 ) (169,404 ) (415,589 ) 18,093,920
Mortgage loans
Letters of credit 7,235 - 435 7,670 - (35 ) (35 ) 7,635
Endorsable mortgage loans 19,763 - 859 20,622 - (61 ) (61 ) 20,561
Other residential lending 9,411,387 - 278,088 9,689,475 - (30,711 ) (30,711 ) 9,658,764
Credit from ANAP 1 - - 1 - - - 1
Residential lease transactions - - - - - - - -
Other loans and accounts receivable 144,732 - 9,240 153,972 - (1,239 ) (1,239 ) 152,733
Subtotal 9,583,118 - 288,622 9,871,740 - (32,046 ) (32,046 ) 9,839,694
Consumer loans
Consumer loans in installments 2,479,087 - 229,210 2,708,297 - (195,029 ) (195,029 ) 2,513,268
Current account debtors 139,392 - 4,019 143,411 - (8,451 ) (8,451 ) 134,960
Credit card debtors 1,009,720 - 20,905 1,030,625 - (35,851 ) (35,851 ) 994,774
Consumer lease transactions (1) 441 - - 441 - (5 ) (5 ) 436
Other loans and accounts receivable 7 - 716 723 - (498 ) (498 ) 225
Subtotal 3,628,647 - 254,850 3,883,497 - (239,834 ) (239,834 ) 3,643,663
Total 31,065,068 196,194 1,003,484 32,264,746 (246,185 ) (441,284 ) (687,469 ) 31,577,277
(1) In this item, the Bank finances its clients the acquisition of real estate and chattels through financial lease agreements. As of June 30, 2021 Ch$798,787 million correspond to finance leases on real estate and Ch$783,413 million correspond to finance leases on chattels.

36

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, 2020
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 13,818,088 136,072 438,535 14,392,695 (197,777 ) (139,718 ) (337,495 ) 14,055,200
Foreign trade loans 941,825 7,347 17,791 966,963 (33,441 ) (2,374 ) (35,815 ) 931,148
Current account debtors 111,888 3,617 4,973 120,478 (2,789 ) (6,762 ) (9,551 ) 110,927
Factoring transactions 369,656 3,617 601 373,874 (8,512 ) (837 ) (9,349 ) 364,525
Student loans 55,058 - 2,449 57,507 - (4,201 ) (4,201 ) 53,306
Commercial lease transactions (1) 1,513,776 44,968 33,348 1,592,092 (7,504 ) (6,169 ) (13,673 ) 1,578,419
Other loans and accounts receivable 72,769 455 16,206 89,430 (6,892 ) (6,319 ) (13,211 ) 76,219
Subtotal 16,883,060 196,076 513,903 17,593,039 (256,915 ) (166,380 ) (423,295 ) 17,169,744
Mortgage loans
Letters of credit 8,646 - 692 9,338 - (44 ) (44 ) 9,294
Endorsable mortgage loans 22,885 - 1,220 24,105 - (81 ) (81 ) 24,024
Other residential lending 8,894,326 - 305,815 9,200,141 - (32,427 ) (32,427 ) 9,167,714
Credit from ANAP 2 - - 2 - - - 2
Residential lease transactions - - - - - - - -
Other loans and accounts receivable 146,174 - 8,894 155,068 - (1,212 ) (1,212 ) 153,856
Subtotal 9,072,033 - 316,621 9,388,654 - (33,764 ) (33,764 ) 9,354,890
Consumer loans
Consumer loans in installments 2,418,658 - 299,469 2,718,127 - (236,408 ) (236,408 ) 2,481,719
Current account debtors 153,855 - 4,869 158,724 - (10,186 ) (10,186 ) 148,538
Credit card debtors 1,052,342 - 25,103 1,077,445 - (42,789 ) (42,789 ) 1,034,656
Consumer lease transactions (1) 302 - - 302 - (3 ) (3 ) 299
Other loans and accounts receivable 10 - 667 677 - (465 ) (465 ) 212
Subtotal 3,625,167 - 330,108 3,955,275 - (289,851 ) (289,851 ) 3,665,424
Total 29,580,260 196,076 1,160,632 30,936,968 (256,915 ) (489,995 ) (746,910 ) 30,190,058
(1) In this item, the Bank finances its clients the acquisition of real estate and chattels through financial lease agreements. As of December 31, 2020 Ch$802,828 million correspond to finance leases on real estate and Ch$789,566 million correspond to finance leases on chattels.

37

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 June 30, 2021 and December 31, 2020, the Bank presents the following details of normal and impaired portfolio:

Assets before Allowances Allowances established
Normal Portfolio Impaired Portfolio Total Individual Provisions Group Provisions Total Net assets
June December June December June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Commercial loans 18,009,963 17,039,307 499,546 553,732 18,509,509 17,593,039 (246,185 ) (256,915 ) (169,404 ) (166,380 ) (415,589 ) (423,295 ) 18,093,920 17,169,744
Mortgage loans 9,583,118 9,072,033 288,622 316,621 9,871,740 9,388,654 - - (32,046 ) (33,764 ) (32,046 ) (33,764 ) 9,839,694 9,354,890
Consumer loans 3,628,647 3,625,167 254,850 330,108 3,883,497 3,955,275 - - (239,834 ) (289,851 ) (239,834 ) (289,851 ) 3,643,663 3,665,424
Total 31,221,728 29,736,507 1,043,018 1,200,461 32,264,746 30,936,968 (246,185 ) (256,915 ) (441,284 ) (489,995 ) (687,469 ) (746,910 ) 31,577,277 30,190,058

38

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 2021 and 2020, are summarized as follows:

Commercial Mortgage Consumer
Individual Group Group Group Total
MCh$ MCh$ MCh$ MCh$ MCh$
Balance as of January 1, 2020 176,942 150,831 28,047 329,598 685,418
Charge-offs (6,243 ) (25,070 ) (3,763 ) (171,557 ) (206,633 )
Sales or transfers of credits (186 ) - - - (186 )
Allowances established 54,342 26,249 2,307 117,777 200,675
Allowances released - - - - -
Balance as of June 30, 2020 224,855 152,010 26,591 275,818 679,274
Charge-offs (4,586 ) (28,247 ) (5,115 ) (71,979 ) (109,927 )
Sales or transfers of credits (145 ) - - - (145 )
Allowances established 36,791 42,617 12,288 86,012 177,708
Allowances released - - - - -
Balance as of December 31, 2020 256,915 166,380 33,764 289,851 746,910
Charge-offs (6,105 ) (28,816 ) (5,053 ) (78,410 ) (118,384 )
Sales or transfers of credits (14,457 ) - - - (14,457 )
Allowances established 9,832 31,840 3,335 28,393 73,400
Allowances released - - - - -
Balance as of June 30, 2021 246,185 169,404 32,046 239,834 687,469

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).

