SEC Filing | Banco Santander Chile

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FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

Commission File Number: 001-14554

Banco Santander Chile

Santander Chile Bank

(Translation of Registrant’s Name into English)

Bandera 140

Santiago, Chile

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F

Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes

Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

SIGNATURE

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

	BANCO SANTANDER-CHILE

	By:	/s/ Cristian Florence
	Name:	Cristian Florence
	Title:	General Counsel

Date: May 24, 2017

Exhibit 99.1

CONTENT

Consolidated Interim Financial Statements

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION	3
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF INCOME FOR THE PERIOD	4
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME FOR THE PERIOD	5
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD	6
UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR THE PERIOD	7

Notes to the Unaudited Consolidated Interim Financial Statements

NOTE 01 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	7
NOTE 02 SIGNIFICANT EVENTS	37
NOTE 03 REPORTING SEGMENTS	38
NOTE 04 CASH AND CASH EQUIVALENTS	41
NOTE 05 TRADING INVESTMENTS	42
NOTE 06 DERIVATIVE FINANCIAL INSTRUMENTS, AND HEDGE ACCOUNTING	43
NOTE 07 INTERBANK LOANS	50
NOTE 08 LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS	51
NOTE 09 AVAILABLE FOR SALE INVESTMENTS	58
NOTE 10 INTANGIBLE ASSETS	59
NOTE 11 PROPERTY, PLANT AND EQUIPMENT	61
NOTE 12 CURRENT AND DEFERRED TAXES	64
NOTE 13 OTHER ASSETS	67
NOTE 14 TIME DEPOSITS AND OTHER TIME LIABILITIES	68
NOTE 15 ISSUED DEBT INSTRUMENTS, AND OTHER FINANCIAL LIABILITIES	69
NOTE 16 MATURITY OF FINANCIAL ASSETS AND LIABILITIES	76
NOTE 17 OTHER LIABILITIES	78
NOTE 18 CONTINGENCIES AND COMMITMENTS	79
NOTE 19 EQUITY	82
NOTE 20 CAPITAL REQUIREMENTS (BASEL)	85
NOTE 21 NON-CONTROLLING INTEREST	87
NOTE 22 INTEREST INCOME	90
NOTE 23 FEES AND COMMISSIONS	92
NOTE 24 NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS	93
NOTE 25 NET FOREIGN EXCHANGE INCOME	93
NOTE 26 PROVISION FOR LOAN LOSSES	94
NOTE 27 PERSONNEL SALARIES AND EXPENSES	96
NOTE 28 ADMINISTRATIVE EXPENSES	97
NOTE 29 DEPRECIATION, AMORTIZATION AND IMPAIRMENT	98
NOTE 30 OTHER OPERATING INCOME AND EXPENSES	99
NOTE 31 TRANSACTIONS WITH RELATED PARTIES	100
NOTE 32 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES	104
NOTE 33 SUBSEQUENT EVENTS	110

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

		As of March 31,			As of December 31,
		2017			2016
	NOTE	MCh$			MCh$

ASSETS
Cash and deposits in banks	4		1,828,411			2,279,389
Cash items in process of collection	4		800,901			495,283
Trading investments	5		387,190			396,987
Investments under resale agreements			-			6,736
Financial derivative contracts	6		2,500,630			2,500,782
Interbank loans, net	7		351,880			272,635
Loans and accounts receivables from customers, net	8		26,294,766			26,113,485
Available for sale investments	9		2,807,974			3,388,906
Held to maturity investments			-			-
Investments in associates and other companies			24,501			23,780
Intangible assets	10		59,118			58,085
Property, plant, and equipment	11		249,485			257,379
Current taxes	12		-			-
Deferred taxes	12		368,276			372,699
Other assets	13		1,035,406			840,499
TOTAL ASSETS			36,708,538			37,006,645
LIABILITIES
Deposits and other demand liabilities	14		7,408,618			7,539,315
Cash items in process of being cleared	4		602,307			288,473
Obligations under repurchase agreements			205,151			212,437
Time deposits and other time liabilities	14		12,700,210			13,151,709
Financial derivative contracts	6		2,293,744			2,292,161
Interbank borrowing			1,491,687			1,916,368
Issued debt instruments	15		7,411,645			7,326,372
Other financial liabilities	15		238,331			240,016
Current taxes	12		24,847			29,294
Deferred taxes	12		11,623			7,686
Provisions			324,584			308,982
Other liabilities	17		997,313			795,785
TOTAL LIABILITIES			33,710,060			34,108,598
EQUITY

Attributable to the equity holders of the Bank			2,968,491			2,868,706
Capital	19		891,303			891,303
Reserves	19		1,640,112			1,640,112
Valuation adjustments	19		6,763			6,640
Retained earnings			430,313			330,651
Retained earnings from prior years			472,351			-
Income for the period			142,375			472.351
Minus: Provision for mandatory dividends			(184,413	)		(141.700	)
Non-controlling interest	21		29,987			29,341
TOTAL EQUITY			2,998,478			2,898,047

TOTAL LIABILITIES AND EQUITY			36,708,538			37,006,645

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF INCOME FOR THE PERIOD

For the periods ended

		March 31,
		2017			2016
	NOTE	MCh$			MCh$

OPERATING INCOME

Interest income	22		523,968			518,729
Interest expense	22		(205,393	)		(205,856	)

Net interest income			318,575			312,873

Fee and commission income	23		115,295			104,508
Fee and commission expense	23		(42,472	)		(41,517	)

Net fee and commission income			72,823			62,991

Net income (expense) from financial operations	24		1,276			(179,699	)
Net foreign exchange gain	25		35,456			213,961
Other operating income	30		13,019			5,248

Net operating profit before provision for loan losses			441,149			415,374

Provision for loan losses	26		(73,862	)		(77,926	)

NET OPERATING PROFIT			367,287			337,448

Personnel salaries and expenses	27		(92,676	)		(92,967	)
Administrative expenses	28		(58,482	)		(58,694	)
Depreciation and amortization	29		(17,622	)		(14,345	)
Impairment of property, plant, and equipment	29		(184	)		(37	)
Other operating expenses	30		(18,817	)		(16,234	)

Total operating expenses			(187,781	)		(182,277	)

OPERATING INCOME			179,506			155,171

Income from investments in associates and other companies			720			531

Income before tax			180,226			155,702

Income tax expense	12		(37,208	)		(29,662	)

NET INCOME FOR THE PERIOD			143,018			126,040

Attributable to:
Equity holders of the Bank			142,375			125,439
Non-controlling interest	21		643			601
Earnings per share attributable to
Equity holders of the Bank:
(expressed in Chilean pesos)
Basic earnings	19		0.756			0.666
Diluted earnings	19		0.756			0.666

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF OTHER COMPREHENSIVE INCOME

For the periods ended

		March 31
		2017			2016
	NOTE	MCh$			MCh$

NET INCOME FOR THE PERIOD			143,018			126,040

OTHER COMPREHENSIVE INCOME - ITEMS WHICH MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS

Available for sale investments	9		14,366			20,518
Cash flow hedge	19		(14,006	)		(21,425	)

Other comprehensive income which may be reclassified subsequently to profit or loss, before tax a la renta			360			(907	)

Income tax related to items which may be reclassified subsequently to profit or loss	12		(236	)		194

Other comprehensive income for the period which may be reclassified subsequently to profit or loss, net of tax			124			(713	)

OTHER COMPREHENSIVE INCOME THAT WILL NOT BE RECASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS			-			-

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD			143,142			125,327

Attributable to:
Equity holders of the Bank			142,496			124,625
Non-controlling interest	22		646			702

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

For the periods ended March 31, 2017 and 2016

			RESERVES					VALUATION ADJUSTMENTS									RETAINED EARNINGS
	Capital		Reserves and other retained earnings		Effects of merger of companies under common control			Available for sale investments			Cash flow hedge			Income tax effects			Retained earnings of prior years		Income for the period			Provision for mandatory dividends			Total attributable to equity holders of the Bank			Non- controlling interest			Total Equity
	MCh$		MCh$		MCh$			MCh$			MCh$			MCh$			MCh$		MCh$			MCh$			MCh$			MCh$			MCh$

Equity as of December 31, 2015		891,303		1,530,117		(2,224	)		(6,965	)		8,626			(373	)		-		448,878			(134,663	)		2,734,699			30,181			2,764,880
Distribution of income from previous period		-		-		-			-			-			-			448,878		(448,878	)		-			-			-			-
Equity as of January 1, 2016		891,303		1,530,117		(2,224	)		(6,965	)		8,626			(373	)		448,878		-			(134,663	)		2,734,699			30,181			2,764,880
Increase or decrease of capital and reserves		-		-		-			-			-			-			-		-			-			-			-			-
Dividends distributions/ withdrawals made		-		-		-			-			-			-			-		-			-			-			(327	)		(327	)
Transfer of retained earnings to reserves		-		-		-			-			-			-			-		-			-			-			-			-
Provision for mandatory dividends		-		-		-			-			-			-			-		-			(37,632	)		(37,632	)		-			(37,632	)
Subtotals		-		-		-			-			-			-			-		-			(37,632	)		(37,632	)		(327	)		(37,959	)
Other comprehensive income		-		-		-			20,387			(21,425	)		224			-		-			-			(814	)		101			(713	)
Income for the year		-		-		-			-			-			-			-		125,439			-			125,439			601			126,040
Subtotals		-		-		-			20,387			(21,425	)		224			-		125,439			-			124,625			702			125,327
Equity as of March 31, 2016		891,303		1,530,117		(2,224	)		13,422			(12,799	)		(149	)		448,878		125,439			(172,295	)		2,821,692			30,556			2,852,248

Equity as of December 31, 2016		891,303		1,642,336		(2,224	)		6,449			2,288			(2,097	)		-		472,351			(141,700	)		2,868,706			29,341			2,898,047
Distribution of income from previous period		-		-		-			-			-			-			472,351		(472,351	)		-			-			-			-
Equity as of January 1, 2017		891,303		1,642,336		(2,224	)		6,449			2,288			(2,097	)		472,351		-			(141,700	)		2,868,706			29,341			2,898,047
Increase or decrease of capital and reserves		-		-		-			-			-			-			-		-			-			-			-			-
Dividends distributions/ withdrawals made		-		-		-			-			-			-			-		-			-			-			-			-
Transfer of retained earnings to reserves		-		-		-			-			-			-			-		-			-			-			-			-
Provision for mandatory dividends		-		-		-			-			-			-			-		-			(42,713	)		(42,713	)		-			(42,713	)
Subtotals		-		-		-			-			-			-			-		-			(42,713	)		(42,713	)		-			(42,713	)
Other comprehensive income		-		-		-			14,346			(14,006	)		(217	)		-		-			-			123			3			126
Income for the year		-		-		-			-			-			-			-		142,375			-			142,375			643			143,018
Subtotals		-		-		-			14,346			(14,006	)		(217	)		-		142,375			-			142,498			646			143,144
Equity as of March 31, 2017		891,303		1,642,336		(2,224	)		20,795			(11,718	)		(2,314	)		472,351		142,375			(184,413	)		2,968,491			29,987			2,998,478

	Total attributable to equity holders of the Bank		Allocated to reserves		Allocated to dividends		Percentage distributed		Number of		Dividend per share
Period	MCh$		MCh$		MCh$		%		shares		(in pesos)

Year 2015 (Shareholders Meeting April 2016)		448,878		112,219		336,659		75		188,446,126,794		1.787

Year 2014 (Shareholders Meeting April 2015)		550,331		220,132		330,199		60		188,446,126,794		1.752

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

For the periods ended

		For the three months ended March 31,
		2017			2016
	NOTE	MCh$			MCh$

A – CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME FOR THE YEAR			143.018			126,040
Debits (credits) to income that do not represent cash flows			(204.635	)		(318,390	)
Depreciation and amortization	29		17.622			14,345
Impairments of property, plant, and equipment	11		184			37
Provision for loan losses	26		93.180			95,781
Mark to market of trading investments			117.756			(2,241	)
Income from investments in associates and other companies			(720	)		(531	)
Net gain on sale of assets received in lieu of payment	30		(6.342	)		(4,193	)
Provision on assets received in lieu of payment			1.771			2,573
Net gain on sale of property, plant, and equipment	30		(17	)		(320	)
Charge off of assets received in lieu of payment	30		5.520			2,615
Net interest income	22		(318.575	)		(312,873	)
Net fee and commission income	23		(72.823	)		(62,991	)
Other debits (credits) to income that do not represent cash flows			(3.005	)		(60,424	)
Changes in deferred taxes	12		(39.180	)		9,832
Increase/decrease in operating assets and liabilities			(349.883	)		(437,447	)
(Increase) decrease of loans and accounts receivables from customers, net			(1.406.572	)		(374,761	)
(Increase) decrease of financial investments			(353.610	)		(472,872	)
Decrease (increase) due to resale agreements (assets)			-			2,463
Decrease (increase) of interbank loans			(319.962	)		(21,035	)
(Increase) decrease of assets received or awarded in lieu of payment			17.792			(1,166	)
Increase (decrease) of debits in customers checking accounts			439.209			(283,946	)
Increase (decrease) of time deposits and other time liabilities			(22.689	)		540,132
Increase (decrease) of obligations with domestic banks			5.400			9,192
Increase (decrease) of other demand liabilities or time obligations			(109.863	)		7,096
Increase (decrease) of obligations with foreign banks			169.535			9,176
Increase (decrease) of obligations with Central Bank of Chile			(14	)		16
Increase (decrease) of obligations under repurchase agreements			153.728			(92,266	)
Increase (decrease) in other financial liabilities			13.443			4,361
Net increase of other assets and liabilities			307.764			(370,345	)
Redemption of letters of credit			8.576			(4,956	)
Redemption of mortgage bonds and payments of interest			(2.553	)		(2,503	)
Senior bond issuances			266.616			774,362
Redemption of senior bonds and payments of interest			91.919			(564,597	)
Interest received			523.968			519,356
Interest paid			(205.393	)		(206,276	)
Dividends received from investments in other companies			-			28,131
Fees and commissions received	23		115.295			104,508
Fees and commissions paid	23		(42.472	)		(41,517	)
Total cash flow provided by (used in) operating activities			(411.500	)		(629,797	)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

UNAUDITED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

For the periods ended

		For the three months ended March 31,
		2017			2016
	NOTE	MCh$			MCh$

B – CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchases of property, plant, and equipment	11		(4,440	)		(3,821	)
Sales of property, plant, and equipment			198			146
Purchases of investments in associates and other companies			-			-
Purchases of intangible assets	10		(6,252	)		(5,035	)
Total cash flow provided by (used in) investment activities			(10,494	)		(8,710	)

C – CASH FLOW FROM FINANCING ACTIVITIES:
From shareholder´s financing activities			(8,152	)		(5,251	)
Redemption of subordinated bonds and payments of interest			(8,152	)		(5,251	)
Dividends paid			-			-
From non-controlling interest financing activities			-			-
Dividends and/or withdrawals paid			-			-
Total cash flow used in financing activities			(8,152	)		(5,251	)

D – NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE PERIOD			(430,146	)		(643,758	)

E – EFFECTS OF FOREIGN EXCHANGE RATE FLUCTUATIONS			(29,048	)		(96,826	)

F – INITIAL BALANCE OF CASH AND CASH EQUIVALENTS			2,486,199			2,327,170

FINAL BALANCE OF CASH AND CASH EQUIVALENTS	4		2,027,005			1,586,586

		For the three months ended March 31,
Reconciliation of provisions for the Consolidated Interim Statements		2017			2016
of Cash Flows for the periods		MCh$			MCh$

Provision for loan losses for cash flow purposes			93,180			95,781
Recovery of loans previously charged off			(19,318	)		(17,855	)
Provision for loan losses - net	26		73,862			77,926

					Changes other than cash
Reconciliation of liabilities arising from financing activities	December, 31 2016 MCh$		Cash Flow MCh$		Acquisition MCh$		Foreign Currency Movement MCh$		UF Movement MCh$		Fair Value Changes MCh$		March, 31 2017 MCh$
Subordinated Bonds		759,665		8,152		-		-		11,054		-		762,567
Dividends paid		-		-		-		-		-		-		-
Other		-		-		-		-		-		-		-
Total liabilities from financing activities		759,665		8,152		-		-		11,054		-		762,567

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CORPORATE INFORMATION

Banco Santander Chile is a banking corporation (limited company) operating under the laws of the Republic of Chile, headquartered at Bandera N°140, Santiago. The corporation provides a broad range of general banking services to its customers, ranging from individuals to major corporations. Banco Santander Chile and its subsidiaries (collectively referred to herein as the “Bank” or “Banco Santander Chile”) offers commercial and consumer banking services, including (but not limited to) factoring, collection, leasing, securities and insurance brokering, mutual and investment fund management, and investment banking.

Banco Santander Spain controls Banco Santander Chile through its holdings in Teatinos Siglo XXI Inversiones Ltda. and Santander Chile Holding S.A., which are controlled subsidiaries of Banco Santander Spain. As of March 31, 2017 Banco Santander Spain owns or controls directly and indirectly 99.5% of Santander Chile Holding S.A. and 100% of Teatinos Siglo XXI Inversiones Ltda. This gives Banco Santander Spain control over 67.18% of the Bank’s shares.

a) Basis of preparation

These Unaudited Consolidated Interim Financial Statements have been prepared in accordance with the Compendium of Accounting Standards issued by the Superintendency of Banks and Financial Institutions (SBIF), the Chilean regulatory agency. Article 15 of the General Banking Law states that banks must apply accounting standards established by SBIF. For those issues not covered by the SBIF, the Bank must apply generally accepted standards issued by the Colegio de Contadores de Chile A.G (Association of Chilean Accountants), which conform with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). In the event of discrepancies between the IFRS and accounting standards issued by the SBIF (Compendium of Accounting Standards and Instructions), the latter shall prevail.

For purposes of these financial statements the Bank uses certain terms and conventions. References to “US$”, “U.S. dollars” and “dollars” are to United States dollars, references to “EUR” are to European Economic Community Euro, references to “CNY” are to Chinese Yuan, references to “CHF” are to Swiss franc, references to “Chilean pesos”, “pesos” or “Ch$” are to Chilean pesos, and references to “UF” are to Unidades de Fomento. The UF is an inflation-indexed Chilean monetary unit with a value in Chilean pesos that changes daily to reflect changes in the official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the Chilean National Institute of Statistics) for the previous month.

