5. Segment Reporting:

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

Retail: This segment focuses on individuals and small and medium-sized companies with annual sales up to 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 and money market operations:

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

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

Subsidiaries: Corresponds to companies and corporations controlled by the Bank, where income is obtained individually by the respective subsidiary. The companies that comprise this segment are:

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.

The financial information used to measure the performance of the Bank’s business segments is not necessarily comparable with similar information from other financial institutions because it is based on internal reporting policies. The accounting policies used to prepare the Bank’s operating segment information are similar to those described in Note 2, “Summary of Significant Accounting Policies”. The Bank obtains the majority of its income from: interest, revaluations and fees, discounted the credit cost and expenses. Management is mainly focused on these concepts in its evaluation of segment performance and decision-making regarding goals and allocation of resources for each unit individually. Although the results of the segments reconcile with those of the Bank at total level, this is not necessarily the case for all concepts on an individual basis, since the management is measured and controlled in individual form and additionally applies the following criteria:

The net interest margin of loans and deposits is measured on an individual transaction and individual client basis. For that purposes, it is considered the volume of each operation and its contribution margin, that at the same time corresponds to the difference between effective rate of the client and the internal transfer price established according to terms and currency of each operation.

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

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

The Bank did not enter into transactions with any particular customer or third party that collectively generated more than 10% of the Bank’s total income in 2016 and 2017.

Taxes are managed at the consolidated level and are not allocated to business segments.

	As of December 31, 2015
	Retail		Wholesale		Treasury		Subsidiaries (*)		Subtotal		Reclassifications and adjustments to conform IFRS			Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		Note	MCh$
Net interest income	840,451		355,783		27,942		(6,555	)	1,217,621		10,667			1,228,288
Net fees and commissions income	156,936		43,853		(2,163	)	116,145		314,771		(8,792	)		305,979
Other operating income	25,199		64,861		10,355		24,805		125,220		1,996			127,216

Total operating revenue	1,022,586		464,497		36,134		134,395		1,657,612		3,871		(1)	1,661,483
Provisions for loan losses	(229,669	)	(73,510	)	—		117		(303,062	)	56,840		(2)	(246,222	)
Depreciation and amortization	(21,310	)	(5,364	)	(267	)	(2,596	)	(29,537	)	(2,285	)	(3)	(31,822	)
Other operating expenses	(471,529	)	(138,638	)	(4,770	)	(93,021	)	(707,958	)	13,502		(4)	(694,456	)
Income attributable to associates	2,521		716		34		401		3,672		(429	)		3,243

Income before income taxes	302,599		247,701		31,131		39,296		620,727		71,499			692,226
Income taxes									(61,730	)	(20,591	)	(5)	(82,321	)

Income after income taxes									558,997		50,908			609,905


Assets	14,350,327		11,926,049		4,383,945		520,385		31,180,706		(252,302	)		30,928,404
Current and deferred taxes									223,019		(93,827	)		129,192

Total assets									31,403,725		(346,129	)	(6)	31,057,596


Liabilities	9,726,286		9,934,304		8,605,278		373,056		28,638,924		(781,367	)		27,857,557
Current and deferred taxes									24,714		—			24,714

Total liabilities									28,663,638		(781,367	)	(7)	27,882,271

(*) On December 30, 2016, the dissolution and merger of the subsidiary Promarket S.A. was announced. As such, and for the purpose of adequate comparison in this disclosure, the amounts for the retail segment for the year 2015 have been restated.

Reclassifications and adjustments to conform IFRS

(1)

The total effect due to the elimination adjustments to conform the total operating revenue is MCh$(11,257). The total effect of IFRS adjustments is MCh$15,128 which mainly stems from the reclassification of interest on repurchase agreements and suspended interest recognition.

(2)

The total effect relates to IFRS adjustments of MCh$56,840, which mainly stems from differing allowances for loan losses.

(3)

The total effect relates to IFRS adjustments of MCh$(2,285), which stems from the amortization of intangibles and depreciation of property and equipment acquired through business combinations.

(4)

The total effect due to the elimination adjustments to conform other operating expenses is MCh$11,257. The total effect of IFRS adjustments is MCh$2,245, which represents reversal of write-offs of assets received in lieu of payments.

(5)

The total effect relates to IFRS adjustments of MCh$(20,591), which stems from deferred taxes.

(6)

The total effect due to the elimination adjustments to conform the consolidated financial position data in assets is MCh$(147,013). The total effect of IFRS adjustments in assets is MCh$(199,116), which mainly stems from deviating allowances for loan losses, the acquisition of Citibank Chile and deferred taxes effects.

(7)

The total effect due to the elimination adjustments to conform the consolidated financial position data in liabilities is MCh$(147,013). The total effect of IFRS adjustments in liabilities is MCh$(634,354), which mainly stems from provision for minimum dividends and differing allowances for loan losses.