Other disclosures:

1. As of June 30, 2021, the Bank and its subsidiaries have made sales of 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 June 30, 2021, the Bank and its subsidiaries derecognized 100% of its portfolio of loans sold and on which all or substantially all of the risks and benefits associated to these financial assets have been transferred (see Note No. 12 letter (e)).
3. As of June 30, 2021 and December 31, 2020, under the Commercial Loans item, operations are maintained that guarantee obligations maintained with the Central Bank of Chile as part of the Loan Increase Conditional Credit Facility (FCIC by its Spanish initials) program for an approximate amount of Ch$2,198,879 million (Ch$2,021,688 million in December 2020).

39

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 (*)
June December June December June December
2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Within one year 511,988 521,445 (50,609 ) (52,438 ) 461,379 469,007
From 1 to 2 years 373,074 373,304 (36,649 ) (37,958 ) 336,425 335,346
From 2 to 3 years 251,028 245,667 (24,010 ) (25,084 ) 227,018 220,583
From 3 to 4 years 161,472 161,492 (16,512 ) (17,433 ) 144,960 144,059
From 4 to 5 years 114,350 110,743 (11,989 ) (12,841 ) 102,361 97,902
After 5 years 330,761 350,679 (25,578 ) (28,994 ) 305,183 321,685
Total 1,742,673 1,763,330 (165,347 ) (174,748 ) 1,577,326 1,588,582
(*) The net balance receivable does not include past-due portfolio totaling Ch$4,874 million as of June 30, 2021 (Ch$3,812 million as of December 2020).

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.

40

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

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

12. Loans to Customers, continued:
(d) Purchase of loan portfolio:

During the period ended June 30, 2021 and the year ended 2020 no portfolio purchases were made.

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

During the period 2021 and 2020 there have been operations of sale or transfer of the loan portfolio according to the following:

As of June 30, 2021
Carrying amount Allowances Sale price

Effect on income

(loss) gain (*)

MCh$ MCh$ MCh$ MCh$
Sale of current loans 16,327 (14,457 ) 6,537 4,667
Sale of written - off loans - - - -
Total 16,327 (14,457 ) 6,537 4,667
As of June 30, 2020
Carrying amount Allowances Sale price

Effect on income

(loss) gain (*)

MCh$ MCh$ MCh$ MCh$
Sale of current loans 43,804 (186 ) 43,804 186
Sale of written - off loans - - - -
Total 43,804 (186 ) 43,804 186
(*) See Note No. 30.
(f) Securitization of own assets:

During the period 2021 and the year 2020, there is no securitization transactions executed involving its own assets.

41

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

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

13. Investment Securities:

As of June 30, 2021 and December 31, 2020, investment securities classified as available-for-sale and held-to-maturity are detailed as follows:

June 2021 December 2020
Available-
for-sale
Held-to- maturity Total Available-
for -sale
Held-to- maturity Total
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Instruments issued by the Chilean Government and Central Bank of Chile
Bonds issued by the Central Bank of Chile 105 - 105 109 - 109
Promissory notes issued by the Central Bank of Chile - - - - - -
Other instruments of the Chilean Government and the Central Bank of Chile 1,405,893 127,770 1,533,663 163,491 - 163,491
Other instruments issued in Chile
Deposit promissory notes from domestics banks - - - - - -
Mortgage bonds from domestic banks 120,376 - 120,376 128,763 - 128,763
Bonds from domestic banks 4,295 - 4,295 15,887 - 15,887
Deposits from domestic banks 806,734 - 806,734 685,392 - 685,392
Bonds from other Chilean companies 23,514 - 23,514 34,539 - 34,539
Promissory notes issued by other Chilean companies - - - - - -
Other instruments issued in Chile 3,411 - 3,411 32,342 - 32,342
Instruments issued Abroad
Instruments from foreign governments or Central Banks - - - - - -
Other instruments - - - - - -
Total 2,364,328 127,770 2,492,098 1,060,523 - 1,060,523

42

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$3,713 million in June 30, 2021 (Ch$13,268 million in December 2020). The repurchase agreements have an average maturity of 5 days in June 2021 (5 days in December 2020). Additionally, instruments given as collateral are classified as part of the Loan Increase Conditional Credit Facility program (FCIC by its Spanish initials) granted by the Central Bank of Chile for an approximate amount of Ch$842,646 million as of June 30, 2021.

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$20,887 million as of June 30, 2021 (Ch$36,146 million as of December 31, 2020).

Under Instruments of Other National Institutions are classified instruments delivered as collateral as part of the Loan Increase Conditional Credit Facility program (FCIC by its Spanish initials) granted by the Central Bank of Chile for an approximate amount of Ch$581,360 as of June 30, 2021 (Ch$350,154 million as of December 31, 2020).

As of June 30, 2021, the portfolio of financial assets available-for-sale includes an accumulated unrealized loss of Ch$47,463 million (accumulated unrealized gain of Ch$801 million in December 2020), recorded as an equity valuation adjustment.

During the periods 2021 and 2020, there is no evidence of impairment of financial assets.