The Notes to the Unaudited Consolidated Interim Financial Statements contain additional information to support the figures submitted in the Unaudited Consolidated Interim Statement of Financial Position, Unaudited Consolidated Interim Statement of Income, Unaudited Consolidated Interim Statement of Comprehensive Income, Unaudited Consolidated Interim Statement of Changes in Equity and Unaudited Consolidated Interim Statement of Cash Flows for the period. These contain narrative descriptions and details of these statements in a clear, relevant, reliable and comparable manner.

b) Basis of preparation for the Unaudited Consolidated Interim Financial Statements

The Unaudited Consolidated Interim Financial Statements as of March 31, 2017 and 2016 and December 31, 2016 and for the three-month periods ended March 31, 2016 and 2015, incorporate the financial statements of the Bank entities over which the Bank has control (including structured entities); and includes the adjustments, reclassifications and eliminations needed to comply with the accounting and valuation criteria established by IFRS. Control is achieved when the Bank:

has power over the investee;

II.

is exposed, or has rights, to variable returns from its involvement with the investee; and

III.

has the ability to use its power to affect its returns.

The Bank reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Bank has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities over the investee unilaterally. The Bank considers all relevant facts and circumstances in assessing whether or not the Bank’s voting rights in an investee are sufficient to give it power, including:

The size of the Bank’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

The potential voting rights held by the Bank, other vote holders or other parties;

The rights arising from other agreements; and

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

any additional facts and circumstances that indicate that the Bank has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Unaudited Consolidated Interim Statement of Income and in the Unaudited Consolidated Interim Financial Statementof Comprehensive Income from the date the Bank gains control until the date when the Bank ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Bank and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interests even if this results in the non-controlling interests having a deficit in certain circumstances.

When necessary, adjustments are made to the financial statements of the subsidiaries to ensure their accounting policies are consistent with the Bank’s accounting policies. All intragroup assets, liabilities, equity, income, expenses and cash flows relating to transactions between consolidated entities are eliminated in full on consolidation.

Changes in the consolidated entities ownership interests in subsidiaries that do not result in a loss of control over the subsidiaries are accounted for as equity transactions. The carrying values of the Bank’s equity and the non-controlling interests’ equity are adjusted to reflect the changes to their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Bank.

In addition, third parties’ shares in the Bank’s consolidated equity are presented as “Non-controlling interests” in the Unaudited Consolidated Interim Statement of Changes in Equity. Their share in the income for the year is presented as “Attributable to non-controlling interest” in the Unaudited Consolidated Interim Statement of Income.

The following companies are considered entities controlled by the Bank and are therefore within the scope of consolidation:

Entities controlled by the Bank through participation in equity

			Percent ownership share
		Place of	As of March 31,						As of December 31,						As of March 31,
		Incorporation	2017						2016						2016
		and	Direct		Indirect		Total		Direct		Indirect		Total		Direct		Indirect		Total
Name of the Subsidiary	Main Activity	operation	%		%		%		%		%		%		%		%		%

Santander Corredora de Seguros Limitada	Insurance brokerage	Santiago, Chile		99.75		0.01		99.76		99.75		0.01		99.76		99.75		0.01		99.76
Santander Corredores de Bolsa Limitada	Financial instruments brokerage	Santiago, Chile		50.59		0.41		51.00		50.59		0.41		51.00		50.59		0.41		51.00
Santander Agente de Valores Limitada	Securities brokerage	Santiago, Chile		99.03		-		99.03		99.03		-		99.03		99.03		-		99.03
Santander S.A. Sociedad Securitizadora	Purchase of credits and issuance of debt instruments	Santiago, Chile		99.64		-		99.64		99.64		-		99.64		99.64		-		99.64

The details of non-controlling interest in all the subsidiaries can be seen in Note 21 – Non-controlling interest.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

ii.

Entities controlled by the Bank through other considerations

The following companies have been consolidated as of March 31, 2017 and 2016 and as of December 31, 2016 based on the determination that the Bank has control as previously defined above and in accordance with IFRS 10, Consolidated Financial Statements:

Santander Gestión de Recaudación y Cobranza Limitada (collection services)

Bansa Santander S.A. (management of repossessed assets and leasing of properties)

iii.

Associates

An associate is an entity over which the Bank has significant influence. Significant influence, in this case, is defined as the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate.

The following companies are considered “Associates” in which the Bank accounts for its participation using the equity method:

			Percentage of ownership share
		Place of Incorporation	As of March 31		As of December 31,		As of March 31,
		and	2017		2016		2016
Associates	Main activity	operation	%		%		%
Redbanc S.A.	ATM services	Santiago, Chile		33.43		33.43		33.43
Transbank S.A.	Debit and credit card services	Santiago, Chile		25.00		25.00		25.00
Centro de Compensación Automatizado	Electronic fund transfer and compensation services	Santiago, Chile		33.33		33.33		33.33
Sociedad Interbancaria de Depósito de Valores S.A.	Repository of publically offered securities	Santiago, Chile		29.29		29.29		29.29
Cámara de Compensación de Pagos de Alto Valor S.A.	Payments clearing	Santiago, Chile		14.93		14.93		14.23
Administrador Financiero del Transantiago S.A.	Administration of boarding passes to public transportation	Santiago, Chile		20.00		20.00		20.00
Sociedad Nexus S.A.	Credit card processor	Santiago, Chile		12.90		12.90		12.90
Servicios de Infraestructura de Mercado OTC S.A.	Administration of the infrastructure for the financial market of derivative instruments	Santiago, Chile		12.07		12.07		11.11

In the case of Sociedad Nexus S.A. and Cámara Compensación de Pagos Alto Valor S.A., Banco Santander Chile has a representative on the Board of Directors. As per the definition of associates, the Bank has concluded that it exerts significant influence over those entities.

Servicios de Infraestructura de Mercado OTC S.A. is considered an associate due to the Bank’s executives being actively involved in the management of the company, including the organization and structuring of this company from the point of incorporation, therefore exercising significant influence over this company.

During the third quarter of 2016 a transaction took place through which Deutsche Bank ceded to Banco Santander a portion of its holding in the companies "Sociedad Operadora de la Cámara de Compensación de pagos de Alto Valor SA" and "Servicios de Infraestructura de Mercado OTC S.A." with which the Bank's share has increased to 14.84% and 11.93% respectively.

Finally, during the last quarter of 2016 a transaction took place through which Banco Penta ceded to Banco Santander a portion of its interest in the companies "Sociedad Operadora de la Cámara de Compensación de pagos de Alto Valor SA" and " Servicios de Infraestructura de Mercado OTC S.A." with which the participation at the end of last year of the Bank has increased to 14.93% and 12.07% respectively.

At the Extraordinary Shareholders' Meeting of Transbank S.A. Held on April 21, 2016, it was agreed to increase the capital of the company by capitalizing the accumulated profits, through the issuance of shares released for payment, and placement of payment shares for approximately $ 4,000 million. Banco Santander Chile participated proportionally to its participation (25%), reason why it subscribed and paid shares for approximately $ 1,000 million.

iv.

Share or rights in other companies

Such entities represent those over which the Bank has no control or significant influences and are presented in this category. These holdings are shown at acquisition value less impairment, if any.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Non-controlling interest

Non-controlling interest represents the portion of net income and net assets which the Bank does not own, either directly or indirectly. It is presented as “Attributable to non-controlling interest” separately in the Unaudited Consolidated Interim Statement of Income, and separately from shareholders’ equity in the Unaudited Consolidated Interim Statement of Financial Position.

In the case of entities controlled by the Bank through other considerations, income and equity are presented in full as non-controlling interest, since the Bank controls them, but does not have any ownership expressed as a percentage.

Reporting segments

Operating segments with similar economic characteristics often exhibit similar long-term financial performance. Two or more segments can be combined only if aggregation is consistent with International Financial Reporting Standard 8 “Operating Segments” (IFRS 8) and the segments have similar economic characteristics and are similar in each of the following respects:

the nature of the products and services;

ii.

the nature of the production processes;

iii.

the type or class of customers that use their products and services;

iv.

the methods used to distribute their products or services; and

if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.

The Bank reports separately on each operating segment that exceeds any of the following quantitative thresholds:

its reported revenue, from both external customers and intersegment sales or transfers, is 10% or more of the combined internal and external revenue of all the operating segments.

ii.

the absolute amount of its reported profit or loss is 10% or more of the greater in absolute amount of: (i) the combined reported profit of all the operating segments that did not report a loss; (ii) the combined reported loss of all the operating segments that reported a loss.

iii.

its assets represent 10% or more of the combined assets of all the operating segments.

Operating segments that do not meet any of the quantitative threshold may be treated as segments to be reported, in which case the information must be disclosed separately if management believes it could be useful for the users of the Unaudited Consolidated Interim Financial Statements.

Information about other business activities of the segments not separately reported is combined and disclosed in the “Other segments” category.

According to the information presented, the Bank’s segments were selected based on an operating segment being a component of an entity:

that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses from transactions with other components of the same entity);

ii.

whose operating results are regularly reviewed by the entity’s chief executive officer, who makes decisions about resources allocated to the segment and assess its performance; and

iii.

for which discrete financial information is available.

Functional and presentation currency

According to IAS 21 “The Effects of Changes in Foreign Exchange Rates”, the Chilean peso is the currency of the primary economic environment in which the Bank operates and the currency which influences its costs and revenue structure, so it has been defined as the Bank’s functional and presentation currency.

Accordingly, all balances and transactions denominated in currencies other than the Chilean Peso are treated as “foreign currency”.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Foreign currency transactions

The Bank performs transactions in foreign currencies, mainly the U.S. dollar. Assets and liabilities denominated in foreign currencies and held by the Bank are translated to Chilean pesos based on the representative market rate published by Reuters at 1:30 p.m. on the month end date. The rate used was Ch$660.16 per US$1 as of March, 2017 (Ch$667.68 per US$1 as of March, 2016 and Ch$666.00 per US$1 as of December, 2016).

The amounts of net foreign exchange gains and losses includes recognition of the effects that exchange rate variations have on assets and liabilities denominated in foreign currencies and the profits and losses on foreign exchange spot and forward transactions undertaken by the Bank.

Definitions and classification of financial instruments

Definitions

A “financial instrument” is any contract that gives rise to a financial asset of an entity, and a financial liability or equity instrument of another entity.

An “equity instrument” is a legal transaction that evidences a residual interest in the assets of an entity deducting all of its liabilities.

A “financial derivative” is a financial instrument whose value changes in response to the changes in an observable market variable (such as an interest rate, a foreign exchange rate, a financial instrument’s price, or a market index, including credit ratings), whose initial investment is very small compared with other financial instruments having a similar response to changes in market factors, and which is generally settled at a future date.

“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract together with a financial derivative, known as an embedded derivative, which is not separately transferable and has the effect that some of the cash flows of the hybrid contract vary in a way similar to a stand-alone derivative. In the first quarter of 2017 and during 2016, Banco Santander did not keep implicit derivatives in its portfolio.

ii.

Classification of financial assets for measurement purposes

Financial assets are classified into the following specified categories: financial assets trading investments at fair value through profit or loss (FVTPL), ‘held to maturity investments’, ‘available for sale investments (AFS)’ financial assets and ‘loans and accounts receivable from customers'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial asset are recognized and derecognized on a trade basis. Regular way purchases or sales of financial assets require delivery of the asset within the time frame established by regulation or convention in the marketplace.

Financial assets are initially recognized at fair value plus, in the case of a financial assets not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for loans and accounts receivables other than those financial assets classified as at fair value through profit or loss.

Financial assets FVTPL - Trading investments

Financial assets are classified as FVTPL when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling it in the near term; or

on initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.

Financial assets FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘net income (expense) from financial operations' line item.

Held to maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment.

Available for sale investments (AFS investments)

AFS investments are non-derivatives that are either designated as AFS or are not classified as (a) loans and accounts receivable from customers, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss (trading investments).

Financial instruments held by the Bank that are traded in an active market are classified as AFS and are stated at fair value at the end of each reporting period. The Bank also has investments in financial instruments that are not traded in an active market but that are also classified as AFS investments and stated at fair value at the end of each reporting period (because the directors consider that fair value can be reliably measured). Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments are recognised in profit or loss. Other changes in the carrying amount of available for sale investments are recognised in other comprehensive income and accumulated under the heading of “Valuation Adjustment”. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on AFS equity instruments are recognised in profit or loss when the Bank's right to receive the dividends is established.

The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated as the described in f) above. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset.

Loans and accounts receivables from customers

Loans and accounts receivable from customers are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and accounts receivables from customers (including loans and accounts receivable from customers and interbank loans) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

iii.

Classification of financial assets for presentation purposes

For presentation purposes, the financial assets are classified by their nature into the following line items in the Consolidated Financial Statements:

Cash and deposits in banks: this line includes cash balances, checking accounts and on-demand deposits with the Central Bank of Chile and other domestic and foreign financial institutions. Amounts invested as overnight deposits are included in this item.

Cash items in process of collection: this item represents domestic transactions in the process of transfer through a central domestic clearinghouse or international transactions which may be delayed in settlement due to timing differences, etc.

Trading investments: this item includes financial instruments held-for-trading and investments in mutual funds which must be adjusted to their fair value in the same way as instruments acquired for trading.

Investments under resale agreements: includes balances of financial instruments purchased under resale agreement.

Financial derivative contracts: financial derivative contracts with positive fair values are presented in this item. It includes both independent contracts as well as derivatives that should and can be separated from a host contract, whether they are for trading or accounted for as derivatives held for hedging, as shown in Note 6.

Trading derivatives: includes the fair value of derivatives which do not qualify for hedge accounting, including embedded derivatives separated from hybrid financial instruments.

Hedging derivatives: includes the fair value of derivatives designated as being in a hedging relationship, including the embedded derivatives separated from the hybrid financial instruments.

Interbank loans: this item includes the balances of transactions with domestic and foreign banks, including the Central Bank of Chile, other than those reflected in certain other financial asset classifications listed above.

Loans and accounts receivables from customers: these loans are non-derivative financial assets for which fixed or determined amounts are charged, that are not listed on an active market and which the Bank does not intend to sell immediately or in the short term. When the Bank is the lessor in a lease, and it substantially transfers the risks and rewards incidental to the leased asset, the transaction is presented in loans and accounts receivable from customers while the leased asset is derecognized in the Bank´s statement of financial position.

Investment instruments: are classified into two categories: held-to-maturity investments, and available-for-sale investments. The held-to-maturity investment classification includes only those instruments for which the Bank has the ability and intent to hold to maturity. The remaining investments are treated as available for sale.

iv.

Classification of financial liabilities for measurement purposes

Financial liabilities are classified as either financial liabilities FVTPL or other financial liabilities.

Financial liabilities FVTPL

Financial liabilities are classified as FVTPL when the financial liability is either held for trading or it is designated as FVTPL.

A financial liability is classified as held for trading if:

it has been incurred principally for the purpose of repurchasing it in the near term; or

on initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

it is a derivative that is not designated and effective as a hedging instrument.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

A financial liability other than a financial liability held for trading may be designated as FVTPL upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.

Financial liabilities FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘net income (expense) from financial operations' line item.

Other financial liabilities

Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and interest paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Classification of financial liabilities for presentation purposes

Financial liabilities are classified by their nature into the following items in the Unaudited Consolidated Interim Statement of Financial Position:

Deposits and other on-demand liabilities: this includes all on-demand obligations except for term savings accounts, which are not considered on-demand instruments in view of their special characteristics. Obligations whose payment may be required during the period are deemed to be on-demand obligations. Operations which become callable the day after the closing date are not treated as on-demand obligations.

Cash items in process of being cleared: this represents domestic transactions in the process of transfer through a central domestic clearing house or international transactions which may be delayed in settlement due to timing differences, etc.

Obligations under repurchase agreements: this includes the balances of sales of financial instruments under securities repurchase and loan agreements. The Bank does not record as own portfolio instruments acquired under repurchase agreements.

Time deposits and other time liabilities: this shows the balances of deposit transactions in which a term at the end of which they become callable has been stipulated.

Financial derivative contracts: this includes financial derivative contracts with negative fair values (i.e. a liability of the Bank), whether they are for trading or for hedge accounting, as set forth in Note6.

Trading derivatives: includes the fair value of derivatives which do not qualify for hedge accounting, including embedded derivatives separated from hybrid financial instruments.

Hedging derivatives: includes the fair value of derivatives designated as being in a hedging relationship, including the embedded derivatives separated from the hybrid financial instruments.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Interbank borrowings: this includes obligations due to other domestic banks, foreign banks, or the Central Bank of Chile, other than those reflected in certain other financial liability classifications listed above.

Issued debt instruments: there are three types of instruments issued by the Bank: Obligations under letters of credit, Subordinated bonds and Senior bonds placed in the local and foreign market.

Other financial liabilities: this item includes credit obligations to persons other than domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the normal course of business.

Valuation of financial instruments and recognition of fair value changes

In general, financial assets and liabilities are initially recognized at fair value, which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments, other than those measured at fair value through profit or loss, are initially recognized at fair value plus transaction costs. Subsequently, and at the end of each reporting period, financial instruments are measured pursuant to the following criteria:

Valuation of financial instruments

Financial assets are measured according to their fair value, gross of any transaction costs that may be incurred in the course of a sale, except for credit investments and held to maturity investments.

According to IFRS 13 Fair Value Measurement (effective date from January 1, 2013), “fair value” is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When measuring fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability, or (b) in the absence of a principal market, the most advantageous market for the asset or liability. Even when there is no observable market to provide pricing information in connection with the sale of an asset or the transfer of a liability at the measurement date, the fair value measurement shall assume that the transaction takes place, considered from the perspective of a potential market participant who intends to maximize value associated with the asset or liability.

When using valuation techniques, the Bank shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs as available. If an asset or a liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorized within the fair value hierarchy (i.e. Level 1, 2 or 3). IFRS 13 establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

All derivatives are recorded in the Unaudited Consolidated Interim Statements of Financial Position at the fair value previously described. This value is compared to the valuation as at the trade date. If the fair value is subsequently measured positive, this is recorded as an asset. If the fair value is subsequently measured negative, this is recorded as a liability. The fair value on the trade date is deemed, in the absence of evidence to the contrary, to be the transaction price. The changes in the fair value of derivatives from the trade date are recorded in “Net income (expense) from financial operations” in the Unaudited Consolidated Interim Statement of Income.