	As of December 31, 2016
	Retail		Wholesale		Treasury		Subsidiaries		Subtotal		Reclassifications and adjustments to conform IFRS			Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		Note	MCh$
Net interest income	873,669		346,829		4,207		(4,337	)	1,220,368		6,365			1,226,733
Net fees and commissions income	170,529		42,202		(2,473	)	121,383		331,641		(10,370	)		321,271
Other operating income	93,135		33,322		44,754		23,923		195,134		(25,579	)		169,555

Total operating revenue	1,137,333		422,353		46,488		140,969		1,747,143		(29,584	)	(1)	1,717,559
Provisions for loan losses	(301,491	)	(8,243	)	—		(1	)	(309,735	)	50,472		(2)	(259,263	)
Depreciation and amortization	(25,229	)	(4,912	)	(172	)	(2,976	)	(33,289	)	(2,286	)	(3)	(35,575	)
Other operating expenses	(504,041	)	(152,859	)	(5,596	)	(104,847	)	(767,343	)	15,871		(4)	(751,472	)
Income attributable to associates	3,078		914		79		442		4,513		(499	)		4,014

Income before income taxes	309,650		257,253		40,799		33,587		641,289		33,974			675,263
Income taxes									(89,040	)	(11,172	)	(5)	(100,212	)

Income after income taxes									552,249		22,802			575,051


Assets	15,198,634		11,526,685		4,121,333		535,727		31,382,379		(208,655	)		31,173,724
Current and deferred taxes									288,370		(104,790	)		183,580

Total assets									31,670,749		(313,445	)	(6)	31,357,304


Liabilities	10,234,712		10,277,326		7,880,847		390,453		28,783,338		(733,708	)		28,049,630
Current and deferred taxes									—		—			—

Total liabilities									28,783,338		(733,708	)	(7)	28,049,630

Reclassifications and adjustments to conform IFRS

(1)

The total effect due to the elimination adjustments to conform the total operating revenue is MCh$(12,349). The total effect of IFRS adjustments is MCh$(17,235) which mainly stems from the reclassification of interest on repurchase agreements and suspended interest recognition.

(2)

The total effect relates to IFRS adjustments of MCh$50,472, which mainly stems from differing allowances for loan losses.

(3)

The total effect relates to IFRS adjustments of MCh$(2,286), which stems from the amortization of intangibles and depreciation of property and equipment acquired through business combinations.

(4)

The total effect due to the elimination adjustments to conform other operating expenses is MCh$12,349. The total effect of IFRS adjustments is MCh$3,522, which represents reversal of write-offs of assets received in lieu of payments.

(5)

The total effect relates to IFRS adjustments of MCh$(11,172), which stems from deferred taxes.

(6)

The total effect due to the elimination adjustments to conform the consolidated financial position data in assets is MCh$(137,201). The total effect of IFRS adjustments in assets is MCh$(176,244), which mainly stems from deviating allowances for loan losses, the acquisition of Citibank Chile and deferred taxes effects.

(7)

The total effect due to the elimination adjustments to conform the consolidated financial position data in liabilities is MCh$(137,201). The total effect of IFRS adjustments in liabilities is MCh$(596,507), which mainly stems from provision for minimum dividends and differing allowances for loan losses.

	As of December 31, 2017
	Retail		Wholesale		Treasury		Subsidiaries		Subtotal		Reclassifications and adjustments to conform IFRS			Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		Note	MCh$
Net interest income	914,395		321,178		(3,772	)	(4,336	)	1,227,465		7,230			1,234,695
Net fees and commissions income	184,045		43,447		(4,306	)	135,987		359,173		(11,499	)		347,674
Other operating income	36,003		35,201		38,931		26,884		137,019		(31,846	)		105,173

Total operating revenue	1,134,443		399,826		30,853		158,535		1,723,657		(36,115	)	(1)	1,687,542
Provisions for loan losses	(256,262	)	21,415		—		(135	)	(234,982	)	13,727		(2)	(221,255	)
Depreciation and amortization	(27,676	)	(4,540	)	(141	)	(2,894	)	(35,251	)	(2,285	)	(3)	(37,536	)
Other operating expenses	(507,913	)	(153,218	)	(5,022	)	(102,281	)	(768,434	)	21,614		(4)	(746,820	)
Income attributable to associates	4,006		1,339		161		551		6,057		(546	)		5,511

Income before income taxes	346,598		264,822		25,851		53,776		691,047		(3,605	)		687,442
Income taxes									(115,034	)	(327	)	(5)	(115,361	)

Income after income taxes									576,013		(3,932	)		572,081


Assets	16,099,926		10,558,278		5,469,829		637,860		32,765,893		(388,753	)		32,377,140
Current and deferred taxes									290,432		(106,135	)		184,297

Total assets									33,056,325		(494,888	)	(6)	32,561,437


Liabilities	10,380,250		10,272,607		8,815,056		479,244		29,947,157		(934,521	)		29,012,636
Current and deferred taxes									3,453		—			3,453

Total liabilities									29,950,610		(934,521	)	(7)	29,016,089

Reclassifications and adjustments to conform IFRS

(1)

The total effect due to the elimination adjustments to conform the total operating revenue is MCh$(14,387). The total effect of IFRS adjustments is MCh$(21,728) which mainly stems from the reclassification of interest on repurchase agreements and suspended interest recognition.

(2)

The total effect relates to IFRS adjustments of MCh$13,727, which mainly stems from differing allowances for loan losses.

(3)

The total effect relates to IFRS adjustments of MCh$(2,285), which stems from the amortization of intangibles and depreciation of property and equipment acquired through business combinations.

(4)

The total effect due to the elimination adjustments to conform other operating expenses is MCh$14,387. The total effect of IFRS adjustments is MCh$7,227, which represents reversal of write-offs of assets received in lieu of payments.

(5)

The total effect relates to IFRS adjustments of MCh$(327), which stems from deferred taxes.

(6)

The total effect due to the elimination adjustments to conform the consolidated financial position data in assets is MCh$(232,137). The total effect of IFRS adjustments in assets is MCh$(262,751), which mainly stems from deviating allowances for loan losses, the acquisition of Citibank Chile and deferred taxes effects.

(7)

The total effect due to the elimination adjustments to conform the consolidated financial position data in liabilities is MCh$(232,137). The total effect of IFRS adjustments in liabilities is MCh$(702,384), which mainly stems from provision for minimum dividends and differing allowances for loan losses.