Gross profits and losses realized on the sale of available-for-sale investments as of June 30, 2021 and 2020 are shown in Note No. 30 'Net Financial Operating Income'. The changes on results at the end of each period are as fallow:

June June
2021 2020
MCh$ MCh$
Unrealized (losses) gains (44,361 ) 18,296
Realized gains reclassified to income (3,903 ) (12,434 )
Subtotal (48,264 ) 5,862
Income tax on other comprehensive income 13,033 (1,581 )
Net effect in equity (35,231 ) 4,281

43

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$43,588 million as of June 30, 2021 (Ch$44,649 million as of December 31, 2020), as follows:
Investment
Ownership Interest Equity Assets Income
June December June December June December June June
Company Shareholder 2021 2020 2021 2020 2021 2020 2021 2020
% % MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Associates
Transbank S.A. (*) Banco de Chile 26.94 26.16 52,971 67,337 15,970 17,613 (4,258 ) 638
Administrador Financiero del Transantiago S.A. Banco de Chile 20.00 20.00 18,382 19,171 3,677 3,951 114 185
Redbanc S.A. Banco de Chile 38.13 38.13 9,242 8,663 3,525 3,307 221 (288 )
Centro de Compensación Automatizado S.A. Banco de Chile 33.33 33.33 9,624 8,182 3,208 2,787 421 159
Soc. Operadora de Tarjetas de Crédito Nexus S.A. Banco de Chile 29.63 29.63 10,660 8,626 3,158 2,556 603 315
Sociedad Interbancaria de Depósitos de Valores S.A. Banco de Chile 26.81 26.81 6,025 5,526 1,615 1,564 143 115
Sociedad Imerc OTC S.A. Banco de Chile 12.33 12.33 12,158 12,248 1,499 1,510 (10 ) (10 )
Sociedad Operadora de la Cámara de Compensación de Pagos de Alto Valor S.A. Banco de Chile 15.00 15.00 6,614 6,436 992 980 23 20
Subtotal Associates 125,676 136,189 33,644 34,268 (2,743 ) 1,134
Joint Ventures
Servipag Ltda. Banco de Chile 50.00 50.00 13,235 13,268 6,618 6,631 (16 ) (122 )
Artikos Chile S.A. Banco de Chile 50.00 50.00 2,169 2,547 1,085 1,439 245 241
Subtotal Joint Ventures 15,404 15,815 7,703 8,070 229 119
Subtotal 141,080 152,004 41,347 42,338 (2,514 ) 1,253
Investments valued at cost (1)
Bolsa de Comercio de Santiago S.A. Banchile Corredores de Bolsa 1,646 1,646 306 280
Banco Latinoamericano de Comercio Exterior S.A. (Bladex) Banco de Chile 309 309 21 32
Bolsa Electrónica de Chile S.A. Banchile Corredores de Bolsa 257 257 - 9
Sociedad de Telecomunicaciones Financieras Interbancarias Mundiales (Swift) Banco de Chile 21 91 - -
CCLV Contraparte Central S.A. Banchile Corredores de Bolsa 8 8 1 1
Subtotal 2,241 2,311 328 322
Total 43,588 44,649 (2,186 ) 1,575
(1) Income from investments valorized at cost, corresponds to income recognized on cash basis (dividends).
(*) On April 22, 2021, the Extraordinary Shareholders' Meeting of the company unanimously approved a capital increase in the amount of Ch$30,000 million through the issuance of 152,905,194 payment shares. As of June 30, 2021, Banco de Chile has subscribed and paid 13,331,502 shares equivalent to Ch$2,616 million.

44

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 2021 and 2020, are as follows:
June June
2021 2020
MCh$ MCh$
Initial book value 42,338 48,442
Acquisition of investments in companies 2,616 -
Participation on income in companies with significant influence and joint control (2,514 ) 1,253
Dividends received (1,097 ) (751 )
Others 4 4
Total 41,347 48,948
(c) During the period ended as of June 30, 2021 and 2020 no impairment has incurred in these investments.

45

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 June 30, 2021 and December 31, 2020 intangible assets are composed as follows:
Useful Life Average remaining amortization Gross balance Accumulated Amortization Net balance
June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Years Years Years Years MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Other Intangible Assets:
Software or computer programs 6 6 4 4 195,035 180,669 (128,237 ) (119,968 ) 66,798 60,701
Total 195,035 180,669 (128,237 ) (119,968 ) 66,798 60,701

46

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 June 30, 2021 and December 31, 2020 are as follows:
Software or computer programs
June December
2021 2020
MCh$ MCh$
Gross Balance
Balance as of January 1, 180,669 163,485
Acquisition 14,689 18,631
Disposals/ write-downs (352 ) (387 )
Reclassification 29 (16 )
Impairment - (1,044 )
Total 195,035 180,669
Accumulated Amortization
Balance as of January 1, (119,968 ) (105,178 )
Amortization for the period (*) (8,343 ) (15,865 )
Disposals/ write-downs 352 660
Reclassification (278 ) -
Impairment (*) - 415
Total (128,237 ) (119,968 )
Balance Net 66,798 60,701
(*) See Note No. 35 Depreciation, amortization and impairment.
(c) As of June 30, 2021 and December 31, 2020, the Bank maintains the following amounts with technological developments:
Detail Commitment Amount
June December
2021 2020
MCh$ MCh$
Software and licenses 7,251 3,830

47

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 June 30, 2021 and December 31, 2020 are composed as follows:
Useful Life Average remaining depreciation Gross balance Accumulated Depreciation Net balance
June December June December June December June December June December
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Years Years Years Years MCh$ MCh$ MCh$ MCh$ MCh$ MCh$

Type of property and equipment:

Land and Buildings 26 26 20 20 310,110 304,951 (146,748 ) (142,543 ) 163,362 162,408
Equipment 5 5 4 4 233,111 222,624 (183,132 ) (175,141 ) 49,979 47,483
Others 7 7 4 4 56,903 55,898 (48,948 ) (47,861 ) 7,955 8,037
Total 600,124 583,473 (378,828 ) (365,545 ) 221,296 217,928