Specifically, the fair value of financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price. If, for exceptional reasons, the quoted price cannot be determined on a given date, the fair value is determined using similar methods to those used to measure over the counter (OTC) derivatives. The fair value of OTC derivatives is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV) and option pricing models, among other methods. Also, within the fair value of derivatives are included Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA), all with the objective that the fair value of each instrument includes the credit risk of its counterparty and Bank´s own risk. Counterparty Credit Risk (CVA) is a valuation adjustment to derivatives contracted in non-organized markets as a result of exposure to counterparty credit risk. The CVA is calculated considering the potential exposure to each counterparty in future periods. Own-credit risk (DVA) is a valuation adjustment similar to the CVA, but generated by the Bank's credit risk assumed by our counterparties. As of March 31, 2017, the CVA and DVA are Ch $ 9,302 million and Ch $ 14,485 million, respectively.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

“Loans and accounts receivable from customers” and Held-to-maturity instrument portfolio are measured at amortized cost using the effective interest method. Amortized cost is the acquisition cost of a financial asset or liability, plus or minus, as appropriate, prepayments of principal and the cumulative amortization (recorded in the consolidated income statement) of the difference between the initial cost and the maturity amount as calculated under the effective interest method. For financial assets, amortized cost also includes any reductions for impairment or uncollectibility. For loans and accounts receivable designated as hedged items in fair value hedges, the changes in their fair value related to the risk or risks being hedged are recorded in “Net income (expense) from financial operations”.

The “effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to all its estimated cash flows over its remaining life. For fixed-rate financial instruments, the effective interest rate incorporates the contractual interest rate established on the acquisition date. Where applicable, the fees and transaction costs that are a part of the financial return are included. For floating-rate financial instruments, the effective interest rate matches the current rate of return until the date of the next review of interest rates.

Equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives, whose underlying is an equity instrument that are settled by delivery of those instruments, are measured at acquisition cost adjusted for any related impairment loss.

The amounts at which the financial assets are recorded represent the Bank’s maximum exposure to credit risk as at the reporting date. The Bank has also received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist mainly of mortgage guarantees, equity instruments and personal securities, assets under leasing agreements, assets acquired under repurchase agreements, securities loans and derivatives.

ii.

Valuation techniques

Financial instruments at fair value, determined on the basis of price quotations in active markets, include government debt securities, private sector debt securities, equity shares, short positions, and fixed-income securities issued.

In cases where price quotations cannot be observed in available markets, the Bank’s management determines a best estimate of the price that the market would set using its own internal models. In most cases, these models use data based on observable market parameters as significant inputs however for some valuations of financial instruments, significant inputs are unobservable in the market. To determine a value for those instruments, various techniques are employed to make these estimates, including the extrapolation of observable market data.

The most reliable evidence of the fair value of a financial instrument on initial recognition usually is the transaction price, however due to lack of availability of market information, the value of the instrument may be derived from other market transactions performed with the same or similar instruments or may be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.

The main techniques used as of March 31, 2017 and 2016 and as of December 31, 2016 by the Bank’s internal models to determine the fair value of the financial instruments are as follows:

In the valuation of financial instruments permitting static hedging (mainly forwards and swaps), the present value method is used. Estimated future cash flows are discounted using the interest rate curves of the related currencies. The interest rate curves are generally observable market data.

ii.

In the valuation of financial instruments requiring dynamic hedging (mainly structured options and other structured instruments), the Black-Scholes model is normally used. Where appropriate, observable market inputs are used to obtain factors such as the bid-offer spread, exchange rates, volatility, correlation indexes and market liquidity.

iii.

In the valuation of certain financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes model (plain vanilla options) are used. The main inputs used in these models are observable market data, including the related interest rate curves, volatilities, correlations and exchange rates.

The fair value of the financial instruments calculated by the aforementioned internal models considers contractual terms and observable market data, which include interest rates, credit risk, exchange rates, quoted market price of shares, volatility and prepayments, among others. The Bank’s management considers that its valuation models are not significantly subjective, since these methodologies can be adjusted and evaluated, as appropriate, through the internal calculation of fair value and the subsequent comparison with the related actively traded price.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

iii.

Hedging transactions

The Bank uses financial derivatives for the following purposes:

to sell to customers who request these instruments in the management of their market and credit risks;

ii.

to use these derivatives in the management of the risks of the Bank entities’ own positions and assets and liabilities (“hedging derivatives”), and

iii.

to obtain profits from changes in the price of these derivatives (trading derivatives).

All financial derivatives that are not held for hedging purposes are accounted for as trading derivatives.

A derivative qualifies for hedge accounting if all the following conditions are met:

The derivative hedges one of the following three types of exposure:

Changes in the value of assets and liabilities due to fluctuations, among others, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);

Changes in the estimated cash flows arising from financial assets and liabilities, and highly probable forecasted transactions (“cash flow hedge”);

The net investment in a foreign operation (“hedge of a net investment in a foreign operation”).

It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:

At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”).

There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position (“retrospective effectiveness”).

There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.

The changes in the value of financial instruments qualifying for hedge accounting are recorded as follows:

For fair value hedges, the gains or losses arising on both hedging instruments and the hedged items (attributable to the type of risk being hedged) are included as “Net income (expense) from financial operations” in the Unaudited Consolidated Interim Statement of Income.

For fair value hedges of interest rate risk on a portfolio of financial instruments, gains or losses that arise in measuring hedging instruments and other gains or losses due to changes in fair value of the underlying hedged item (attributable to the hedged risk) are recorded in the Unaudited Consolidated Interim Financial Statement of Income under “Net income (expense) from financial operations”.

For cash flow hedges, the change in fair value of the hedging instrument is included as “Cash flow hedge” in “Other comprehensive income”, until the hedged transaction occurs, thereafter being reclassified to the Unaudited Consolidated Interim Statement of Income, unless the hedged transaction results in the recognition of non–financial assets or liabilities, in which case it is included in the cost of the non-financial asset or liability.

The differences in valuation of the hedging instrument corresponding to the ineffective portion of the cash flow hedging transactions are recorded directly in the Unaudited Consolidated Interim Statement of Income under “Net income (expense) from financial operations”.

If a derivative designated as a hedging instrument no longer meets the requirements described above due to expiration, ineffectiveness or for any other reason, hedge accounting treatment is discontinued. When “fair value hedging” is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged risk are amortized to gain or loss from that date, where applicable.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

When cash flow hedges are discontinued, any cumulative gain or loss of the hedging instrument recognized under “Other comprehensive income” (from the period when the hedge was effective) remains recorded in equity until the hedged transaction occurs, at which time it is recorded in the Unaudited Consolidated Interim Statement of Income, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recorded immediately in the Unaudited Consolidated Interim Statement of Income.

iv.

Derivatives embedded in hybrid financial instruments

Derivatives embedded in other financial instruments or in other hybrid contracts are accounted for separately as derivatives if 1) their risks and characteristics are not closely related to the host contracts, 2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and 3) provided that the hybrid contracts are not classified as “Trading investments” or as other financial assets (liabilities) at fair value through profit or loss.

Offsetting of financial instruments

Financial asset and liability balances are offset, i.e., reported in the Unaudited Consolidated Interim Statements of Financial Position at their net amount, only if there is a legally enforceable right to offset the recorded amounts and the Bank intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

vi.

Derecognition of financial assets and liabilities

The accounting treatment of transfers of financial assets is determined by the extent and the manner in which the risks and rewards associated with the transferred assets are transferred to third parties:

If the Bank transfers substantially all the risks and rewards of ownership to third parties, as in the case of unconditional sales of financial assets, sales under repurchase agreements at fair value at the date of repurchase, sales of financial assets with a purchased call option or written put option deeply out of the money, utilization of assets in which the transferor does not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognized from the Unaudited Consolidated Interim Statement of Financial Position and any rights or obligations retained or created in the transfer are simultaneously recorded.

ii.

If the Bank retains substantially all the risks and rewards of ownership associated with the transferred financial asset, as in the case of sales of financial assets under repurchase agreements at a fixed price or at the sale price plus interest, securities lending agreements under which the borrower undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognized from the Unaudited Consolidated Interim Financial Statement of Financial Position and continues to be measured by the same criteria as those used before the transfer. However, the following items are recorded:

An associated financial liability for an amount equal to the consideration received; this liability is subsequently measured at amortized cost.

Both the income from the transferred (but not removed) financial asset as well as any expenses incurred due to the new financial liability.

iii.

If the Bank neither transfers nor substantially retains all the risks and rewards of ownership associated with the transferred financial asset—as in the case of sales of financial assets with a purchased call option or written put option that is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases, the following distinction is made:

If the transferor does not retain control of the transferred financial asset: the asset is derecognized from the Unaudited Consolidated Interim Statement of Financial Position and any rights or obligations retained or created in the transfer are recognized.

If the transferor retains control of the transferred financial asset: it continues to be recognized in the Unaudited Consolidated Interim Statement of Financial Position for an amount equal to its exposure to changes in value and a financial liability associated with the transferred financial asset is recorded. The net carrying amount of the transferred asset and the associated liability is the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Accordingly, financial assets are only derecognized from the Unaudited Consolidated Interim Statement of Financial Position when the rights over the cash flows they generate have terminated or when all the inherent risks and rewards of ownership have been substantially transferred to third parties. Similarly, financial liabilities are only derecognized from the Unaudited Consolidated Interim Financial Statement Financial Position when the obligations specified in the contract are discharged or cancelled or the contract has matured.

Recognizing income and expenses

The most significant criteria used by the Bank to recognize its revenues and expenses are summarized as follows:

Interest revenue, interest expense, and similar items

Interest revenue, expense and similar items are recorded on an accrual basis using the effective interest method.

However, when a given operation or transaction is past due by 90 days or more, when it originated from a refinancing or renegotiation, or when the Bank believes that the debtor poses a high risk of default, the interest and adjustments pertaining to these transactions are not recorded directly in the Unaudited Consolidated Interim Statement of Income unless they have been actually received.

This interest and adjustments are generally referred to as “suspended” and they are reported as part of the complementary information thereto and as memorandum accounts (Note 22). This interest is recognized as income, when collected.

The resumption of interest income recognition of previously impaired loans only occurs when such loans become current (i.e. payments were received such that the loans are contractually past-due for less than 90 days) or they are no longer classified under the C3, C4, C5, or C6 risk categories (for loans individually evaluated for impairment).

ii.

Commissions, fees, and similar items

Fee and commission income and expenses are recognized in the Unaudited Consolidated Interim Statement of Income using criteria that vary according to their nature. The main criteria are:

Fee and commission income and expenses on financial assets and liabilities are recognized when they are earned.

Those arising from transactions or services that are performed over a period of time are recognized over the life of these transactions or services.

Those relating to services provided in a single transaction are recognized when the single transaction is performed.

iii.

Non-financial income and expenses

Non-financial income and expenses are recognized for accounting purposes on an accrual basis.

iv.

Loan arrangement fees

Fees that arise as a result of the origination of a loan, mainly application and analysis-related fees, are deferred and charged to the Unaudited Consolidated Interim Statement of Income over the term of the loan.

Impairment

Financial assets:

A financial asset, other than that at fair value through profit and loss, is evaluated on each financial statement filing date to determine whether objective evidence of impairment exists.

A financial asset or group of financial assets will be impaired if, and only if, objective evidence of impairment exists as a result of one or more events that occurred after initial recognition of the asset (“event causing the loss”), and this event or events causing the loss have an impact on the estimated future cash flows of a financial asset or group of financial assets.

An impairment loss relating to financial assets recorded at amortized cost is calculated as the difference between the recorded amount of the asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

Individually significant financial assets are individually tested to determine their impairment. The remaining financial assets are evaluated collectively in groups that share similar credit risk characteristics.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

All impairment losses are recorded in income. Any impairment loss relating to a financial asset available for sale previously recorded in equity is transferred to profit or loss.

The reversal of an impairment loss occurs only if it can be objectively related to an event occurring after the initial impairment loss was recorded. The reversal of an impairment loss shall not exceed the carrying amount that would have been determined if no impairment loss has been recognized for the asset in prior years. The reversal is recorded in income with the exception of available for sale equity financial assets, in which case it is recorded in other comprehensive income.

ii.

Non-financial assets:

The Bank’s non-financial assets, excluding investment properties, are reviewed at the reporting date to determine whether they show signs of impairment (i.e. its carrying amount exceeds its recoverable amount). If any such evidence exists, the recoverable amount of the asset is estimated, in order to determine the extent of the impairment loss.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

In connection with other assets, impairment losses recorded in prior periods are assessed at each reporting date to determine whether the loss has decreased and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. Goodwill impairment is not reversed.

Property, plant, and equipment

This category includes the amount of buildings, land, furniture, vehicles, computer hardware and other fixtures owned by the consolidated entities or acquired under finance leases. Assets are classified according to their use as follows:

Property, plant and equipment for own use

Property, plant and equipment for own use includes but is not limited to tangible assets received by the consolidated entities in full or partial satisfaction of financial assets representing accounts receivable from third parties which are intended to be held for continuing own use and tangible assets acquired under finance leases. These assets are presented at acquisition cost less the related accumulated depreciation and, if applicable, any impairment losses (when net carrying amount was higher than recoverable amount).

Depreciation is calculated using the straight line method over the acquisition cost of assets less their residual value, assuming that the land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The Bank applies the following useful lives for the tangible assets that comprise its assets:

ITEM	Useful life (Months)

Land		-
Paintings and works of art		-
Carpets and curtains		36
Computers and hardware		36
Vehicles		36
IT systems and software		36
ATMs		60
Other machines and equipment		60
Office furniture		60
Telephone and communication systems		60
Security systems		60
Rights over telephone lines		60
Air conditioning systems		84
Other installations		120
Buildings		1,200

The consolidated entities assess at each reporting date whether there is any indication that the carrying amount of any tangible asset exceeds its recoverable amount. If this is the case, the carrying amount of the asset is reduced to its recoverable amount and future depreciation charges are adjusted in accordance with the revised carrying amount and to the new remaining useful life, if the useful life needs to be revised.

The estimated useful lives of the items of property, plant and equipment held for own use are reviewed at the end of each reporting period to detect significant changes. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation charge to be recorded in the Unaudited Consolidated Interim Statement of Income in future years on the basis of the new useful lives.

Maintenance expenses relating to tangible assets held for own use are recorded as an expense in the period in which they are incurred.

ii.

Assets leased out under operating leases

The criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives, and to record their impairment losses, are the same as those for property, plant and equipment held for own use.

Leasing

Finance leases

Finance leases are leases that substantially transfer all the risks and rewards incidental to ownership of the leased asset to the lessee.

When a consolidated entity is the lessor of an asset, the sum of the present value of the lease payments receivable from the lessee, including the exercise price of the lessee’s purchase option at the end of the lease term, which is equivalent to one additional lease payment and so is reasonably certain to be exercised, is recognized as lending to third parties and is therefore included under “Loans and accounts receivable from customers” in the Unaudited Consolidated Interim Statement of Financial Position.

When a consolidated entity is a lessee, it reports the cost of leased assets in the Unaudited Consolidated Interim Statement of Financial Position based on the nature of the leased asset, and simultaneously records a liability for the same amount (which is the lower of the fair value of the leased asset, and the sum of the present value of the lease payments payable to the lessor plus, if appropriate, the exercise price of the purchase option). The depreciation policy for these assets is the same as that for property, plant and equipment for own use.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

In both cases, the finance income and finance expenses arising from these contracts are credited and debited, respectively, to “Interest income” and “Interest expense” in the Unaudited Consolidated Interim Statement of Income so as to achieve a constant rate of return over the lease term.

ii.

Operating leases

In operating leases, ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the lessor.

When a consolidated entity is the lessor, it reports the acquisition cost of the leased assets under "Property, plant and equipment”. The depreciation policy for these assets is the same as that for similar items of property, plant and equipment held for own use and revenues from operating leases is recorded on a straight line basis under “Other operating income” in the Unaudited Consolidated Interim Statement of Income.

When a consolidated entity is the lessee, the lease expenses, including any incentives granted by the lessor, are charged on a straight line basis to “Other operating expenses” in the Unaudited Consolidated Interim Statement of Income.

iii.

Sale and leaseback transactions

For sale at fair value and operating leasebacks, the profit or loss generated is recorded at the time of sale except in the case of excess of proceeds over fair value, which difference is amortized over the period of use of the asset. In the case of finance leasebacks, the profit or loss generated is amortized over the lease term.

Factored receivables

Factored receivables are valued at the amount disbursed by the Bank in exchange of invoices or other commercial instruments representing the credit which the transferor assigns to the Bank. The price difference between the amounts disbursed and the actual face value of the credits is recorded as interest income in the Unaudited Consolidated Interim Statement of Income using the effective interest method over the financing period.

When the assignment of these instruments involves no liability on the part of the assignee, the Bank assumes the risks of insolvency of the parties responsible for payment.

Intangible assets

Intangible assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance which arise as a result of legal or contractual rights or it is separable. The Bank recognizes an intangible asset, whether purchased or self-created (at cost), when the cost of the asset can be measured reliably and it is probable that the future economic benefits that are attributable to the asset will flow to the Bank.

Intangible assets are recorded initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortization and any accumulated impairment losses.

Internally developed computer software is recorded as an intangible asset if, among other requirements (basically the Bank’s ability to use or sell it), it can be identified and its ability to generate future economic benefits can be demonstrated. The estimated useful life for software is 36 months.

Intangible assets are amortized on a straight-line basis over their estimated useful life; which has been defined as 36 months.

Expenditure on research activities is recorded as an expense in the year in which it is incurred and cannot be subsequently capitalized.

Cash and cash equivalents

The indirect method is used to prepare the cash flow statement, starting with the Bank’s consolidated pre-tax income and incorporating non-cash transactions, as well as income and expenses associated with cash flows, which are classified as operating, investing or financing activities.

The cash flow statement was prepared considering the following definitions:

Cash flows: Inflows and outflows of cash and cash equivalents, such as deposits with the Central Bank of Chile, deposits in domestic banks, and deposits in foreign banks.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

ii.

Operating activities: Principal revenue-producing activities performed by banks and other activities that cannot be classified as investing or financing activities.

iii.

Investing activities: The acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

iv.