48

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 June 30, 2021 and December 31, 2020 are as follows:
June 2021
Land and Buildings Equipment Others Total
MCh$ MCh$ MCh$ MCh$
Gross Balance
Balance as of January 1, 2021 304,951 222,624 55,898 583,473
Additions 5,378 11,009 1,510 17,897
Write-downs and sales of the period (219 ) (522 ) (502 ) (1,243 )
Impairment (*) - - (3 ) (3 )
Total 310,110 233,111 56,903 600,124
Accumulated Depreciation
Balance as of January 1, 2021 (142,543 ) (175,141 ) (47,861 ) (365,545 )
Depreciation charges of the period (*) (**) (4,378 ) (8,512 ) (1,587 ) (14,477 )
Write-downs and sales of the period 173 521 500 1,194
Impairment - - - -
Total (146,748 ) (183,132 ) (48,948 ) (378,828 )
Balance as of June 30, 2021 163,362 49,979 7,955 221,296
2020
Land and Buildings Equipment Others Total
MCh$ MCh$ MCh$ MCh$
Gross Balance
Balance as of January 1, 2020 301,619 207,605 55,519 564,743
Additions 6,303 20,658 1,510 28,471
Write-downs and sales of the year (2,903 ) (5,606 ) (1,105 ) (9,614 )
Impairment (***) (68 ) (33 ) (26 ) (127 )
Total 304,951 222,624 55,898 583,473
Accumulated Depreciation
Balance as of January 1, 2020 (136,394 ) (162,560 ) (45,527 ) (344,481 )
Depreciation charges of the year (**) (8,844 ) (17,273 ) (3,371 ) (29,488 )
Write-downs and sales of the year 2,695 4,692 1,025 8,412
Impairment (***) - - 12 12
Total (142,543 ) (175,141 ) (47,861 ) (365,545 )
Balance as of December 31, 2020 162,408 47,483 8,037 217,928
(*) See Note No.35 Depreciation, Amortization and Impairment.
(**) This amount does not include the depreciation of the year of the Investment Properties, amount is included in 'Other Assets' for Ch$178 million (Ch$357 million as of December 2020).
(***) As of December 31, 2020 does not include charge-offs of Property and Equipment of Ch$916 million.

49

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 June 30, 2021 and December 31, 2020 is as follows:

Gross Balance

Accumulated Depreciation

Net Balance

June December June December June December
2021 2020 2021 2020 2021 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Categories
Buildings 127,730 123,215 (42,234 ) (33,560 ) 85,496 89,655
Floor space for ATMs 42,549 40,445 (21,365 ) (16,496 ) 21,184 23,949
Improvements to leased properties 27,189 26,579 (21,702 ) (21,354 ) 5,487 5,225
Total 197,468 190,239 (85,301 ) (71,410 ) 112,167 118,829
(d) The changes of the rights over leased assets as of June 30, 2021 and December 31, 2020 is as follows:
June 2021

Buildings

Floor space for ATMs

Improvements to leased properties

Total

MCh$ MCh$ MCh$ MCh$
Gross Balance
Balance as of January 1, 2021 123,215 40,445 26,579 190,239
Additions 5,092 2,318 705 8,115
Write-downs (577 ) (214 ) (95 ) (886 )
Total 127,730 42,549 27,189 197,468
Accumulated Depreciation
Balance as of January 1, 2021 (33,560 ) (16,496 ) (21,354 ) (71,410 )
Depreciation of the period (*) (9,251 ) (5,077 ) (442 ) (14,770 )
Write-downs 577 214 94 885
Others - (6 ) - (6 )
Total (42,234 ) (21,365 ) (21,702 ) (85,301 )
Balance as of June 30, 2021 85,496 21,184 5,487 112,167
(*) See Note No.35 Depreciation, Amortization and Impairment.

50

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 2020

Buildings

Floor space for ATMs

Improvements to leased properties

Total

MCh$ MCh$ MCh$ MCh$
Gross Balance
Balance as of January 1, 2020 130,853 41,960 27,254 200,067
Additions 7,907 1,319 847 10,073
Write-downs (15,538 ) (1,197 ) (1,522 ) (18,257 )
Remeasurement (7 ) (1,637 ) - (1,644 )
Total 123,215 40,445 26,579 190,239
Accumulated Depreciation
Balance as of January 1, 2020 (18,722 ) (9,091 ) (21,589 ) (49,402 )
Depreciation of the year (*) (18,867 ) (7,774 ) (1,006 ) (27,647 )
Write-downs 4,029 369 1,241 5,639
Total (33,560 ) (16,496 ) (21,354 ) (71,410 )
Balance as of December 31, 2020 89,655 23,949 5,225 118,829
(*) Does not include provision for impairment of Ch$1 million.
(e) The future maturities (including unearned interest) of the lease liabilities as of June 30, 2021 and December 31, 2020 are shown below:
June 2021

Up to 1 month

Over
1 month
and up to
3 months
Over
3 months
and up to
12 months
Over
1 year
and up to
3 years
Over
3 years
and up to
5 years

Over 5 years

Total

MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Lease associated to:
Buildings 1,742 3,478 15,400 27,423 21,046 29,382 98,471
ATMs 892 1,753 7,755 10,906 384 411 22,101
Total 2,634 5,231 23,155 38,329 21,430 29,793 120,572
December 2020

Up to 1 month

Over
1 month
and up to
3 months
Over
3 months
and up to
12 months
Over
1 year
and up to
3 years
Over
3 years
and up to
5 years

Over 5 years

Total

MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Lease associated to:
Buildings 1,646 3,371 14,501 28,663 20,869 30,865 99,915
ATMs 824 1,644 7,229 14,467 419 483 25,066
Total 2,470 5,015 21,730 43,130 21,288 31,348 124,981

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, 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 2021 and 2020 are as follows:

Total cash flow

for the period

Lease liability MCh$
Balances as of January 1, 2020 146,013
Liabilities for new lease agreements 1,197
Interest expenses 1,391
Payments of capital and interests (13,852 )
Remeasurement (1,274 )
Derecognized contracts (3,158 )
Others 1,813
Balances as of June 30, 2020 132,130
Liabilities for new lease agreements 4,571
Interest expenses 1,141
Payments of capital and interests (14,853 )
Remeasurement (370 )
Derecognized contracts (9,179 )
Others 1,577
Balances as of December 31, 2020 115,017
Liabilities for new lease agreements 4,946
Interest expenses 1,052
Payments of capital and interests (15,294 )
Remeasurement -
Derecognized contracts -
Others 2,464
Balances as of June 30, 2021 108,185
(f) The future cash flows related to short-term lease agreements in effect as of June 30, 2021 correspond to Ch$5,584 million (Ch$6,814 as of December 31, 2020).