Financing Activities: Activities that result in changes in the size and composition of net equity and liabilities that are not operating or investing activities.

Allowances for loan losses

The Bank has continuously evaluated the entire loan portfolio and contingent loans, as is established by the SBIF, to timely provide the necessary and sufficient provisions to cover expected losses associated with the characteristics of the debtors and their loans, which determine payment behavior and recovery.

The Bank has established allowances to cover probable losses on loans and account receivables in accordance with instructions issued by Superintendency of Banks and Financial Institutions (SBIF) Including the amendments introduced by Circular No. 3,573 (and its further modifications) applicable as of January 1, 2016 which establishes a standard method for residential mortgage loans and complements and specifies instructions on provisions and loans classified in the impaired portfolio, and subsequent amendments.

The Bank uses the following models established by the SBIF, to evaluate its loan portfolio and credit risk:

Individual assessment - where the Bank assesses a debtor as individually significant when their loans are significant, or when the debtor cannot be classified within a group of financial assets with similar credit risk characteristics, due to its size, complexity or level of exposure.

Group assessment - a group assessment is relevant for analyzing a large number of transactions with small individual balances due from individuals or small companies. The Bank groups debtors with similar credit risk characteristics giving to each group a default probability and recovery rate based on a historical analysis. The Bank has implemented standard models for mortgage loans, established in Circular N°3,573 (modified by Circular N°3,584), and internal models for commercial and consumer loans.

Allowances for individual assessment

An individual assessment of commercial debtors is necessary according to the SBIF, in the case of companies which, due to their size, complexity or level of exposure, must be known and analyzed in detail.

The analysis of the debtor is primarily focused on their credit quality and their risk category classification of the debtor and of their respective contingent loans and loans These are assigned to one of the following portfolio categories: Normal, Substandard and Impaired. The risk factors considered are: industry or economic sector, owners or managers, financial situation and payment ability, and payment behavior.

The portfolio categories and their definitions are as follows:

Normal Portfolio includes debtors with a payment ability that allows them to meet their obligations and commitments. Evaluations of the current economic and financial environment do not indicate that this will change. The classifications assigned to this portfolio are categories from A1 to A6.

ii.

Substandard Portfolio includes debtors with financial difficulties or a significant deterioration of their payment ability. There is reasonable doubt concerning the future reimbursement of the capital and interest within the contractual terms, with limited ability to meet short-term financial obligations. The classifications assigned to this portfolio are categories from B1 to B4.

iii.

Impaired Portfolio includes debtors and their loans where repayment is considered remote, with a reduced or no likelihood of repayment. This portfolio includes debtors who have stopped paying their loans or that indicate that they will stop paying, as well as those who require forced debt restructuration, reducing the obligation or delaying the term of the capital or interest, and any other debtor who is over 90 days overdue in his payment of interest or capital. The classifications assigned to this portfolio are categories from C1 to C6.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Normal and Substandard Compliance Portfolio

As part of individual assessment, the Bank classifies debtors into the following categories, assigning them a probability of non-performance (PNP) and severity (SEV), which result in the expected loss percentages.

Portfolio	Debtor’s Category	Probability of Non-Performance (%)		Severity (%)		Expected Loss (%)
	A1		0.04		90.0		0.03600
	A2		0.10		82.5		0.08250
Normal portfolio	A3		0.25		87.5		0.21875
	A4		2.00		87.5		1.75000
	A5		4.75		90.0		4.27500
	A6		10.00		90.0		9.00000
	B1		15.00		92.5		13.87500
Substandard portfolio	B2		22.00		92.5		20.35000
	B3		33.00		97.5		32.17500
	B4		45.00		97.5		43.87500

The Bank first determines all credit exposures, which includes the accounting balances of loans and accounts receivable from customers plus contingent loans, less any amount recovered through executing the financial guarantees or collateral covering the operations. The percentages of expected loss are applied to this exposure. In the case of collateral, the Bank must demonstrate that the value assigned reasonably reflects the value obtainable on disposal of the assets or equity instruments. When the credit risk of the debtor is substituted for the credit quality of the collateral or guarantor, this methodology is applicable only when the guarantor or guarantor is a person qualified in a assimilable investment grade by a local or international company rating agency recognized by the SBIF. guaranteed securities cannot be deducted from the exposure amount, only financial guarantees and collateral can be considered.

Notwithstanding the foregoing, the Bank must maintain a minimum provision of 0.5% of loans and contingent loans in the normal portfolio.

Impaired Portfolio

The impaired portfolio includes all loans and the entire value of contingent loans of the debtors that are over 90 days overdue on the payment of interest or principal of any loan at the end of the month. It also includes debtors who have been granted a loan to refinance loans over 60 days overdue, as well as debtors who have undergone forced restructuration or partial debt condonation.

The impaired portfolio excludes: a) residential mortgage loans, with payments less than 90 days overdue; and, b) loans to finance higher education according to Law 20,027, provided the breach conditions outlined in Circular No. 3,454 of December 10, 2008 are not fulfilled.

The provision for an impaired portfolio is calculated by determining the expected loss rate for the exposure, adjusting for amounts recoverable through available financial guarantees and deducting the present value of recoveries made through collection services after the related expenses.

Once the expected loss range is determined, the debtor can be classified into categories C1 to C6. Using this classification system the related provision percentage is applied over the exposure amount, which includes loans and contingent loans related to the debtor.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

The allowance rates applied over the calculated exposure are as follows:

Classification	Estimated range of loss	Allowance
C1	Up to 3%		2	%
C2	Greater than 3% and less than 20%		10	%
C3	Greater than 20% and less than 30%		25	%
C4	Greater than 30% and less than 50%		40	%
C5	Greater than 50% and less than 80%		65	%
C6	Greater than 80%		90	%

Loans are maintained in the impaired portfolio until their payment ability is normal, notwithstanding the write off of each particular credit that meets conditions of Title II of Chapter B-2. Once the circumstances that led to classification in the Impaired Portfolio have been overcome, the debtor can be removed from this portfolio once all the following conditions are met:

the debtor has no obligations of the debtor with the Bank more than 30 days overdue;

ii.

the debtor has not been granted loans to pay its obligations;

iii.

at least one of the payments include the amortization of capital;

iv.

if the debtor has made partial loan payments in the last six months, two payments have already been made;

if the debtor must pay monthly installments for one or more loans, four consecutive installments have been made;

vi.

the debtor does not appear to have bad debts in the information provided by the SBIF, except for insignificant amounts.

II.

Allowances for group assessments

Group assessments are used to estimate allowances required for loans with low balances relat to individuals or small companies.

Group assessments require the formation of groups of loans with similar characteristics by type of debtor and loan conditions, in order to establish both the group payment behavior and the recoveries of their defaulted loans, using technically substantiated estimates and prudential criteria. The model used is based on the characteristics of the debtor, payment history, outstanding loans and default among other relevant factors.

The Bank uses methodologies to establish credit risk, based on internal models to estimate the allowances for the group-evaluated portfolio. This portfolio includes commercial loans with debtors that are not assessed individually, mortgage and consumer loans (including installment loans, credit cards and overdraft lines). These methods allow the Bank to independently identify the portfolio behavior and establish the provision required to cover losses arising during the year.

The customers are classified according to their internal and external characteristics into profiles, using a customer-portfolio model to differentiate each portfolio’s risk in an appropriate manner. This is known as the profile allocation method.

The profile allocation method is based on a statistical construction model that establishes a relationship through logistic regression between variables (for example default, payment behavior outside the Bank, socio-demographic data) and a response variable which determines the client’s risk, which in this case is over 90 days overdue. Hence, common profiles are established and assigned a Probability of Non-Performance (PNP) and a recovery rate based on a historical analysis known as Severity (SEV).

Therefore, once the customers have been profiled, and the loan’s profile assigned a PNP and a SEV, the exposure at default (EXP) is calculated. This exposure includes the book value of the loans and accounts receivable from the customer, plus contingent loans, less any amount that can be recovered by executing guarantees (for credits other than consumer loans).

Notwithstanding the above, on establishing provisions, the Bank must recognize minimum provisions according to standard methods established by the SBIF for this type of loan. While this is considered to be a prudent minimum base, it does not relieve the Bank of its responsibility to have its own methodologies of determining adequate provisions to protect the credit risk of the portfolio.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Standard method of residential mortgage loan provisions

As of January 1, 2016 and in accordance with Circular No. 3,573 issued by the SBIF, the Bank began applying the standard method of provisions for residential mortgage loans. According to this method, the expected loss factor applicable to residential mortgage loans will depend on the default of each loan and the relationship between the outstanding principal of each loan and the value of the associated mortgage guarantee (Loans to Value, LTV) at the end of each month.

The allowance rates applied according to default and LTV are the following:

LTV Range	Days overdue at month end	0		1-29		30-59		60-89		Impaired portfolio
	PNP(%)		1.0916		21.3407		46.0536		75.1614		100
LTV≤40%	Severity (%)		0.0225		0.0441		0.0482		0.0482		0.0537
	Expected Loss (%)		0.0002		0.0094		0.0222		0.0362		0.0537
	PNP(%)		1.9158		27.4332		52.0824		78.9511		100
40%< LTV ≤80%	Severity (%)		2.1955		2.8233		2.9192		2.9192		3.0413
	Expected Loss (%)		0.0421		0.7745		1.5204		2.3047		3.0413
	PNP(%)		2.5150		27.9300		52.5800		79.6952		100
80%< LTV ≤90%	Severity (%)		21.5527		21.6600		21.9200		22.1331		22.2310
	Expected Loss (%)		0.5421		6.0496		11.5255		17.6390		22.2310
	PNP(%)		2.7400		28.4300		53.0800		80.3677		100
LTV >90%	Severity (%)		27.2000		29.0300		29.5900		30.1558		30.2436
	Expected Loss (%)		0.7453		8.2532		15.7064		24.2355		30.2436

LTV =Loan capital/Value of guarantee

If the same debtor has more than one residential mortgage loan with the Bank and one of them over 90 days overdue, all their loans shall be allocated to the impaired portfolio, calculating provisions for each them in accordance with their respective LTV.

For residential mortgage loans related to housing programs and grants from the Chilean government, the allowance rate may be weighted by a factor of loss mitigation (LM), which depends on the LTV percentage and the price of the property in the deed of sale (S), as long as the debtor has contracted auction insurance provided by the Chilean government.

III.

Additional provisions

According to SBIF regulation, banks are allowed to establish provisions over the limits already described, to protect themselves from the risk of non-predictable economical fluctuations that could affect the macro-economic environment or a specific economic sector.

According to No. 10 of Chapter B-1 from the SBIF Compendium of Accounting Standards, these provisions will be recorded in liabilities, similar to provisions for contingent loans.

IV.

Charge-offs

As a general rule, charge-offs should be done when the contract rights over cash flow expire. In the case of loans, even if the above does not happen, the Bank will charge-off these amounts in accordance with Title II of Chapter B-2 of the Compendium of Accounting Standards (SBIF).

These charge-offs refer to the derecognition from the Unaudited Consolidated Interim Statements of Financial Position of the respective loan, including any not yet due future payments in the case of installment loans or leasing transactions (for which partial charge-offs do not exist).

Charge-offs are always recorded as a charge to loan risk allowances according to Chapter B-1 of the Compendium of Accounting Regulations, no matter the reason for the charge-off. Any payment received related to a loan previously charged-off will be recognized as recovery of loan previously charged-off within Provision for loan losses at the Unaudited Consolidated Interim Statement of Income.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Loan and accounts receivable charge-offs are recorded for overdue, past due, and current installments when they exceed the time periods described below since reaching overdue status:

Type of loan		Term

Consumer loans with or without collateral		6 months
Other transactions without collateral		24 months
Commercial loans with collateral		36 months
Mortgage loans		48 months
Consumer leasing		6 months
Other non-mortgage leasing transactions		12 months
Mortgage leasing (household and business)		36 months

Recovery of loans previously charged off and accounts receivable from customers

Any recovery on “Loans and accounts receivable from customers” previously charged-off will be recognized as a recovery within “Provision for loan losses” in the Unaudited Consolidated Interim Statement of Income.

Provisions, contingent assets, and contingent liabilities

Provisions are liabilities of uncertain timing or amount. Provisions are recognized in the Unaudited Consolidated Interim Statements of Financial Position when the Bank:

has a present obligation (legal or constructive) as a result of past events, and

ii.

it is probable that an outflow of resources will be required to settle these obligations and the amount of these resources can be reliably measured.

Contingent assets or contingent liabilities are any potential rights or obligations arising from past events whose existence will be confirmed only by the occurrence or non-occurrence if one or more uncertain future events that are not wholly within control of the Bank.

The Unaudited Consolidated Interim Financial Statements reflect all significant provisions for which it is estimated that the probability of having to meet the obligation is more than likely. Provisions are quantified using the best available information regarding the consequences of the event giving rise to them and are reviewed and adjusted at the end of accounting period. Provisions are used when the liabilities for which they were originally recognized are settled. Partial or total reversals are recognized when such liabilities cease to exist or are reduced.

Provisions are classified according to the obligation covered as follows:

Provision for employee salaries and expenses

Provision for mandatory dividends

Provision for contingent loan risks

Provisions for contingencies

Income taxes and deferred taxes

The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences between the carrying amount of assets and liabilities and their tax bases. The measurement of deferred tax assets and liabilities is based on the tax rate, in accordance with the applicable tax laws, using the tax rate that applies to the period when the deferred asset and liability will be recovered or settled. The future effects of changes in tax legislation or tax rates are recorded in deferred taxes from the date on which the law is enacted or substantially enacted.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Use of estimates

The preparation of the financial statements requires the Bank’s management to make estimates and assumptions that affect the application of the accounting policies and the reported values of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

In certain cases, International Financial Reporting Standards (IFRS) require that assets or liabilities be recorded or disclosed at their fair values. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between informed market participants at the measurement date. When available, quoted market prices in active markets have been used as the basis for measurement. When quoted market prices in active markets are not available, the Bank has estimated such values based on the best information available, including the use of internal modeling and other valuation techniques.

The Bank has established allowances to cover cover probable losses, to estimate allowances. These allowances must be regularly reviewed taking into consideration factors such as changes in the nature and volume of the loan portfolio, trends in forecasted portfolio quality, credit quality and economic conditions that may adversely affect the borrowers’ ability to pay. Increases in the allowances for loan losses are reflected as “Provision for loan losses” in the Unaudited Consolidated Interim Statement of Income.

Loans are charged-off when the contractual rights for the cash flows expire, however, for loans and accounts receivable from customers the bank will charge-off in accordance with Title II of Chapter B-2 of the Compendium of Accounting Standards issued by the SBIF. Charge-offs are recorded as a reduction of the allowance for loan losses.

The relevant estimates and assumptions made to calculate provisions are regularly reviewed by the Bank’s Management to quantify certain assets, liabilities, revenues, expenses, and commitments.

Revised accounting estimates are recorded in the period in which the estimate is revised and in any affected future period.

These estimates are based on the best available information and mainly refer to:

Allowances for loan losses (Notes 7, 8, and 26)

Impairment losses of certain assets (Notes 6, 7, 8, 9, and 29)

The useful lives of tangible and intangible assets (Notes 10, 11 and 29)

The fair value of assets and liabilities (Notes 5, 6, 7, 9 and 32)

Commitments and contingencies (Note 18)

Current and deferred taxes (Note 12)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Non-current assets held for sale

Non-current assets (or a group of assets and liabilities) that expect to be recovered mainly through the sale of these items rather than through their continued use, are classified as held for sale. Immediately prior to this classification, assets (or elements of a disposable group) are valued in accordance with the Bank’s policies. The assets (or disposal group) are subsequently valued at the lower of carrying amount and fair value less selling costs.

As of March 31, 2017 and 2016 and December 31, 2016 the Bank has not classified any non-current assets as held for sale.

Assets received or awarded in lieu of payment

Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognized at their fair value (as determined by an independent appraisal). A price is agreed upon by the parties through negotiation or, when the parties do not reach an agreement, at the amount at which the Bank is awarded those assets at a judicial auction. In the both cases, an independent appraisal is performed.

The excess of the outstanding loan balance over the fair value is charged to net income for the period, under “Provision for loan losses”. Any excess of the fair value over the outstanding loan balance, less costs to sell of the collateral, is returned to the client. These assets are subsequently adjusted to their net realizable value less cost to sale (assuming a forced sale). The difference between the carrying value of the asset and the estimated fair value less costs to sell is charged to net income for the period, under “Other operating expenses”.

At the end of each year the Bank performs an analysis to review the “selling costs” of assets received or awarded in lieu of payments which will be applied at this date and during the following year. As of December 31, 2016 the average selling cost has been estimated at 5.1% of the appraisal value (5.0% as of December 31, 2015).

Independent appraisals are obtained at least every 18 months and fair values are adjusted accordingly.

Earnings per share

Basic earnings per share are calculated by dividing the net income attributable to the equity holders of the Bank by the weighted average number of shares outstanding during the reported period.

Diluted earnings per share are calculated in a similar manner to basic earnings, but the weighted average number of outstanding shares is adjusted to take into consideration the potential diluting effect of stock options, warrants, and convertible debt.

As of March 31, 2017 and 2016 and December 31, 2016 the Bank did not have any instruments that generated dilution.

Temporary acquisition (assignment) of assets and liabilities

Purchases or sales of financial assets under non-optional repurchase agreements at a fixed price (repos) are recorded in the Unaudited Consolidated Interim Statements of Financial Position as an financial assignment based on the nature of the debtor (creditor) under “Deposits in the Central Bank of Chile,” “Deposits in financial institutions” or “Loans and accounts receivable from customers” (“Central Bank of Chile deposits,” “Deposits from financial institutions” or “Customer deposits”).

Differences between the purchase and sale prices are recorded as financial interest over the term of the contract.

Assets under management and investment funds managed by the Bank

Assets owned by third parties and managed by certain companies that are within the Bank’s scope of consolidation (Santander S.A. Sociedad Securitizadora), are not included in the Unaudited Consolidated Interim Statement of Financial Position. Management fees are included in “Fee and commission income” in the Unaudited Consolidated Interim Statement of Income.

Provision for mandatory dividends

As of March 31, 2017 and 2016 and December 31, 2016 the Bank recorded a provision for minimum mandatory dividends. This provision is made pursuant to Article 79 of the Corporations Act, which is in accordance with the Bank’s internal policy, which requires at least 30% of net income for the period is distributed, except in the case of a contrary resolution adopted at the respective shareholders’ meeting by unanimous vote of the outstanding shares. This provision is recorded as a deduction from “Retained earnings” – “Provision for mandatory dividends” in the Unaudited Consolidated Interim Statement of Changes in Equity with offset to Provisions.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Employee benefits

Post-employment benefits – Defined Benefit Plan:

According to current collective labor agreements and other agreements, the Bank has an additional benefit available to its principal executives, consisting of a pension plan, whose purpose is to endow them with funds for a better supplementary pension upon their retirement.

Features of the Plan:

The main features of the Post-Employment Benefits Plan promoted by the Banco Santander Chile are:

Aimed at the Bank’s management.

The general requirement is that the beneficiary must still be employed by the Bank when reaching 60 years old.

The Bank will mixed collective life and savings insurance policy for each beneficiary in the plan. Regular voluntary installments will be paid into this fund by the beneficiary and matched by the Bank.

The Bank will be responsible for granting the benefits directly.

The projected unit credit method is used to calculate the present value of the defined benefit obligation and the current service cost.

Components of defined benefit cost include:

current service cost and any past service cost, which are recognized in profit or loss for the period;

net interest on the liability (asset) for net defined benefit, which is recognized in profit or loss for the period;

new liability (asset) remeasurements for net defined benefit include:

(a) actuarial gains and losses;

(b) the performance of plan assets, and;

The liability (asset) for net defined benefit is the deficit or surplus, calculated as the difference between the present value of the defined benefit obligation less the fair value of plan assets.

Plan assets comprise the pension fund taken out by the Group with a third party that is not a related party. These assets are held by an entity legally separated from the Bank and exist solely to pay benefits to employees.

The Bank recognizes the present service cost and the net interest of the Personnel wages and expenses on the Unaudited Consolidated Interim Statement of Income.

The post-employment benefits liability, recognized in the Unaudited Consolidated Interim Statement of Financial Position, represents the deficit or surplus in the defined benefit plans of the Bank. Any surplus resulting from the calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions.

When employees leave the plan before meeting the requirements to be eligible for the benefit, contributions made by the Bank are reduced.

ii.

Severance provision:

Severance provision for years of employment are recorded only when they actually occur or upon the availability of a formal and detailed plan in which the fundamental modifications to be made are identified, provided that such plan has already started to be implemented or its principal features have been publicly announced, or objective facts about its execution are known.

iii.

Cash-settled share based compensation

The Bank allocates cash-settled share based compensation to executives of the Bank and its Subsidiaries in accordance with IFRS 2. The Bank measures the services received and the obligation incurred at fair value.

Until the obligation is settled, the Bank calculates the fair value at the end of each reporting period, as well as at the date of settlement, recognizing any change in fair value in the income statement for the period.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

New accounting pronouncements

Adoption of new accounting standards and instructions issued both by the Superintendency of Banks and Financial Institutions and the International Accounting Standards Board

As of the issue date of these Unaudited Consolidated Interim Financial Statements, the following new accounting pronouncements have been issued by the both the SBIF and the IASB, which have been fully incorporated by the Bank and are detailed as follows:

Accounting Standards Issued by the SBIF

Circular No. 3,621. Compendium of Accounting Standards. Chapters B-1 and C-3. Credits guaranteed by the School Infrastructure Guarantee Fund. Complementary instructions - This circular issued on March 15, 2017 introduces the following modifications:

• The title of No. 4 of Chapter B-1 is replaced by the following: "4 Warranty, goods delivered under lease, factoring operations and School Infrastructure Guarantee fund".

• The section 4.4 "Guarantee Fund for School Infrastructure" is added to this section, for purposes of determining provisions applicable to the substitution of credit risk of direct credit for the credibility of the referred fund, assigning for this purpose category A1 .

• The following item is added: 1302.1.50 Credits for school infrastructure Law N ° 20.845.

This rule is immediately applicable. This change had no impact on the Bank.

Accounting Standards issued by the International Accounting Standards Board

Amendment to IAS 12 Recognition of deferred tax assets related to unrealized losses - On January 19, 2016, the IASB issued this amendment to clarify the recognition of deferred assets related to debt instruments measured at fair value due to different recognition practices Of deferred assets, it is clarified that:

- Unrealized losses on debt instruments measured at fair value and measures at cost for tax purposes generate a deductible temporary difference regardless of whether the holder of the debt instrument expects to recover the book value of the debt instrument by sale or use .

- The book value of an asset does not limit the estimate of probable taxable profits.

- The estimate of future taxable income excludes tax deductions from the reverse of deductible temporary differences.

This regulation is applicable as of January 1, 2017. This change had no impact for the Bank.

Amendment to IAS 7 Statement of Cash Flow. Disclosure Initiative - This amendment issued on January 29, 2016 improves the information provided to users of the financial statements related to the entities' financing activities. The purpose of the amendment is to provide disclosures that enable EEFF users to assess changes in liabilities generated from financing operations. One way to comply with this new disclosure is to provide a reconciliation between the initial and final balance in the EFE for liabilities generated from financing activities.

This regulation is applicable from January 1, 2017, with early application allowed. The implementation of this amendment had no material impact on the Bank's consolidated financial statements.

Annual improvements, cycle 2014-2016

Amendment to IFRS 12 Disclosures of Interest in Other Entities - Clarifies the scope of the standard by specifying that the disclosure requirements of the standard, except for paragraphs B10-B16, apply to interest on an entity listed in paragraph 5 ( Subsidiaries, joint ventures, associates and non-consolidated structured entities) that are classified as held for sale, held for distribution or as discontinued operations in accordance with IFRS 5 Non-current assets held for sale and discontinued operations.

The amendment to IFRS 12 is for annual periods beginning on or after 1 January 2017. The implementation of this amendment had no material impact on the Bank's consolidated financial statements.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

ii.

New accounting standards and instructions issued by both the Superintendency of Banks and Financial Institutions and by the International Accounting Standards Board that have not come into effect as of March 31, 2017

As of the closing date of these financial statements, new International Financial Reporting Standards had been published as well as interpretations of them and SBIF rules, which were not mandatory as of March 31, 2017. Although in some cases the application Is permitted by the IASB, the Bank has not made its application on that date.

Accounting Standards issued by the Superintendency of Banks and Financial Institutions

Circular No. 3,615. Compendium of Accounting Standards. Chapter C-2. Report on the revision of the interim financial information - The circular issued on December 12, 2016, aims to increase the level of transparency of the financial information provided by the banks, reason why, the SBIF has considered pertinent that from the Year 2017, the financial statements referred to June 30 will be subject to a review report of the interim financial information issued by its external auditors in accordance with NAGA No. 63, AU930, or its international equivalent, SAS No. 122, Section AU-C 930, which must be sent to the SBIF on the same day of publication, or the immediately preceding or following bank business day.

If a bank does not have the necessary information to prepare financial statements with its respective notes within the period established in the law, it shall at least publish and send to the SBIF the Statement of Financial Position and Income Statement, adding a note with the date In which they will be available, although they must be available within the first fortnight of the following month.

In the case of the financial statements referred to as of June 30, the banks must send, by August 15, the review report of their external auditors.

Accounting Standards issued by the International Accounting Standards Board

IFRS 9, Financial Instruments - On November 12, 2009, the International Accounting Standard Board (IASB) issued IFRS 9, Financial Instruments. This Standard introduces new requirements for the classification and measurement of financial assets. IFRS 9 specifies how an entity should classify and measure its financial assets. It requires that all financial assets be classified in full on the basis of the entity's business model for the management of financial assets and the characteristics of the contractual cash flows of the financial assets. Financial assets are measured at amortized cost or fair value. Only financial assets that are classified as measured at amortized cost will be tested for impairment. On October 28, 2010, the IASB published a revised version of IFRS 9, Financial Instruments.

The revised Standard retains the requirements for the classification and measurement of financial assets that was published in November 2009, but adds guidelines on the classification and measurement of financial liabilities. As part of the restructuring of IFRS 9, the IASB has also replicated the guidance on the derecognition of financial instruments and related implementation guidance from IAS 39 to IFRS 9. These new guidelines conclude the first phase of the IASB project to replace IAS 39 The other phases, impairment and hedge accounting, have not yet been finalized.

The guidance in IFRS 9 on the classification and measurement of financial assets has not changed from those in IAS 39. In other words, financial liabilities will continue to be measured at amortized cost or at fair value through profit or loss. The concept of derivatives bifurcation incorporated in a contract for a financial asset has not changed either. Financial liabilities held for trading will continue to be measured at fair value through profit or loss, and all other financial assets will be measured at amortized cost unless the fair value option is applied using the criteria currently in IAS 39.

Notwithstanding the above, there are two differences with respect to IAS 39:

- Presentation of the effects of changes in fair value attributable to the credit risk of a liability; and

- The elimination of the exemption of cost for liabilities derivatives to be settled through the delivery of non-traded equity instruments.

On December 16, 2011, the IASB issued Compulsory Application Date of IFRS 9 and Transition Disclosures, deferring the effective date of both the 2009 and 2010 versions to annual periods beginning on or after January 1, 2015 Prior to the amendments, the application of IFRS 9 was mandatory for annual periods beginning on or after 2013. The amendments change the requirements for the transition from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9. In addition, they also modify IFRS 7 Financial Instruments: Disclosures to add certain requirements in the reporting period in which the date of application of IFRS 9 is included. Amendments subsequent to this standard have modified the effective date of this standard for annual periods beginning on January 1, 2018. The Administration in accordance with the established by the Superintendency of Banks and Institutions Financiers, will not apply this rule in advance, nor will it be applied until such time as the Superintendency does not provide it as a mandatory standard for all banks.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

IFRS 9, Financial Instruments - hedge accounting and amendments to IFRS 9, IFRS 7 and IAS 39 - On November 19, 2013, the IASB issued this amendment, which includes a new general model of hedge accounting, which is more closely aligned With risk management, delivering more useful information to the users of the financial statements. On the other hand, requirements related to the fair value option for financial liabilities were changed to address own credit risk, this improvement establishes that the effects of changes in the credit risk of a liability should not affect the result of the period a Unless the liability is held for trading; Early adoption of this amendment is permitted without the application of the other requirements of IFRS 9. In addition, it conditions the effective date of entry into force at the end of the draft IFRS 9, likewise allowing its adoption. Management is evaluating the potential impact of adopting these amendments with respect to IFRS 7 and IAS 39, since those referred to IFRS 9 by express provision of the SBIF will not apply as long as the aforementioned Superintendency does not provide it as a standard of Compulsory use for all banks.

IFRS 9, Financial Instruments - On July 24, 2014, the IASB published IFRS 9 - Financial Instruments, this final document includes the rules already issued together with a new expected loss model and small modifications to the requirements of classifications and measurement for the Financial assets, adding a new category of financial instruments: assets at fair value with changes in other comprehensive income for certain debt instruments. It also includes additional guidance on how to apply the business model and evidence of contractual cash flow characteristics.

This rule is effective for periods beginning after January 1, 2018. Early application is permitted. The Administration, in accordance with what is established by the Superintendency of Banks and Financial Institutions, will not apply this rule in advance, nor will it be applied as long as the aforementioned Superintendency does not provide it as a mandatory standard for all banks.

IFRS 15, Income from contracts with clients - On May 28, 2014, the IASB published IFRS 15, which aims to establish principles for reporting useful information to users of financial information about the nature, amount, timing and uncertainty of The income and cash flows generated from an entity's contracts with its customers. IFRS 15 eliminates IAS 11 Construction Contracts, IAS 18 Income, IFRIC 13 Loyalty Programs with Customers, IFRIC 15 Real Estate Construction Agreements, IFRIC 18 Transfer of Assets from Customers and SIC 31 Revenue - Exchange of Advertising Services.

This rule is effective as of January 1, 2017, however, the IASB has deferred its entry into force for annual periods beginning on or after January 1, 2018. Advance application is permitted. Management is evaluating the potential impact of adopting this standard.

Amendments to IFRS 10 and IAS 28 - Sale and Contribution of assets between an Investor and its associate or joint venture - On September 11, 2014, the IASB published this amendment, which clarifies the scope of the profits and losses recognized in a transaction involving To an associate or joint venture, and that it depends on whether the asset sold or contribution constitutes a business. Therefore, IASB concluded that all of the gains or losses must be recognized against loss of control of a business. In addition, gains or losses arising from the sale or contribution of a non-business subsidiary (definition of IFRS 3) to an associate or joint venture must be recognized only to the extent of unrelated interests in the associate or joint venture.

This standard was initially effective as of January 1, 2016, however, on December 17, 2015, the IASB issued "Effective Date of Amendment to IFRS 10 and IAS 28" postponing indefinitely the entry into force of this standard. The Administration will be waiting for the new validity to evaluate the potential effects of this modification.

IFRS 16 Leases - On January 13, 2016, the IASB issued this new regulation which replaces IAS 17 Leases, IFRIC 4 Determination of whether an agreement contains a lease, SIC 15 Operating leases - incentives and SIC 27 Evacuation of the essence of Transactions that take the legal form of a lease. The main effects of this rule apply to tenant accounting, mainly because it eliminates the dual accounting model: operational or financial leasing, this means that tenants must recognize "a right to use an asset" and a liability for Lease (the present value of lease futures payments). In the case of the landlord the current practice is maintained - that is, lessors continue to classify leases as financial and operating leases. This regulation is applicable as of January 1, 2019, with early application permitted if IFRS 15 "Customer Contract Revenue" is applied. The Administration is evaluating the potential impact of the adoption of these regulations.

Clarifications to IFRS 15 Revenue from Ordinary Activities from Client Contracts - This clarification issued on April 12, 2016, does not change the principles underlying the regulation, but only clarifies and offers some alternatives for the transition. The matters addressed by this amendment relate to: Identification of performance obligations, Principal and agent considerations, and licenses.

An entity shall apply these amendments for annual periods beginning on or after 1 January 2018. Early application is permitted. If an entity applies those changes in a period beginning earlier, it will disclose this fact. The Administration is evaluating the potential impact of the adoption of these regulations.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Amendment to IFRS 2 Classification and measurement of share-based payment transactions - This amendment, issued on June 20, 2016, addresses matters on which the IASB decided to address matters, are:

- Accounting for payment transactions based on cash settled shares that include a performance condition.

- Classification of share-based payment transactions with balancing-off characteristics.

- Accounting for changes in share-based payment transactions from cash settled to settled in equity instruments.

This amendment is applicable from January 1, 2018 on a prospective basis, with early application allowed. The Administration is evaluating the potential impact of the adoption of these regulations.

Amendment to IFRS 4 Application of IFRS 9 Financial Instruments and IFRS 4 Insurance Contracts - This amendment issued on September 12, 2016 is intended to address concerns about the differences between the effective date of IFRS 9 and the next new contract standard This amendment provides two options for entities issuing insurance contracts within the scope of IFRS 4:

- An option that allows the entities to reclassify from profit or loss to other comprehensive income, some of the income or expenses derived from the designated financial assets; This is the so-called superposition approach.

- An optional temporary exemption from the application of IFRS 9 for entities whose main activity is the issuance of contracts within the scope of IFRS 4; This is the so-called deferral approach.

An entity that chooses to apply the retroactive overlapping approach to the classification of financial assets will do so when IFRS 9 is applied for the first time, while the entity choosing to apply the deferral approach will do so for annual periods beginning in Or after January 1, 2018. Management has assessed that this standard will have no effect on the Bank's financial statements.

IFRIC 22 Transactions in foreign currency and consideration received / delivered in advance - This interpretation issued on December 8, 2016 clarifies the accounting of transactions that include the receipt or payment of an early consideration in a foreign currency. The Interpretation covers transactions in foreign currency when an entity recognizes an asset or a non-monetary liability arising from the payment or early receipt of a consideration before the entity recognizes the related asset, expense or income. It does not apply when an entity measures the initial recognition of the asset, expense or income related to its fair value or the fair value of the consideration received or paid on a date other than the date of initial recognition of the non-monetary asset or liability. In addition, it is not necessary to apply the Interpretation to income taxes, insurance contracts or reinsurance contracts.

The date of the transaction for the purpose of determining the exchange rate is the date of the initial recognition of the non-monetary asset paid in advance or of the deferred income liability. If there are several payments or receipts in advance, a transaction date is established for each payment or receipt. IFRIC 22 is effective for annual reporting periods beginning on or after 1 January 2018. Advance application is permitted. Management has assessed that this standard will have no effect on the Bank's financial statements.

Annual improvements, cycle 2014-2016

Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards - Eliminates the short-term exemptions contained in paragraphs E3-E7 (Transitory Provisions of Financial Instruments, Employee Benefit and Investment Entities) of IFRS 1, Since they have fulfilled the intended purpose.

Amendment to IAS 28 Investments in Associates and Joint Ventures - Clarifies that the choice to measure at fair value through profit and loss (FVTPL) an investment in an associate or joint venture belonging to an entity that is a venture capital organization, or Another qualified entity, is available for each investment in an associated entity or joint venture on the basis of the investment, upon initial recognition.

Amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after 1 January 2018. Management is assessing the potential impact of the adoption of this standard.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 02

SIGNIFICANT EVENTS

As of March 31, 2017, the following significant events have occurred and affected the Bank`s operations and Unaudited Consolidated Interim Financial Statements.

a) Use of Profits and Distribution of Dividends

In the Ordinary Board Meeting of Banco Santander Chile held on March 16, 2017, agreed to quote a Shareholders' meeting for April 26, 2017, in order to discuss, among other matters, the proposal to distribute a dividend of $ 1.75459102 per 70% of the profits for the year 2016 and that the remaining 30% of the profits of the same year 2016 is destined to increase the Bank's reserves.

b) Issuance of bonds – As of March 31, 2017

b.1) Senior bonds as of March 31 2017

During the first quarter of 2017, the Bank did not issue senior bonds.

b.2) Subordinated bonds as of March 31, 2017

During the first quarter of 2017, the Bank did not issue subordinated bonds.

b.3) Mortgage bonds as of March 31, 2017

During the first quarter of 2017, the Bank did not issue mortgage bonds.

b.4) Repurchased bonds

In the three months ended March 31, 2017 the Bank has repurchased the following bonds:

Date		Currency			Repurchase amount
03-06-2017		Senior			USD	6,900,000

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 03

REPORTING SEGMENTS

The Bank manages and measures the performance of its operations by business segments. The information disclosed in this note is not necessarily comparable to that of other financial institutions, since it is based on management’s internal information system by segment.