52

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 June 30, 2021 and December 31, 2020, according to the following detail:

June December
2021 2020
MCh$ MCh$
Income tax 114,293 153,084
Less:
Monthly prepaid taxes (89,841 ) (172,683 )
Credit for training expenses (633 ) (1,900 )
Others (1,116 ) (1,139 )
Total 22,703 (22,638 )
Tax rate 27 % 27 %
June December
2021 2020
MCh$ MCh$
Current tax assets 1.515 22,949
Current tax liabilities (24.218 ) (311 )
Total tax receivable (payable), net (22.703 ) 22,638
(b) Income Tax:

The effect of the tax expense during the periods between January 1 and June 30, 2021 and 2020, are broken down as follows:

June June
2021 2020
MCh$ MCh$
Income tax expense:
Current year tax 92,053 66,939
Tax Previous year (2,375 ) (1,269 )
Subtotal 89,678 65,670
Charge for deferred taxes:
Origin and reversal of temporary differences (10,926 ) (4,805 )
Subtotal (10,926 ) (4,805 )
Others 2,525 2,433
Net charge to income for income taxes 81,277 63,298

53

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 June 30, 2021 and 2020:

June 2021 June 2020
Tax rate Tax rate
% MCh$ % MCh$
Income tax calculated on net income before tax 27.00 109,659 27.00 84,208
Additions or deductions 0.37 1,491 (1.93 ) (6,023 )
Price-level restatement (7.54 ) (30,618 ) (5.88 ) (18,344 )
Others 0.18 745 1.11 3,457
Effective rate and income tax expense 20.01 81,277 20.30 63,298

The effective rate for income tax for the period 2021 is 20.01% (20.30% in June 2020).

54

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 Interim Consolidated Financial Statements. The effects of deferred taxes on assets, liabilities and income accounts as of June 30, 2021 are detailed as follows:

Balances

as of

December 31,

Effect on

Balances

as of

June 31,

2020 Income Equity 2021
MCh$ MCh$ MCh$ MCh$
Debit Differences:
Allowances for loan losses 268,482 2,495 - 270,977
Personnel provisions 16,233 (4,071 ) - 12,162
Staff vacations provisions 9,164 396 - 9,560
Accrued interests adjustments from impaired loans 4,570 434 - 5,004
Staff severance indemnities provision 537 (9 ) (100 ) 428
Provision of credit cards expenses 7,959 673 - 8,632
Provision of accrued expenses 14,083 (783 ) - 13,300
Adjustment for valuation of financial assets available-for-sale - - 12,810 12,810
Leasing 28,835 10,719 - 39,554
Incomes received in advance 16,088 (1,917 ) - 14,171
Other adjustments 26,905 6,746 - 33,651
Total Debit Differences 392,856 14,683 12,710 420,249
Credit Differences:
Depreciation and price-level restatement of property and equipment 17,256 162 - 17,418
Adjustment for valuation of financial assets available-for-sale 223 - (223 ) -
Transitory assets 5,378 3,465 - 8,843
Loans accrued to effective rate 2,779 (202 ) - 2,577
Prepaid expenses 2,234 5,359 - 7,593
Other adjustments 7,041 (5,027 ) - 2,014
Total Credit Differences 34,911 3,757 (223 ) 38,445
Total, Net 357,945 10,926 12,933 381,804

55

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 accounts as of June 30, 2020 and December 31, 2020 are detailed as follows:

Balance as of December 31, Effect on Balance as of
June 30,
Effect on Balance as of
December 31,
2019 Income Equity 2020 Income Equity 2020
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Debit differences:
Allowances for loan losses 221,079 19,712 - 240,791 27,691 - 268,482
Personnel provisions 16,714 (5,231 ) - 11,483 4,750 - 16,233
Staff vacations provisions 7,444 304 - 7,748 1,416 - 9,164
Accrued interest adjustments from impaired loans 3,674 522 - 4,196 374 - 4,570
Staff severance indemnities provision 607 (63 ) 25 569 (32 ) - 537
Provisions of credit card expenses 8,221 533 - 8,754 (795 ) - 7,959
Provisions of accrued expenses 10,564 1,920 - 12,484 1,599 - 14,083
Leasing 41,792 (2,708 ) - 39,084 (10,249 ) - 28,835
Incomes received in advance 32,170 (10,780 ) - 21,390 (5,302 ) - 16,088
Other adjustments 15,485 666 - 16,151 10,754 - 26,905
Total Debit Differences 357,750 4,875 25 362,650 30,206 - 392,856
Credit differences:
Depreciation of property and equipment and investment properties 15,524 781 - 16,305 951 - 17,256
Adjustment for valuation financial assets available-for-sale 1,039 - 1,581 2,620 - (2,397 ) 223
Transitory assets 7,174 1,201 - 8,375 (2,997 ) - 5,378
Loans accrued to effective rate 1,386 (795 ) - 591 2,188 - 2,779
Prepaid expenses 3,334 (1,354 ) - 1,980 254 - 2,234
Other adjustments 8,345 237 - 8,582 (1,541 ) - 7,041
Total Credit Differences 36,802 70 1,581 38,453 (1,145 ) (2,397 ) 34,911
Total, Net 320,948 4,805 (1,556 ) 324,197 31,351 2,397 357,945

56

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:

June December
2021 2020
MCh$ MCh$
Assets held for leasing (*) 91,923 85,626
Assets received or awarded as payment (**)
Assets awarded at judicial sale 4,794 5,571
Assets received in lieu of payment 995 99
Provision for assets received in lieu of payment or awarded (59 ) (52 )
Subtotal 5,730 5,618
Other Assets
Deposits by derivatives margin 131,047 232,732
Trading and brokerage (***) 119,343 84,993
Recoverable income taxes 64,906 8,691
Prepaid expenses 60,593 29,654
Other accounts and notes receivable 31,101 63,100%
Commissions receivable 12,679 11,810
Investment properties 12,655 12,833
VAT receivable 9,701 10,777
Servipag available funds 9,445 11,385
Pending transactions 4,433 1,825
Rental guarantees 2,018 2,014
Accounts receivable for sale of assets received in lieu of payment 1,510 715
Assets recovered from leasing for sale 1,364 2,469
Materials and supplies 731 784
Others 20,820 13,745
Subtotal 482,346 488,223
Total 579,999 579,467
(*) These correspond to property and equipment to be given under finance lease.
(**) Assets received in lieu of payment are assets received as payment of customers' past-due debts. The assets acquired must not exceed the aggregate 20% of the Bank's effective equity. These assets currently represent 0.0193% % (0.0024% as of December 31, 2020) of the Bank's effective equity.
(***) This item mainly includes simultaneous operations carried out by the subsidiary Banchile Corredores de Bolsa S.A.