Inter-segment transactions are conducted under normal arm’s length commercial terms and conditions. Each segment’s assets, liabilities, and income include items directly attributable to the segment to which they can be allocated on a reasonable basis.

Due to changes aimed at improving relations with its customers and streamlining processes, the Bank has modified its internal structure: these changes consist in internal components (the aggregation of subsegments) but do not modify the existing segments or their managers. For this reason, the disclosure has been adapted (simplified) to reflect how the Bank is currently managed.

Under IFRS 8, the Bank has aggregated operating segments with similar economic characteristics according to the aggregation criteria specified in the standard. A reporting segment consists of clients that are offered differentiated but, considering how their performance is measured, are homogenous, thus they form part of the same reporting segment. Overall, this aggregation has no significant impact on the understanding of the nature and effects of the Bank’s business activities and the economic environment.

The information relating to 2016 has been prepared using the current criteria so that the figures presented are comparable.

The Bank has the reportable segments noted below:

Retail Banking

Consists of individuals and small to middle-sized entities (SMEs) with annual income less than Ch$2,000 million. This segment gives customers a variety of services, including consumer loans, credit cards, auto loans, commercial loans, foreign exchange, mortgage loans, debit cards, checking accounts, savings products, mutual funds, stockbrokerage, and insurance brokerage. Additionally the SME clients are offered government-guaranteed loans, leasing and factoring.

Middle-market

This segment is made up of companies and large corporations with annual sales exceeding Ch$2,000 million. It serves institutions such as universities, government entities, local and regional governments and companies engaged in the real estate industry who carry out projects to sell properties to third parties and annual sales exceeding Ch$800 million with no upper limit. The companies within this segment have access to many products including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds, and insurance brokerage. Also companies in the real estate industry are offered specialized services to finance residential projects, with the aim of expanding sales of mortgage loans.

Global Corporate Banking

This segment consists of foreign and domestic multinational companies with sales over Ch$10,000 million. The companies within this segment have access to many products including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, investments, savings products, mutual funds and insurance brokerage.

This segment also consists of a Treasury Division which provides sophisticated financial products, mainly to companies in the Middle-market and Global Corporate Banking segments. These include products such as short-term financing and fund raising, brokerage services, derivatives, securitization, and other tailor-made products. The Treasury area may act as brokers to transactions and also manages the Bank’s investment portfolio.

Corporate Activities (“Other”)

This segment mainly includes the results of our Financial Management Division, which develops global management functions, including managing inflation rate risk, foreign currency gaps, interest rate risk and liquidity risk. Liquidity risk is managed mainly through wholesale deposits, debt issuances and the Bank’s available for sale portfolio. This segment also manages capital allocation by unit. These activities usually result in a negative contribution to income.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 03

REPORTING SEGMENTS, continued

In addition, this segment encompasses all the intra-segment income and all the activities not assigned to a given segment or product with customers.

The segments’ accounting policies are those described in the summary of accounting policies. The Bank earns most of its income in the form of interest income, fee and commission income and income from financial operations. To evaluate a segment’s financial performance and make decisions regarding the resources to be assigned to segments, the Chief Operating Decision Maker (CODM) bases his assessment on the segment's interest income, fee and commission income, and expenses.

Below are the tables showing the Bank’s results by business segment, for the periods ending as of March 31, 2017 and 2016:

	For the three months ended March 31, 2017
	Loans and accounts receivable from customers (1)		Net interest income			Net fee and commission income		Financial transactions , net (2)		Provision for loan losses			Support expenses (3)			Segment`s net contribution
	MCh$		MCh$			MCh$		MCh$		MCh$			MCh$			MCh$

Retail Banking		18,673,359		238,971			52,175		5,045		(71,551	)		(128,668	)		95,972
Middle- market		6,534,707		65,455			9,143		3,008		(3,129	)		(22,293	)		52,184
Commercial Banking		25,208,066		304,426			61,318		8,053		(74,680	)		(150,961	)		148,156

Global Corporate Banking		2,162,457		24,248			10,642		17,449		557			(14,520	)		38,376
Other		82,127		(10,099	)		863		11,230		261			(3,299	)		(1,044	)

Total		27,452,650		318,575			72,823		36,732		(73,862	)		(168,780	)		185,488
Other operating income																	13,019
Other operating expenses																	(19,001	)
Income from investments in associates and other companies																	720
Income tax expense																	(37,208	)
Net income for the period																	143,018

(1) Loans and accounts receivable from customers, without deducting their allowances for loan losses.

(2) The sum of net income (expense) from financial operations and foreign exchange gains or losses.

(3) The sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 03

REPORTING SEGMENTS, continued

	For the three months ended March 31, 2016
	Loans and accounts receivable from customers (1)		Net interest income		Net fee and commission income		Financial transactions , net (2)		Provision for loan losses			Support expenses (3)			Segment`s net contribution
	MCh$		MCh$		MCh$		MCh$		MCh$			MCh$			MCh$

Retail Banking		17,346,399		223,985		45,668		4,068		(82,805	)		(128,719	)		62,197
Middle-market		6,142,987		61,707		9,356		5,061		(2,536	)		(22,091	)		51,497
Commercial Banking		23,489,386		285,692		55,024		9,129		(85,341	)		(150,810	)		113,694

Global Corporate Banking		2,155,131		23,127		7,085		10,931		517			(13,933	)		27,727
Other		81,444		4,054		882		14,202		6,898			(1,263	)		24,773

Total		25,725,961		312,873		62,991		34,262		(77,926	)		(166,006	)		166,194
Other operating income																5,248
Other operating expenses																(16,271	)
Income from investments in associates and other companies																531
Income tax expense																(29,662	)
Net income for the period																126,040

(1) Loans and accounts receivable from customers, without deducting their allowances for loan losses.

(2) The sum of net income (expense) from financial operations and foreign exchange gains or losses.

(3) The sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 04

CASH AND CASH EQUIVALENTS

The detail of the balances included under cash and cash equivalents is as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Cash and deposit in banks
Cash		623,536		570,317
Deposit in the Central Bank of Chile		202,040		507,275
Deposit in domestic banks		941		1,440
Deposit in foreign banks		1,001,894		1,200,357
Subtotal		1,828,411		2,279,389

Cash in process of collection, net		198,594		206,810

Cash and cash equivalents		2,027,005		2,486,199

The balance of funds held in cash and at the Central Bank of Chile reflects the reserves that the Bank must maintain on average each month in accordance with the regulations governing minimum reserves.

Cash in process of collection:

Cash items in process of collection and in process of being cleared represent domestic transactions which have not been processed through the central domestic clearinghouse or international transactions which may be delayed in settlement due to timing differences. These transactions are as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Assets
Documents held by other banks (document to be cleared)		186,469		200,109
Funds receivable		614,432		295,174
Subtotal		800,901		495,283
Liabilities
Funds payable		602,307		288,473
Subtotal		602,307		288,473

Cash in process of collection, net		198,594		206,810

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 05

TRADING INVESTMENTS

The detail of instruments deemed as financial trading investments is as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Chilean Central Bank and Government securities
Chilean Central Bank Bonds		185,483		158,686
Chilean Central Bank Notes		-		-
Other Chilean Central Bank and Government securities		196,410		237,325
Subtotal		381,893		396,011

Other Chilean securities
Time deposits in Chilean financial institutions		-		-
Mortgage finance bonds of Chilean financial institutions		-		-
Chilean financial institutions bonds		-		-
Chilean corporate bonds		4,082		976
Other Chilean securities		-		-
Subtotal		4,082		976

Foreign financial securities
Foreign Central Banks and Government securities		-		-
Other foreign financial instruments		-		-
Subtotal		-		-

Investments in mutual funds
Funds managed by related entities		1,215		-
Funds managed by third parties		-		-
Subtotal		1,215		-

Total		387,190		396,987

As of March 31, 2017 and December 31, 2016, there were no trading investments sold under contracts to resell to clients and financial institutions.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

As of March 31, 2017 and December 31, 2016 the Bank holds the following portfolio of derivative instruments:

	As of March 31, 2017
	Notional amount								Fair value
	Up to 3 Months		More than 3 months to 1 year		More than 1 year		Total		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Fair value hedge derivatives
Currency forwards		-		-		-		-		-		-
Interest rate swaps		82,000		570,507		1,663,770		2,316,277		44,115		486
Cross currency swaps		127,222		381,979		1,245,009		1,754,210		41,382		29,791
Call currency options		-		-		-		-		-		-
Call interest rate options		-		-		-		-		-		-
Put currency options		-		-		-		-		-		-
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotal		209,222		952,486		2,908,779		4,070,487		85,497		30,277

Cash flow hedge derivatives
Currency forwards		488,712		517,096		-		1,005,808		12,959		526
Interest rate swaps		-		-		-		-		-		-
Cross currency swaps		852,298		2,419,366		4,857,809		8,129,473		32,571		92,563
Call currency options		-		-		-		-		-		-
Call interest rate options		-		-		-		-		-		-
Put currency options		-		-		-		-		-		-
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotal		1,341,010		2,936,462		4,857,809		9,135,281		45,530		93,089

Trading derivatives
Currency forwards		12,167,568		11,439,359		3,184,431		26,791,358		152,257		160,798
Interest rate swaps		5,746,115		15,956,771		49,133,140		70,836,026		668,643		559,969
Cross currency swaps		2,823,658		8,511,557		52,976,879		64,312,094		1,547,295		1,448,644
Call currency options		111,503		50,531		6,371		168,405		852		311
Call interest rate options		-		-		-		-		-		-
Put currency options		138,515		33,041		660		172,216		556		656
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotal		20,987,359		35,991,259		105,301,481		162,280,099		2,369,603		2,170,378

Total		22,537,591		39,880,207		113,068,069		175,485,867		2,500,630		2,293,744

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

	As of December 31, 2016
	Notional amount								Fair value
	Up to 3 months		More than 3 months to 1 year		More than 1 year		Total		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Fair value hedge derivatives
Currency forwards		-		-		-		-		-		-
Interest rate swaps		74,086		514,454		1,402,870		1,991,410		38,977		211
Cross currency swaps		424,086		505,902		1,239,490		2,169,478		32,640		32,868
Call currency options		-		-		-		-		-		-
Call interest rate options		-		-		-		-		-		-
Put currency options		-		-		-		-		-		-
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotal		498,172		1,020,356		2,642,360		4,160,888		71,617		33,079

Cash flow hedge derivatives
Currency forwards		915,879		639,939		-		1,555,818		10,216		3,441
Interest rate swaps		-		-		-		-		-		-
Cross currency swaps		897,480		2,613,706		4,260,194		7,771,380		43,591		68,894
Call currency options		-		-		-		-		-		-
Call interest rate options		-		-		-		-		-		-
Put currency options		-		-		-		-		-		-
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotal		1,813,359		3,253,645		4,260,194		9,327,198		53,807		72,335

Trading derivatives
Currency forwards		15,840,731		11,240,251		3,358,765		30,439,747		185,618		209,955
Interest rate swaps		6,889,665		12,512,285		49,747,459		69,149,409		627,047		526,695
Cross currency swaps		3,966,443		7,589,201		53,148,109		64,703,753		1,562,068		1,449,550
Call currency options		73,943		20,994		2,664		97,601		521		5
Call interest rate options		-		-		-		-		-		-
Put currency options		52,143		7,892		2,664		62,699		104		542
Put interest rate options		-		-		-		-		-		-
Interest rate futures		-		-		-		-		-		-
Other derivatives		-		-		-		-		-		-
Subtotal		26,822,925		31,370,623		106,259,661		164,453,209		2,375,358		2,186,747

Total		29,134,456		35,644,624		113,162,215		177,941,295		2,500,782		2,292,161

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

Hedge accounting

Fair value hedge

The Bank uses cross-currency swaps, and interest rate swaps to hedge its exposure to changes in fair value of hedged items attributable to interest rates. The aforementioned hedging instruments change the effective cost of long-term issuances from a fixed interest rate to a variable interest rate.

The hedged items and hedge instruments under fair value hedges as of March 31, 2017 and December 31, 2016, classified by term to maturity are as follows:

	As of March 31, 2017
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$

Hedged item
Available for sale investments
Yankee bonds		-		-		13,203		118,829		132,032
Mortgage financing bonds		-		-		99,024		468,714		567,738
Treasury bonds (BTP)		-		-		5,430		-		5,430
Central bank bonds (BCP)		-		-		-		-		-
Time deposits and other demand liabilities
Time deposits		756,996		24,000		-		-		780,996
Issued debt instruments
Senior bonds		404,712		907,154		749,880		522,545		2,584,291
Total		1,161,708		931,154		867,537		1,110,088		4,070,487
Hedging instrument
Cross currency swaps		509,200		442,154		530,310		272,546		1,754,210
Interest rate swaps		652,508		489,000		337,227		837,542		2,316,277
Total		1,161,708		931,154		867,537		1,110,088		4,070,487

	As of December 31, 2016
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$

Hedged item
Available for sale investments
Yankee bond		-		-		6,660		56,610		63,270
Mortgage finance bonds		-		-		5,651		-		5,651
Treasury bonds (BTP)		-		-		33,300		366,300		399,600
Central bank bonds (BCP)		-		-		-		-		-
Time deposits and other demand liabilities
Time deposits		993,659		-		-		-		993,659
Issued debt instruments
Senior bonds		524,869		652,046		1,000,905		520,888		2,698,708
Total		1,518,528		652,046		1,046,516		943,798		4,160,888
Hedging instrument
Cross currency swaps		929,988		437,046		531,556		270,888		2,169,478
Interest rate swaps		588,540		215,000		514,960		672,910		1,991,410
Total		1,518,528		652,046		1,046,516		943,798		4,160,888

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

Cash flow hedges

The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates of mortgages, bonds and interbank loans at a variable rate. To cover the inflation risk in some items, both forwards as well as currency swaps are used.

The notional values of the hedged items as of March 31, 2017 and December 31, 2016, and the period when the cash flows will be generated are as follows:

	As of March 31, 2017
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$

Hedged item
Loans and accounts receivables from customers
Mortgage loan		870,243		786,043		1,330,869		586,945		3,574,100
Commercial loans		898,196		-		-		-		898,196
Available for sale investments
Time deposits (ASI)		-		-		125,556		380,481		506,037
Yankee bond		-		-		-		-		-
Chilean Central Bank bonds		26,259		-		-		-		26,259
Time deposits and other time liabilities
Time deposits		52,242		-		-		-		52,242
Issued debt instruments
Senior bonds (variable rate)		591,652		401,949		284,768		-		1,278,369
Senior bonds (fixed rate)		-		109,075		245,254		106,144		460,473
Interbank borrowings
Interbank loans		1,812,110		414,083		-		-		2,226,193
Total		4,250,702		1,711,150		1,986,447		1,073,570		9,021,869
Hedging instrument
Cross currency swaps		3,271,664		1,711,150		1,986,447		1,073,570		8,042,831
Currency forwards		979,038		-		-		-		979,038
Total		4,250,702		1,711,150		1,986,447		1,073,570		9,021,869

	As of December 31, 2016
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$

Hedged item
Loans and accounts receivables from customers
Mortgage loan		1,083,972		312,546		900,746		956,803		3,254,067
Commercial loans		972,360		-		-		-		972,360
Available for sale investments
Time deposits (ASI)		-		-		126,140		406,881		533,021
Yankee bond		20,754		-		-		-		20,754
Chilean Central Bank bonds		26,196		-		-		-		26,196
Time deposits and other time liabilities
Time deposits		285,090		-		-		-		285,090
Issued debt instruments
Senior bonds (variable rate)		854,414		399,451		285,355		-		1,539,220
Senior bonds (fixed rate)		140,765		108,409		243,121		105,600		597,895
Interbank borrowings
Interbank loans		1,683,453		415,142		-		-		2,098,595
Total		5,067,004		1,235,548		1,555,362		1,469,284		9,327,198
Hedging instrument
Cross currency swaps		3,511,186		1,235,548		1,555,362		1,469,284		7,771,380
Currency forwards		1,555,818		-		-		-		1,555,818
Total		5,067,004		1,235,548		1,555,362		1,469,284		9,327,198

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

An estimate of the periods in which flows are expected to be produced is as follows:

b.1) Forecasted cash flows for interest rate risk:

	As of March 31, 2017
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		182,758			84,235			32,633			3,367			302,993
Outflows		(61,962	)		(45,596	)		(16,873	)		-			(124,431	)
Net flows		120,796			38,639			15,760			3,367			178,562

Hedging instrument
Inflows		61,962			45,596			16,873			-			124,431
Outflows (*)		(182,758	)		(84,235	)		(32,633	)		(3,367	)		(302,993	)
Net flows		(120,796	)		(38,639	)		(15,760	)		(3,367	)		(178,562	)

(*) Only includes cash flow forecast portion of the hedge instruments used to cover interest rate risk.

	As of December 31, 2016
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		159,439			83,193			32,647			3,748			279,027
Outflows		(72,631	)		(45,857	)		(18,040	)		-			(136,528	)
Net flows		86,808			37,336			14,607			3,748			142,499

Hedging instrument
Inflows		72,631			45,857			18,040			-			136,528
Outflows (*)		(159,439	)		(83,193	)		(32,647	)		(3,748	)		(279,027	)
Net flows		(86,808	)		(37,336	)		(14,607	)		(3,748	)		(142,499	)

(*) Only includes cash flow forecast portion of the hedge instruments used to cover interest rate risk.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

b.2) Forecasted cash flows for inflation risk:

	As of March 31, 2017
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		17,809			20,911			104,253			83,624			226,597
Outflows		(627	)		-			-			-			(627	)
Net flows		17,182			20,911			104,253			83,624			225,970

Hedging instrument
Inflows		627			-			-			-			627
Outflows		(17.809	)		(20.911	)		(104.253	)		(83.624	)		(226,597	)
Net flows		(17.182	)		(20.911	)		(104.253	)		(83.624	)		(225,970	)

	As of December 31, 2016
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		22,586			11,896			56,107			115,753			206,342
Outflows		(4,900	)		-			-			-			(4,900	)
Net flows		17,686			11,896			56,107			115,753			201,442

Hedging instrument
Inflows		4,900			-			-			-			4,900
Outflows		(22,586	)		(11,896	)		(56,107	)		(115,753	)		(206,342	)
Net flows		(17,686	)		(11,896	)		(56,107	)		(115,753	)		(201,442	)

b.2) Forecasted cash flows for exchange rate risk:

As of March 31, 2017 and December 31, 2016, the Bank did not have cash flow hedges for exchange rate risk.

The accumulated effect of the mark to market adjustment of cash flow hedges produced by hedge instruments used in hedged cash flow was recorded in the Unaudited Consolidated Interim Statement of Changes in Equity, specifically within Other comprehensive income, as of March 31, 2017 and 2016, and is as follows:

	As of March 31,
	2017			2016
Hedged item	MCh$			MCh$

Interbank loans		(10,463	)		(2,677	)
Time deposits and other time liabilities		(2	)		(27	)
Issued debt instruments		(11,344	)		247
Available for sale investments		13,701			(7,605	)
Loans and accounts receivable from customers		(3,611	)		(2,738	)
Net flows		(11,719	)		(12,800	)

Since the inflows and outflows for both the hedged item and the hedging instrument mirror each other, the hedges are nearly 100% effective, which means that the fluctuations of fair value attributable to risk components are almost completely offset. As of March 31, 2017 and 2017, Ch$473 million and Ch$473 million respectively, are recognized in income for the ineffective portion.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 06

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING, continued

During the year, the Bank did not have any cash flow hedges for forecast transactions.

The income generated by cash flow hedges that were reclassified from other comprehensive income to the period’s net income is as follows:

	As of March 31,
	2017			2016
	MCh$			MCh$

Bond hedging derivatives		(115	)		7
Interbank loans hedging derivatives		-			-

Cash flow hedge net income		(115	)		7

See Note 19 “Equity”, letter d)

Net investment hedges in foreign operations:

As of March 31, 2017 and December 31, 2016, the Bank does not have any foreign net investment hedges in its hedge accounting portfolio.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 07

INTERBANK LOANS

As of March 31, 2017 and December 31, 2016, balances of “Interbank loans” are as follows:

	As of March 31,			As of December 31,
	2017			2016
	MCh$			MCh$

Domestic banks
Loans and advances to banks		-			-
Deposits in the Central Bank of Chile - not available		-			-
Non-transferable Chilean Central Bank Bonds		-			-
Other Central Bank of Chile loans		-			-
Interbank loans		32			23
Overdrafts in checking accounts		-			-
Non-transferable domestic bank loans		-			-
Other domestic bank loans		77			51
Allowances and impairment for domestic bank loans		-			-

Foreign interbank loans
Interbank loans – Foreign		351,935			272,733
Overdrafts in checking accounts		-			-
Non-transferable foreign bank deposits		-			-
Other foreign bank loans		-			-
Provisions and impairment for foreign bank loans		(164	)		(16	)

Total		351,880			272,635

The amount of provisions and impairment of interbank loans in each period is shown below:

	As of March 31,								As of December 31,
	2017								2016
	Domestic banks		Foreign banks			Total			Domestic banks			Foreign banks			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$

Balance as of January 1		-		172			172			-			16			16
Charge-offs		-		-			-			-			-			-
Provisions established		-		29			29			1			238			239
Provisions released		-		(37	)		(37	)		(1	)		(82	)		(83	)

Total		-		164			164			-			172			172

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS

Loans and accounts receivable from customers

As of March 31, 2017 and December 31, 2016, the composition of the loan portfolio is as follows:

	Assets before allowances								Allowances established
	Normal portfolio		Substandard portfolio		Impaired portfolio		Total		Individual allowances		Group allowances		Total		Assets net balance
As of March 31, 2017	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans
Commercial loans		8,880,723		346,116		568,185		9,795,024		168,486		145,827		314,313		9,480,711
Foreign trade loans		1,655,201		74,132		73,073		1,802,406		61,977		1,012		62,989		1,739,417
Checking accounts debtors		180,758		6,382		13,342		200,482		3,406		7,240		10,646		189,836
Factoring transactions		345,954		2,518		3,972		352,444		4,615		592		5,207		347,237
Leasing transactions		1,310,346		78,325		85,115		1,473,786		20,324		5,642		25,966		1,447,820
Other loans and account receivable		192,703		1,194		32,797		226,694		5,272		21,674		26,946		199,748
Subtotal		12,565,685		508,667		776,484		13,850,836		264,080		181,987		446,067		13,404,769

Mortgage loans
Loans with mortgage finance bonds		29,285		-		1,227		30,512		-		18		18		30,494
Mortgage mutual loans		119,660		-		4,488		124,148		-		222		222		123,926
Other mortgage mutual loans		8,181,819		-		410,845		8,592,664		-		58,946		58,946		8,533,718
Subtotal		8,330,764		-		416,560		8,747,324		-		59,186		59,186		8,688,138

Consumer loans
Installment consumer loans		2,533,606		-		262,599		2,796,205		-		249,859		249,859		2,546,346
Credit card balances		1,393,056		-		30,735		1,423,791		-		40,643		40,643		1,383,148
Leasing transactions		5,065		-		48		5,113		-		79		79		5,034
Other consumer loans		271,649		-		5,689		277,338		-		10,007		10,007		267,331
Subtotal		4,203,376		-		299,071		4,502,447		-		300,588		300,588		4,201,859

Total		25,099,825		508,667		1,492,115		27,100,607		264,080		541,761		805,841		26,294,766

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued

	Assets before allowances								Allowances established
	Normal portfolio		Substandard Portfolio		Impaired portfolio		Total		Individual allowances		Group allowances		Total		Assets net balance
As of December 31, 2016	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans
Commercial loans		8,946,709		327,996		578,952		9,853,657		178,648		148,703		327,351		9,526,306
Foreign trade loans		1,622,422		131,900		75,582		1,829,904		63,767		901		64,668		1,765,236
Checking accounts debtors		162,470		4,262		12,736		179,468		3,130		6,854		9,984		169,484
Factoring transactions		288,292		3,771		4,688		296,751		5,363		620		5,983		290,768
Leasing transactions		1,325,583		69,302		90,238		1,485,123		19,710		5,546		25,256		1,459,867
Other loans and account receivable		193,496		1,678		27,388		222,562		5,355		20,482		25,837		196,725
Subtotal		12,538,972		538,909		789,584		13,867,465		275,973		183,106		459,079		13,408,386

Mortgage loans
Loans with mortgage finance bonds		31,368		-		1,211		32,579		-		18		18		32,561
Mortgage mutual loans		115,400		-		4,534		119,934		-		203		203		119,731
Other mortgage mutual loans		8,074,900		-		391,943		8,466,843		-		60,820		60,820		8,406,023
Subtotal		8,221,668		-		397,688		8,619,356		-		61,041		61,041		8,558,315

Consumer loans
Installment consumer loans		2,468,692		-		253,673		2,722,365		-		249,545		249,545		2,472,820
Credit card balances		1,418,409		-		29,709		1,448,118		-		41,063		41,063		1,407,055
Leasing transactions		5,062		-		55		5,117		-		72		72		5,045
Other consumer loans		266,056		-		5,147		271,203		-		9,339		9,339		261,864
Subtotal		4,158,219		-		288,584		4,446,803		-		300,019		300,019		4,146,784

Total		24,918,859		538,909		1,475,856		26,933,624		275,973		544,166		820,139		26,113,485

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued

Portfolio characteristics

As of March 31, 2017 and December 31, 2016, the portfolio before allowances is as follows, by customer`s economic activity:

	Domestic loans (*)				Foreign interbank loans (**)				Total loans				Distribution percentage
	As of March 31,		As of December 31,		As of March 31,		As of December 31,		As of March 31,		As of December 31,		As of March 31,		As of December 31,
	2017		2016		2017		2016		2017		2016		2017		2016
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		%		%
Commercial loans
Manufacturing		1,205,687		1,180,886		-		-		1,205,687		1,180,886		4.39		4.34
Mining		333,110		340,554		-		-		333,110		340,554		1.21		1.25
Electricity, gas, and water		450,792		442,936		-		-		450,792		442,936		1.64		1.63
Agriculture and livestock		1,114,029		1,096,659		-		-		1,114,029		1,096,659		4.06		4.03
Forest		100,073		96,806		-		-		100,073		96,806		0.36		0.36
Fishing		287,460		296,592		-		-		287,460		296,592		1.05		1.09
Transport		745,374		787,510		-		-		745,374		787,510		2.72		2.89
Communications		197,954		196,934		-		-		197,954		196,934		0.72		0.72
Construction		1,847,334		1,792,485		-		-		1,847,334		1,792,485		6.73		6.59
Commerce		3,016,590		3,120,400		351,935		272,733		3,368,525		3,393,133		12.27		12.47
Services		462,420		482,900		-		-		462,420		482,900		1.68		1.77
Other		4,090,122		4,032,877		-		-		4,090,122		4,032,877		14.91		14.84

Subtotal		13,850,945		13,867,539		351,935		272,733		14,202,880		14,140,272		51.73		51.98

Mortgage loans		8,747,324		8,619,356		-		-		8,747,324		8,619,356		31.86		31.68

Consumer loans		4,502,447		4,446,803		-		-		4,502,447		4,446,803		16.40		16.34

Total		27,100,716		26,933,698		351,935		272,733		27,452,651		27,206,431		100.00		100.00

(*)

Includes domestic interbank loans for Ch$109 million as of March 31, 2017 (Ch$74 million as of December 31, 2016), see Note 7.

(**)

Includes foreign interbank loans for Ch$351,935 million as of March 31, 2017 (Ch$272,733 million as of December 31, 2016), see Note 7.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued

Impaired portfolio

As of March 31, 2017 and December 31, 2016, the impaired portfolio is as follows:

	As of March 31,								As of December 31,
	2017								2016
	Commercial		Mortgage		Consumer		Total		Commercial		Mortgage		Consumer		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Individually impaired portfolio		450,115		-		-		450,115		439,707		-		-		439,707
Non-performing loans (collectively evaluated)		327,342		160,916		106,597		594,855		316,838		147,572		99,721		564,131
Other impaired portfolio		174,057		255,644		192,474		622,175		172,624		250,116		188,863		611,603
Total		951,514		416,560		299,071		1,667,145		929,169		397,688		288,584		1,615,441

ii)

The impaired portfolio with or without guarantee as of March 31, 2017 and December 31, 2016 is as follows:

	As of March 31,								As of December 31,
	2017								2016
	Commercial		Mortgage		Consumer		Total		Commercial		Mortgage		Consumer		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Secured debt	543,939		375,569		37,558		957,066		519,821		357,320		35,134		912,275
Unsecured debt		407,575		40,991		261,513		710,079		409,348		40,368		253,450		703,166
Total		951,514		416,560		299,071		1,667,145		929,169		397,688		288,584		1,615,441

iii)

The portfolio of non-performing loans as of March 31, 2017 and December 31, 2016 is as follows:

	As of March 31,								As of December 31,
	2017								2016
	Commercial		Mortgage		Consumer		Total		Commercial		Mortgage		Consumer		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Secured debt	165,623		142,340		11,661		319,624		159,965		129,632		8,940		298,537
Unsecured debt		161,719		18,576		94,936		275,231		156,873		17,940		90,781		265,594
Total		327,342		160,916		106,597		594,855		316,838		147,572		99,721		564,131

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued

Allowances

The changes in allowances balances during 2017 and 2016 are as follows:

	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
Activity during 2017	MCh$			MCh$			MCh$			MCh$			MCh$

Balance as of December 31, 2016		275,973			183,106			61,041			300,019			820,139
Allowances established		17,943			11,953			2,589			38,517			71,002
Allowances released		(16,413	)		(3,194	)		(3,858	)		(4,322	)		(27,787	)
Allowances released due to charge-off		(13,423	)		(9,878	)		(586	)		(33,626	)		(57,513	)
Balance as of March 31, 2017		264,080			181,987			59,186			300,588			805,841

	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
Activity during 2016	MCh$			MCh$			MCh$			MCh$			MCh$

Balance as of December 31, 2015		277,099			168,551			51,160			257,869			754,679
Allowances established		72,330			73,105			30,046			178,886			354,367
Allowances released		(37,073	)		(14,432	)		(17,634	)		(18,512	)		(87,651	)
Allowances released due to charge-off		(36,383	)		(44,118	)		(2,531	)		(118,224	)		(201,256	)
Balance as of December 31, 2016		275,973			183,106			61,041			300,019			820,139

In addition to credit risk allowances, there are allowances held for:

Country risk to cover the risk taken when holding or committing resources with any foreign country. These allowances are established according to country risk classifications as set for Chapter 7-13 of the Updated Compilation of Rules, issued by the SBIF. The balances of allowances as of March 31, 2017 and December 31, 2016 are Ch$367 million and Ch$386 million, respectively.

ii)

According to SBIF’s regulations (compendium of Accounting Standards), the Bank has established allowances related to the undrawn available credit lines and contingent loans. The balances of allowances as of March 31, 2017 and December 31, 2016 are Ch$13,335 million and Ch$13,927 million, respectively and are presented in liabilities of the Unaudited Consolidated Interim Statement of Financial Position

Allowances established on customer and interbank loans

The following chart shows the balance of provisions established, associated with credits granted to customers and banks:

	As of March 31,		As of December 31,
	2017		2016

Customers loans	71,002		354,367
Interbank loans		29		239
Total		71,031		354,606

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued

ii)

Portfolio by its impaired and non-impaired status

	As of March 31, 2017
	Non-impaired												Impaired												Total portfolio
	Commercial			Mortgage			Consumer			Total non- impaired			Commercial			Mortgage			Consumer			Total impaired			Commercial			Mortgage			Consumer			Total portfolio
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Current portfolio		12,709,914			8,064,719			4,006,717			24,781,350			454,375			135,073			107,839			697,287			13,164,289			8,199,792			4,114,556			25,478,637
Overdue for 1-29 days		108,245			68,806			104,189			281,240			42,230			12,236			29,387			83,853			150,475			81,042			133,576			365,093
Overdue for 30-89 days		81,163			197,239			92,470			370,872			135,348			110,645			66,793			312,786			216,511			307,884			159,263			683,658
Overdue for 90 days or more		-			-			-			-			319,561			158,606			95,052			573,219			319,561			158,606			95,052			573,219

Total portfolio before allowances		12,899,322			8,330,764			4,203,376			25,433,462			951,514			416,560			299,071			1,667,145			13,850,836			8,747,324			4,502,447			27,100,607

Overdue loans (less than 90 days) presented as portfolio percentage		1.47	%		3.19	%		4.68	%		2.56	%		18.66	%		29.50	%		32.16	%		23.79	%		2.65	%		4.45	%		6.50	%		3.87	%

Overdue loans (90 days or more) presented as portfolio percentage		-			-			-			-			33.58	%		38.08	%		31.78	%		34.38	%		2.31	%		1.81	%		2.11	%		2.12	%

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 08

LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS, continued

	As of December 31, 2016
	Non-impaired												Impaired												Total portfolio
	Commercial			Mortgage			Consumer			Total non- impaired			Commercial			Mortgage			Consumer			Total impaired			Commercial			Mortgage			Consumer			Total portfolio
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Current portfolio		12,765,961			7,944,260			3,957,566			24,667,787			463,176			133,816			100,670			697,662			13,229,137			8,078,076			4,058,236			25,365,449
Overdue for 1-29 days		97,302			69,227			113,031			279,560			35,777			12,984			32,536			81,297			133,079			82,211			145,567			360,857
Overdue for 30-89 days		75,033			208,181			87,622			370,836			118,461			105,804			70,920			295,185			193,494			313,985			158,542			666,021
Overdue for 90 days or more		-			-			-			-			311,755			145,084			84,458			541,297			311,755			145,084			84,458			541,297

Total portfolio before allowances		12,938,296			8,221,668			4,158,219			25,318,183			929,169			397,688			288,584			1,615,441			13,867,465			8,619,356			4,446,803			26,933,624

Overdue loans (less than 90 days) presented as portfolio percentage		1.33	%		3.37	%		4.83	%		2.57	%		16.60	%		29.87	%		35.85	%		23.31	%		2.35	%		4.60	%		6.84	%		3.81	%

Overdue loans (90 days or more) presented as portfolio percentage		-			-			-			-			33.55	%		36.48	%		29.27	%		33.51	%		2.25	%		1.68	%		1.90	%		2.01	%

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 09

AVAILABLE FOR SALE INVESTMENTS

As of March 31, 2017 and December 31, 2016, details of instruments defined as available for sale investments are as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Chilean Central Bank and Government securities
Chilean Central Bank Bonds		480,752		468,386
Chilean Central Bank Notes		334,011		1,222,283
Other Chilean Central Bank and Government securities		208,978		52,805
Subtotal		1,023,741		1,743,474
Other Chilean securities
Time deposits in Chilean financial institutions		781,700		893,000
Mortgage finance bonds of Chilean financial institutions		24,802		25,488
Chilean financial institution bonds		-		-
Chilean corporate bonds		-		-
Other Chilean securities		1,679		-
Subtotal		808,181		918,488
Foreign financial securities
Foreign Central Banks and Government securities		564,631		387,146
Other foreign financial securities		411,421		339,798
Subtotal		976,052		726,944

Total		2,807,974		3,388,906

As of March 31, 2017 and December 31, 2016, the item Chilean Central Bank and Government securities item includes securities sold under repurchase agreements to clients and financial institutions for Ch$155,154 million and Ch$155,044 million, respectively.

As of March 31, 2017 and December 31, 2016, the item Other Chilean Securities includes securities sold to customers and financial institutions under repurchase agreements totaling Ch$49.997 million and Ch$57,393 million, respectively.

As of March 31, 2017 available for sale investments included a net unrealized profit of Ch$21,741 million, recorded as a “Valuation adjustment” in Equity, distributed between a profit of Ch$20,795 million attributable to equity holders of the Bank and a profit of Ch$946 million attributable to non-controlling interest.