57

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 2021 and 2020 are as follows:
Provision for assets received in lieu of payment MCh$
Balance as of January 1, 2020 188
Provisions used (708 )
Provisions established 613
Provisions released -
Balance as of June 30, 2020 93
Provisions used (380 )
Provisions established 339
Provisions released -
Balance as of December 31, 2020 52
Provisions used (56 )
Provisions established 63
Provisions released -
Balance as of June 30, 2021 59
19. Current Accounts and Other Demand Deposits:

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

June December
2021 2020
MCh$ MCh$
Current accounts 14,128,679 12,477,719
Other demand deposits 1,731,635 1,431,904
Other deposits and sight accounts 1,548,100 1,257,606
Total 17,408,414 15,167,229
20. Savings Accounts and Time Deposits:

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

June December
2021 2020
MCh$ MCh$
Time deposits 7,307,508 8,442,536
Term savings accounts 410,799 342,550
Other term balances payable 151,367 114,455
Total 7,869,674 8,899,541

58

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:

June December
2021 2020
MCh$ MCh$
Domestic banks
Banco de Crédito e Inversiones 1,128 -
Banco Santander 296 -
Banco do Brasil - 7,100
Banco Scotiabank - 1,257
Subtotal domestic banks 1,424 8,357
Foreign banks
Foreign trade financing
Wells Fargo Bank 124,780 85,734
Citibank N.A. United State 55,061 114,525
Sumitomo Mitsui Banking 36,706 11,394
Bank of America 35,810 20,475
Bank of New York Mellon 14,682 21,389
Standard Chartered Bank 2,115 715
Commerzbank AG 1,067 21,687
JP Morgan Chase Bank 601 -
The Bank of Nova Scotia - 121,085
Zürcher Kantonalbank - 39,116
Others 243 40
Borrowings and other obligations
Citibank N.A. United Kingdom 214,028 233
Wells Fargo Bank 110,279 106,965
The Bank of New York 17,876 -
Standard Chartered Bank 4,880 -
Citibank N.A. London Euros 140 -
Citibank N.A. México S.A 3 -
Deutsche Bank Trust Company Americas - 7,333
Others 190 105
Subtotal foreign banks 618,461 550,100%
Chilean Central Bank (*) 4,348,677 3,110,600
Total 4,968,562 3,669,753
(*) Financing provided by the Chilean Central Bank to deliver liquidity to the economy and support the flow of credit to households and companies, among which are the Conditional Credit Facility to Increase Placements (FCIC by its Spanish initials) and the Liquidity Credit Line (LCL).

59

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:

June December
2021 2020
MCh$ MCh$
Mortgage bonds 5,273 6,786
Bonds 7,873,277 7,700,402
Subordinated bonds 892,760 886,407
Total 8,771,310 8,593,595

During the period ended as of June 30, 2021, Banco de Chile issued bonds by an amount of Ch$415,543 million, which corresponds to Short-Term Bonds, according to the following details:

Short-term Bonds

Counterparty

Currency Amount MCh$ Annual interest rate % Issued date Maturity date
Wells Fargo Bank USD 72,240 0.23 20/01/2021 20/04/2021
Wells Fargo Bank USD 36,736 0.38 09/02/2021 04/02/2022
Citibank N.A. USD 36,736 0.28 09/02/2021 02/08/2021
Wells Fargo Bank USD 35,700 0.26 25/02/2021 24/08/2021
Citibank N.A. USD 71,400 0.23 25/02/2021 01/06/2021
Wells Fargo Bank USD 35,700 0.26 25/02/2021 26/08/2021
Citibank N.A. USD 36,295 0.34 04/03/2021 03/09/2021
Citibank N.A. USD 72,589 0.34 04/03/2021 07/09/2021
Wells Fargo Bank USD 18,147 0.25 04/03/2021 01/06/2021
Total as of June 30, 2021 415,543

Current Bonds Long-Term

During the period ended June 30, 2021, there were no current bonds long-term, issued.

Subordinated bonds

During the period ended June 30, 2021, there were no subordinated bonds, issued.

60

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, 2020, Banco de Chile issued bonds by an amount of Ch$889,135 million, from which corresponds to Short-Term Bonds and Current Bonds by an amount of Ch$634,952 million and Ch$254,183 million respectively, according to the following details:

Short-term Bonds

Counterparty

Currency Amount MCh$ Annual interest rate % Issued date Maturity date
Citibank N.A. USD 23,078 2.00 07/01/2020 07/07/2020
Citibank N.A. USD 38,371 1.95 09/01/2020 09/04/2020
Citibank N.A. USD 34,886 1.91 13/01/2020 13/04/2020
Citibank N.A. USD 11,629 1.87 14/01/2020 14/04/2020
Citibank N.A. USD 31,667 1.91 29/01/2020 31/07/2020
Citibank N.A. USD 7,917 1.91 29/01/2020 31/07/2020
Citibank N.A. USD 27,709 1.86 29/01/2020 29/05/2020
Citibank N.A. USD 10,350 1.85 30/01/2020 01/06/2020
Citibank N.A. USD 19,720 1.85 03/02/2020 03/06/2020
Citibank N.A. USD 31,391 1.55 08/04/2020 05/06/2020
Citibank N.A. USD 21,262 1.30 13/04/2020 12/05/2020
Citibank N.A. USD 12,758 1.30 13/04/2020 13/05/2020
Citibank N.A. USD 34,020 1.30 13/04/2020 13/05/2020
Citibank N.A. USD 25,593 1.55 16/04/2020 16/06/2020
Citibank N.A. USD 25,593 1.55 16/04/2020 18/06/2020
Citibank N.A. USD 34,158 1.61 17/04/2020 21/08/2020
Wells Fargo Bank USD 42,697 1.60 17/04/2020 21/08/2020
Wells Fargo Bank USD 42,858 1.50 22/04/2020 14/08/2020
Wells Fargo Bank USD 42,943 1.45 24/04/2020 29/01/2021
Wells Fargo Bank USD 4,175 1.30 29/04/2020 29/10/2020
Citibank N.A. USD 32,834 0.45 18/05/2020 20/07/2020
Citibank N.A. USD 5,089 0.45 18/05/2020 20/07/2020
Wells Fargo Bank USD 74,254 0.45 07/12/2020 06/12/2021
Total as of December 31, 2020 634,952

61

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 93,096 7 0.80 06/01/2020 06/01/2027
BCHIEL0717 UF 123,957 8 0.72 04/02/2020 04/02/2028
Subtotal UF 217,053
BONO AUD AUD 37,130 15 2.65 02/03/2020 02/03/2035
Subtotal Others currency 37,130
Total as of December 31, 2020 254,183

Subordinated bonds

During the year ended December 31, 2020, there were no subordinated bonds, issued.

As of June 30, 2021 and December 31, 2020, the Bank has had no principal and interest defaults on its debt instruments. Likewise, there have been no breaches of covenants and other commitments associated with the debt instruments issued.

62

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:

June December
2021 2020
MCh$ MCh$
Other Chilean obligations 218,382 191,258
Public sector obligations 321 455
Total 218,703 191,713
24. Provisions:
(a) At the end of each period, this item is composed as follows:
June December
2021 2020
MCh$ MCh$
Provisions for minimum dividends (*) 142,792 220,271
Provisions for personnel benefits and payroll expenses 93,129 111,243
Provisions for contingent loan risks 74,908 76,191
Provisions for contingencies:
Additional loan provisions (**) 410,252 320,252
Country risk provisions 8,587 5,446
Other provisions for contingencies 575 508
Total 730,243 733,911
(*) See Note No. 27 letter (c).
(**) As of June 30, 2021, Ch$90,000 million have been established for additional provisions (Ch$107,000 million in December 2020). See Note No. 24 letter (b).

63

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 period 2021 and 2020:
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, 2020 300,461 109,075 57,042 213,252 4,833 684,663
Provisions established 119,099 35,076 11,509 70,000 6,644 242,328
Provisions used (300,461 ) (59,930 ) - - - (360,391 )
Provisions released - - - - (17 ) (17 )
Balances as of June 30, 2020 119,099 84,221 68,551 283,252 11,460 566,583
Provisions established 101,172 47,877 7,640 37,000 (5,523 ) 188,166
Provisions used - (20,855 ) - - - (20,855 )
Provisions released - - - - 17 17
Balances as of December 31, 2020 220,271 111,243 76,191 320,252 5,954 733,911
Provisions established 142,792 56,213 - 90,000 3,208 292,213
Provisions used (220,271 ) (74,327 ) - - - (294,598 )
Provisions released - - (1,283 ) - - (1,283 )
Balances as of June 30, 2021 142,792 93,129 74,908 410,252 9,162 730,243
(c) Provisions for personnel benefits and payroll:
June December
2021 2020
MCh$ MCh$
Staff accrued vacation provision 35,462 33,993
Provisions for performance bonuses 32,320 43,941
Other personnel benefits provision 18,150 25,728
Staff severance indemnities 7,197 7,581
Total 93,129 111,243

64

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:
June June
2021 2020
MCh$ MCh$
Present value of the obligations at the beginning of the period 7,581 7,566
Increase in provision 219 212
Benefit paid (233 ) (453 )
Effect of change in actuarial factors (370 ) 91
Total 7,197 7,416
(ii) Net benefits expenses:
June June
2021 2020
MCh$ MCh$
(Decrease) Increase in provisions (110 ) 48
Interest cost of benefits obligations 329 164
Effect of change in actuarial factors (370 ) 91
Net benefit expenses (151 ) 303
(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:

June 31,
2021
December 31,
2020
% %
Discount rate 4.47 2.31
Salary increase rate 3.94 4.04
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 2021.

65

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:
June June
2021 2020
MCh$ MCh$
Balances as of January 1 43,941 51,051
Net provisions established 23,631 18,324
Provisions used (35,252 ) (40,722 )
Total 32,320 28,653
(f) Changes in staff accrued vacation provision:
June June
2021 2020
MCh$ MCh$
Balances as of January 1 33,993 27,609
Net provisions established 5,718 3,635
Provisions used (4,249 ) (2,508 )
Total 35,462 28,736
(g) Employee benefits share-based provision:

As of June 30, 2021 and 2020, the Bank and its subsidiaries do not have a stock-based compensation plan.

(h) Contingent loan provisions:

As of June 30, 2021 the Bank and its subsidiaries maintain contingent loan provisions by an amount of Ch$74,908 million (Ch$76,191 million at December 2020). See Note No. 26 letter (d).

66

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:

June December
2021 2020
MCh$ MCh$
Accounts and notes payable 288,268 273,143
Income received in advance (*) 60,612 68,907
Dividends payable 5,983 4,309
Other liabilities
Documents intermediated (**) 201,711 137,546
Cobranding 31,708 29,213
VAT debit 15,693 16,519
Securities unliquidated 4,634 2,725
Outstanding transactions 1,463 725
Insurance payments 606 1,802
Others 29,283 30,231
Total 639,961 565,120
(*) In relation to the Strategic Alliance Framework Agreement, on June 4, 2019, Banco de Chile received the payment from the Insurance Companies for an amount of Ch$149,061 million, which was recorded according to IFRS 15. The related income is recognized over time, depending on compliance with the associated performance obligation.
(**) This item mainly includes financing of simultaneous operations performed by subsidiary Banchile Corredores de Bolsa S.A.

67

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:

June December
2021 2020
MCh$ MCh$
Contingent loans
Guarantees and sureties 336,782 224,079
Confirmed foreign letters of credit 141,048 58,299
Issued letters of credit 391,295 343,663
Bank guarantees 2,183,091 2,214,370
Undrawn credit lines 7,905,881 7,650,382
Other credit commitments 70,965 107,707
Transactions on behalf of third parties
Documents in collections 101,433 157,671
Third-party resources managed by the Bank:
Financial assets managed on behalf of third parties 4,143 16,024
Other assets managed on behalf of third parties - -
Financial assets acquired on its own behalf 88,754 80,788
Other assets acquired on its own behalf - -
Custody of securities
Securities held in safe custody in the Bank and subsidiaries 2,409,060 2,023,313
Securities held in safe custody in other entities 18,104,483 18,467,801
Total 31,736,935 31,344,097

68

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 June 30, 2021 the Bank maintain provisions for judicial contingencies amounting to Ch$311 million (Ch$244 million as of December 2020), which are part of the item 'Provisions' in the Statement of Financial Position.

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

As of June 30, 2021
2021 2022 2023 2024 2025 Total
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Legal contingencies - 20 167 124 - 311
(b.2) Contingencies for significant lawsuits in courts:

As of June 30, 2021 and December 31, 2020 there are not significant lawsuits in court that affect or may affect these Interim Consolidated Financial Statements.

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NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

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

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

In compliance with Article No, 12 of Law No. 20,712, Banchile Administradora General de Fondos S.A., has designated Banco de Chile as the representative of the beneficiaries of the guarantees it has established, and in such role the Bank has issued bank guarantees totaling UF 4,109,200, maturing January 7, 2022 (UF 3,778,100, maturing on January 8, 2021 as of December 2020). The subsidiary took a policy with Mapfre Seguros Generales S.A. for the Real State Funds by a guaranteed amount of UF 759,700.

As of June 30, 2021 and December 31, 2020 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 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 Generales S.A., that matures April 22, 2022, whereby the Securities Exchange of the Santiago Stock Exchange was appointed as the subsidiary's creditor representative.

June December
2021 2020
Guarantees: MCh$ MCh$
Shares delivered to cover simultaneous forward sales transactions:
Santiago Securities Exchange, Stock Exchange 59,263 47,684
Electronic Chilean Securities Exchange, Stock Exchange 8,158 20,227
Fixed income securities to guarantee CCLV system:
Santiago Securities Exchange, Stock Exchange 10,000 10,000

Shares delivered to guarantee equity lending and short-selling:

Santiago Securities Exchange, Stock Exchange 4,568 2,858
Total 81,989 80,769

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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, 2022, 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 in the amount of UF 286,600 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 7, 2022.

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.

71

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 58, letter D of D.F.L. 251, as of June 30, 2021 the entity maintains two insurance policies with effect from April 15, 2021 to April 14, 2022 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:

June December
2021 2020
MCh$ MCh$
Undrawn credit lines 38,252 40,404
Bank guarantees provision 28,344 27,596
Guarantees and sureties provision 6,970 7,060
Letters of credit provision 1,289 1,074
Other credit commitments 53 57
Total 74,908 76,191
(e) By Exempt Resolution No. 270 dated October 30, 2014, the Superintendency of Securities and Insurance (current Commission for the Financial Market) imposed a fine of UF 50,000 to Banchile Corredores de Bolsa S.A. for violations of the second paragraph of article 53 of the Securities Market Law, said company filed a claim with the competent Civil Court requesting 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. The judgment indicated has been subject to cassation appeals filed by both parties, which are pending before the Illustrious Court of Appeals 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.

72

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued

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

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

As of June 30, 2021, 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, 2020), with no par value, subscribed and fully paid.

(ii) Shares:

The following table shows the changes in share from December 31, 2019 to June 30, 2021:

Total
Ordinary Shares
Total shares as of December 31, 2019 101,017,081,114
Total shares as of December 31, 2020 101,017,081,114
Total shares as of June 30, 2021 101,017,081,114
(b) Approval and payment of dividends:

At the Bank Ordinary Shareholders' Meeting held on March 25, 2021 it was approved the distribution and payment of dividend No. 209 of Ch$2.18053623438 per share of the Banco de Chile, with charge to the net distributable income for the year ended as of December 31, 2020. The dividends paid in the period 2021 amounted to Ch$220,271 million.

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 charge to the net distributable income for the year ended as of December 31, 2019. The dividends paid in the year 2020 amounted to Ch$350,538 million.

73

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 June 30, 2021 amounted to Ch$86,883 million.

As indicated, as of June 30, 2021, the amount of the net income determined in accordance with the preceding paragraph is equivalent to Ch$237,986 million (Ch$367,119 million as of December 31, 2020). Consequently, the Bank recorded a provision for minimum dividends under 'Provisions' as of June 30, for an amount of Ch$142,792 million (Ch$220,271 million in December 2020), 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).

74

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 June 30, 2021 and 2020 were determined as follows:

June June
2021 2020
Basic earnings per share:
Net profits attributable to ordinary equity holders of the bank (in million Chilean pesos) 324,869 248,585
Weighted average number of ordinary shares 101,017,081,114 101,017,081,114
Earning per shares (in Chilean pesos) 3.22 2.46
Diluted earnings per share:
Net profits attributable to ordinary equity holders of the bank (in million Chilean pesos) 324,869 248,585
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) 3.22 2.46

As of June 30, 2021 and 2020, 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 2021 it was made a credit to equity for Ch$82,373 million (charge to equity of Ch$45,119 million in 2020). The income tax effect presented a charge to equity of Ch$22,240 million (credit of Ch$12,182 million in June 2020).

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 2021, it was made a charge to equity for Ch$48,264 million (credit of Ch$5,862 million during the year 2020). The deferred tax effect meant a credit to equity of Ch$13,033 million (charge to equity of Ch$1,581 million in June 2020).

(f) Retained earnings from previous years:

During the year 2021, the Ordinary Shareholders Meeting of Banco de Chile agreed to deduct and withhold from the 2020 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, which occurred between November 2019 and November 2020, amounting to Ch$95,989 million. Additionally, the Board determined to withhold 40% of the distributable net income, which was equivalent to Ch$146,848 million.

75

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 Interim Consolidated Financial Statement, the interest and indexation income, excluding hedge results, are composed as follows:
June 2021 June 2020
Interest

UF

Indexation

Prepaid fees Total Interest

UF

Indexation

Prepaid fees Total
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Commercial loans 295,748 134,167 3,462 433,377 344,352 84,488 2,410 431,250
Consumer loans 212,733 1,560 2,897 217,190 289,043 866 3,030 292,939
Residential mortgage loans 137,160 207,531 1,757 346,448 136,837 124,023 3,344 264,204
Financial investment 7,452 5,774 - 13,226 18,239 3,826 - 22,065
Repurchase agreements 663 - - 663 861 - - 861
Loans to banks 2,877 - - 2,877 7,286 - - 7,286
Other interest and indexation revenue 3,501 652 - 4,153 6,884 1,558 - 8,442
Total 660,134 349,684 8,116 1,017,934 803,502 214,761 8,784 1,027,047

The amount of interest recognized on a received basis for impaired portfolio in the period 2021 amounts to Ch$1,482 million (Ch$1,844 million in June 2020).

(b) At the each period end, the stock of interest and UF indexation not recognized in incomes is the following:
June 2021 June 2020
Interest

UF

Indexation

Total Interest

UF

Indexation

Total
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$