As of December 31, 2016 available for sale investments included a net unrealized profit of Ch$7,375 million, recorded as a “Valuation adjustment” in Equity, distributed between a profit of Ch$6,449 million attributable to equity holders of the Bank and a profit of Ch$926 million attributable to non-controlling interest.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 10

INTANGIBLE ASSETS

As of March 31, 2017 and December 31, 2016 the composition of intangible assets is as follows:

							As of March 31, 2017
	Years of useful life		Average remaining useful life		Net opening balance as of January 1, 2017		Gross balance			Accumulated amortization			Net balance
					MCh$		MCh$			MCh$			MCh$

Licenses		3		2		1,656		10,932			(9,396	)		1,536
Software development		3		2		56,429		293,114			(235,532	)		57,582

Subtotal						58,085		304,046			(244,928	)		59,118
Fully amortized assets						-		(200,774	)		200,774			-
Total						58,085		103,272			(44,154	)		59,118

							As of December 31, 2016
	Years of useful life		Average remaining useful life		Net opening balance as of January 1, 2016		Gross balance			Accumulated amortization			Net balance
					MCh$		MCh$			MCh$			MCh$

Licenses		3		2		2,060		10,932			(9,276	)		1,656
Software development		3		2		49,077		286,781			(230,352	)		56,429

Subtotal						51,137		297,713			(239,628	)		58,085
Fully amortized assets						-		(200,774	)		200,774			-
Total						51,137		96,939			(38,854	)		58,085

The changes in the value of intangible assets during the periods ended March 31, 2017 and December 31, 2016 is as follows:

b.1)

Gross balance

	Licenses		Software development		Fully amortized assets			Total
Gross balances	MCh$		MCh$		MCh$			MCh$

Balances as of January 1, 2017		10,932		286,781		(200,774	)		96,939
Acquisitions		-		6,333		-			6,333
Disposals and impairment		-		-		-			-
Other		-		-		-			-
Balances as of March 31, 2017		10,932		293,114		(200,774	)		103,272

Balances as of January 1, 2016		10,932		259,500		(181,267	)		89,165
Acquisitions		-		27,281		-			27,281
Disposals and impairment		-		-		-			-
Other		-		-		(19,507	)		(19,507	)
Balances as of December 31, 2016		10,932		286,781		(200,774	)		96,939

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 10

INTANGIBLE ASSETS, continued

b.2)

Accumulated amortization

	Licenses			Software development			Fully amortized assets		Total
Accumulated amortization	MCh$			MCh$			MCh$		MCh$

Balances as of January 1, 2017		(9,276	)		(230,352	)		200,774		(38,854	)
Amortization for the period		(120	)		(5,179	)		-		(5,299	)
Other changes		-			-			-		-
Balances as of March 31, 2017		(9,396	)		(235,531	)		200,774		(44,153	)

Balances as of January 1, 2016		(8,872	)		(210,423	)		181,267		(38,028	)
Amortization for the period		(404	)		(19,929	)		-		(20,333	)
Other changes		-			-			19,507		19,507
Balances as of December 31, 2016		(9,276	)		(230,352	)		200,774		(38,854	)

The Bank has no restriction on intangible assets as of March 31, 2017 and December 31, 2016. Additionally, the intangible assets have not been pledged as guarantee to secure compliance with financial liabilities. Also, the Bank has no debt related to Intangible assets as of those dates.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 11

PROPERTY, PLANT, AND EQUIPMENT

As of March 31, 2017 and December 31, 2016 the property, plant and equipment balances is as follows:

			As of March 31, 2017
	Net opening balance as of January 1, 2017		Gross balance			Accumulated depreciation			Net balance
	MCh$		MCh$			MCh$			MCh$

Land and building		169,809		266,270			(98,191	)		168,079
Equipment		66,506		169,827			(108,469	)		61,358
Ceded under operating leases		4,230		4,888			(660	)		4,228
Other		16,834		56,442			(40,622	)		15,820
Subtotal		257,379		497,427			(247,942	)		249,485
Fully depreciated assets		-		(39,958	)		39,958			-
Total		257,379		457,469			(207,984	)		249,485

			As of December 31, 2016
	Net opening balance as of January 1, 2016		Gross balance			Accumulated depreciation			Net balance
	MCh$		MCh$			MCh$			MCh$

Land and building		158,434		264,016			(94,207	)		169,809
Equipment		59,908		168,124			(101,618	)		66,506
Ceded under operating leases		4,238		4,888			(658	)		4,230
Other		18,079		55,973			(39,139	)		16,834
Subtotal		240,659		493,001			(235,622	)		257,379
Fully depreciated assets		-		(39,958	)		39,958			-
Total		240,659		453,043			(195,664	)		257,379

The changes in the value of property, plant and equipment during the periods ended March 31, 2017 and December 31, 2016 is as follows:

b.1)

Gross balance

	Land and buildings		Equipment			Operating leases		Other			Fully depreciated assets			Total
2017	MCh$		MCh$			MCh$		MCh$			MCh$			MCh$

Balances as of January 1, 2017		264,016		168,124			4,888		55,974			(39,959	)		453,043
Additions		2,254		1,704			-		482			-			4,440
Disposals		-		(184	)		-		(14	)		-			(198	)
Impairment due to damage		-		184			-		-			-			184
Other		-		-			-		-			-			-
Balances as of March 31, 2017		266,270		169,828			4,888		56,442			(39,959	)		457,469

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 11

PROPERTY, PLANT, AND EQUIPMENT, continued

	Land and buildings		Equipment			Operating leases		Other			Fully depreciated assets			Total
2016	MCh$		MCh$			MCh$		MCh$			MCh$			MCh$

Balances as of January 1, 2016		237,449		137,621			4,888		51,482			(26,258	)		405,182
Additions		26,567		30,965			-		4,824			-			62,356
Disposals		-		(228	)		-		(332	)		-			(560	)
Impairment due to damage		-		(234	)		-		-			-			(234	)
Other		-		-			-		-			(13,701	)		(13,701	)
Balances as of December 31, 2016		264,016		168,124			4,888		55,974			(39,959	)		453,043

b.2)

Accumulated depreciation

	Land and buildings			Equipment			Operating leases			Other			Fully depreciated assets		Total
2017	MCh$			MCh$			MCh$			MCh$			MCh$		MCh$

Balances as of January 1, 2017		(94,207	)		(101,618	)		(658	)		(39,139	)		39,958		(195,664	)
Depreciation in the period		(3,984	)		(6,853	)		(2	)		(1,484	)		-		(12,323	)
Sales and disposals in the period		-			2			-			1			-		3
Transfers		-			-			-			-			-		-
Others		-			-			-			-			-		-
Balances as of March 31, 2017		(98,191	)		(108,469	)		(660	)		(40,622	)		39,958		(207,984	)

	Land and buildings			Equipment			Operating leases			Other			Fully depreciated assets		Total
2016	MCh$			MCh$			MCh$			MCh$			MCh$		MCh$

Balances as of January 1, 2016		(79,015	)		(77,713	)		(650	)		(33,403	)		26,258		(164,523	)
Depreciation in the period		(15,192	)		(23,976	)		(8	)		(5,849	)		-		(45,025	)
Sales and disposals in the period		-			71			-			113			-		184
Transfers		-			-			-			-			-		-
Others		-			-			-			-			13,700		13,700
Balances as of December 31, 2016		(94,207	)		(101,618	)		(658	)		(39,139	)		39,958		(195,664	)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 11

PROPERTY, PLANT, AND EQUIPMENT, continued

Operational leases - Lessor

As of March 31, 2017 and December 31, 2016, the future minimum lease cash inflows under non-cancellable operating leases are as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Due within 1 year		644		506
Due after 1 year but within 2 years		1,105		1,029
Due after 2 years but within 3 years		497		502
Due after 3 years but within 4 years		460		473
Due after 4 years but within 5 years		318		344
Due after 5 years		2,002		2,067

Total		5,026		4,921

Operational leases - Lessee

Some of the Bank’s premises and equipment are under operating leases. Future minimum rental payments under non-cancellable leases are as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Due within 1 year		25,210		26,455
Due after 1 year but within 2 years		23,189		24,903
Due after 2 years but within 3 years		18,487		20,582
Due after 3 years but within 4 years		15,471		17,321
Due after 4 years but within 5 years		12,852		14,569
Due after 5 years		50,486		53,694

Total		145,695		157,524

As of March 31, 2017 and December 31, 2016 the Bank has no finance leases which cannot be unilaterally cancelled.

The Bank has no restriction on property, plant and equipment as of March 31, 2017 and December 31, 2016. Additionally, the property, plant, and equipment have not been provided as guarantees to secure compliance with financial liabilities. The Bank has no debt in connection with property, plant and equipment.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 12

CURRENT AND DEFERRED TAXES

Current taxes

As of March 31, 2017 and December 31, 2016, the Bank recognizes taxes payable (recoverable), which is determined based on the currently applicable tax legislation. This amount is recorded net of recoverable taxes, and is shown as follows:

	As of March 31,			As of December 31,
	2017			2016
	MCh$			MCh$

Summary of current tax liabilities (assets)
Current tax (assets)		-			-
Current tax liabilities		24,847			29,294

Total tax payable (recoverable)		24,847			29,294

(Assets) liabilities current taxes detail (net)
Income tax (*)		178,765			145,963
Less:
Provisional monthly payments		(150,596	)		(113,700	)
Credit for training expenses		(2,319	)		(1,972	)
Land taxes leasing		-			-
Grant credits		(1,485	)		(1,079	)
Other		482			82

Total tax payable (recoverable)		24,847			29,294

(*)Tax rate as of March 31, 2017 and December 31, 2016 are 25.5% and 24.0%, respectively

Effect on income

The effect of tax expense on income for the periods from January 1 and March 31, 2017 and 2016 is comprised of the following items:

	For the three months ended March 31,
	2017 MCh$		2016 MCh$

Income tax expense
Current tax		23,698		19,277

Credits (debits) for deferred taxes
Origination and reversal of temporary differences		13,230		9,832
Subtotal		36,928		29,109
Tax for rejected expenses (Article No.21)		185		665
Other		95		(112	)
Net income tax expense		37,208		29,662

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 12

CURRENT AND DEFERRED TAXES, continued

Effective tax rate reconciliation

The reconciliation between the income tax rate and the effective rate in calculating the tax expense as of March 31, 2017 and 2016 is as follows:

	As of March 31,
	2017						2016
	Tax rate			Amount			Tax rate			Amount
	%			MCh$			%			MCh$

Tax calculated over profit before tax		25.50			45,959			24.00			37,367
Permanent differences		(3.65	)		(6,574	)		(4.34	)		(6,759	)
Penalty tax (rejected expenses)		0.10			185			0.43			665
Effect of tax reform changes on deferred tax (*)		(1.30	)		(2,350	)		(0.02	)		(28	)
Other		(0.01	)		(12	)		(1.02	)		(1,583	)
Effective rates and expenses for income tax		20.64			37,208			19.05			29,662

(*) The publication of Law No. 20,780 on September 29, 2014 increased the corporate income tax rate to 21% for 2014, to 22.5% in 2015, 24% for 2016, 25.5 % in 2017 and 27% for 2018 onwards.

Effect of deferred taxes on other comprehensive income

A summary of the separate effect of deferred tax on other comprehensive income, showing the asset and liability balances, for the periods ended March 31, 2017 and December 31, 2016 follows:

	As of March 31,			As of December 31,
	2017			2016
	MCh$			MCh$

Deferred tax assets
Available for sale investments		5,539			3,266
Cash flow hedges		-			-
Total deferred tax assets recognized through other comprehensive income		5,539			3,266

Deferred tax liabilities
Available for sale investments		-			(5,036	)
Cash flow hedges		(2,988	)		(549	)
Total deferred tax liabilities recognized through other comprehensive income		(2,988	)		(5,585	)

Net deferred tax balances in equity		2,551			(2,319	)

Deferred taxes in equity attributable to equity holders of the bank		2,314			(2,097	)
Deferred tax in equity attributable to non-controlling interests		237			(222	)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 12

CURRENT AND DEFERRED TAXES, continued

Effect of deferred taxes on income

As of March 31, 2017 and December 31, 2016, the Bank has recorded effects for deferred taxes in the financial statements.

Below are effects of deferred taxes on assets, liabilities and income:

	As of March 31,			As of December 31,
	2017			2016
	MCh$			MCh$
Deferred tax assets
Interests and adjustments		9,563			9.473
Non-recurring charge-offs		9,565			9.891
Assets received in lieu of payment		4,521			4.625
Property, plant and equipment		5,114			4.570
Allowance for loan losses		171,161			174.929
Provision for expenses		68,470			67.073
Derivatives		-			-
Leased assets		72,206			71.834
Subsidiaries tax losses		9,527			9.467
Valuation of investments		-			-
Other		12,610			17.571
Total deferred tax assets		362,737			369.433

Deferred tax liabilities
Valuation of investments		(4,565	)		(1,802	)
Depreciation		(326	)		-
Other		(3,744	)		(299	)
Total deferred tax liabilities		(8,635	)		(2,101	)

Summary of deferred tax assets and liabilities

A summary of the effect of deferred taxes on equity and income follows:

	As of March 31,			As of December 31,
	2017			2016
	MCh$			MCh$

Deferred tax assets
Recognized through other comprehensive income		5,539			3,266
Recognized through profit or loss		362,737			369,433
Total deferred tax assets		368,276			372,699

Deferred tax liabilities
Recognized through other comprehensive income		(2,988	)		(5,585	)
Recognized through profit or loss		(8,635	)		(2,101	)
Total deferred tax liabilities		(11,623	)		(7,686	)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 13

OTHER ASSETS

Other assets include the following:

	As of March 31,			As of December 31,
	2016			2015
	MCh$			MCh$

Assets for leasing (1)		50,031			44,840

Assets received or awarded in lieu of payment (2)
Assets received in lieu of payment		18,240			19,825
Assets awarded at judicial sale		26,868			26,895
Provision on assets received in lieu of payment or awarded		(6,405	)		(7,558	)
Subtotal		38,703			39,162

Other assets
Guarantee deposits (margin accounts) (3)		346,254			396,289
Gold investments		484			446
VAT credit		9,206			8,941
Income tax recoverable		18,240			22,244
Prepaid expenses		153,334			148,288
Assets recovered from leasing for sale		6,869			6,040
Pension plan assets		1,692			1,637
Accounts and notes receivable		49,693			56,624
Notes receivable through brokerage and simultaneous transactions		292,113			60,632
Other receivable assets		13,938			15,082
Other assets		54,849			40,274
Subtotal		946,672			756,497

Total		1,035,406			840,499

(1)

Assets available to be granted under the financial leasing agreements.

(2)

The assets received in lieu of payment correspond to assets received as payment of debts due from customers. The total value of assets acquired in this way should not at any time exceed 20% of regulatory capital of the Bank. These assets currently represent 0.48% as of March 31, 2017 (0.54% as of December 31, 2016) of the Bank’s effective equity.

Assets awarded in judicial sale are those acquired in judicial auction as payment of debts previously subscribed with the Bank. The assets awarded through a judicial sale are not subject to the aforementioned requirement. These properties are assets available for sale. The Bank expects to complete the sale within one year from the date on which the assets are received or acquired. When they are not sold within that period of time, the Bank must charge-off those assets.

Additionally, a provision is recorded for the difference between the initial awarded value plus any additions and the estimated realizable value (appraisal value) when the former is greater.

(3)

Guarantee deposits (margin accounts) correspond collaterals associated with derivative financial contracts to mitigate the counterparty credit risk and are mainly established in cash. These guarantees operate when mark to market of derivative financial instruments exceed the levels of threshold agreed in the contracts, wich could result the the Bank deliver or receive collateral.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 14

TIME DEPOSITS AND OTHER TIME LIABILITIES

As of March 31, 2017 and December 31, 2016, the composition of the item time deposits and other liabilities is as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Deposits and other demand liabilities
Checking accounts		6,031,255		6,144,688
Other deposits and demand accounts		533,011		564,966
Other demand liabilities		844,352		829,661

Total		7,408,618		7,539,315

Time deposits and other time liabilities
Time deposits		12,579,324		13,031,319
Time savings account		116,922		116,451
Other time liabilities		3,964		3,939

Total		12,700,210		13,151,709

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES

As of March 31, 2017 and December 31, 2016, the composition of this item is as follows:

	As of March 31,		As of December 31,
	2017 MCh$		2016 MCh$

Other financial liabilities
Obligations to public sector		61,625		61,490
Other domestic obligations		175,017		175,028
Foreign obligations		1,689		3,498
Subtotal		238,331		240,016
Issued debt instruments
Mortgage finance bonds		42,937		46,251
Senior bonds		6,504,078		6,416,274
Mortgage Bonds		102,063		104,182
Subordinated bonds		762,567		759,665
Subtotal		7,411,645		7,326,372

Total		7,649,976		7,566,388

Debts classified as current are either demand obligations or will mature in one year or less. All other debts are classified as non-current. The Bank’s debts, both current and non-current, are summarized below:

	As of March 31, 2017
	Current MCh$		Non-current MCh$		Total MCh$

Mortgage finance bonds		10,743		32,194		42,937
Senior bonds		1,002,958		5,501,120		6,504,078
Mortgage Bonds		5,792		96,271		102,063
Subordinated bonds		4		762,563		762,567
Issued debt instruments		1,019,497		6,392,148		7,411,645

Other financial liabilities		156,984		81,347		238,331

Total		1,176,481		6,473,495		7,649,976

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

	As of December 31, 2016
	Current MCh$		Non-current MCh$		Total MCh$

Mortgage finance bonds		11,236		35,015		46,251
Senior bonds		1,135,713		5,280,561		6,416,274
Mortgage Bonds		4,318		99,864		104,182
Subordinated bonds		4		759,661		759,665
Issued debt instruments		1,151,271		6,175,101		7,326,372

Other financial liabilities		158,488		81,528		240,016

Total		1,309,759		6,256,629		7,566,388

Mortgage finance bonds

These bonds are used to finance mortgage loans. Their principal amounts are amortized on a quarterly basis. The range of maturities of these bonds is between five and twenty years. Loans are indexed to UF and create a yearly interest rate of 5.42% as of March 31, 2017 (5.53% as of December 31, 2016).

	As of March 31,		As of December 31,
	2017 MCh$		2016 MCh$

Due within 1 year		10,743		11,236
Due after 1 year but within 2 years		7,973		8,673
Due after 2 years but within 3 years		6,590		6,928
Due after 3 years but within 4 years		6,049		6,246
Due after 4 years but within 5 years		4,985		5,278
Due after 5 years		6,597		7,890
Total mortgage finance bonds		42,937		46,251

Senior bonds

The following table shows senior bonds by currency:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Santander bonds in UF		3,867,030		3,588,373
Santander bonds in USD		892,578		909,354
Santander bonds in CHF		478,672		568,549
Santander bonds in Ch$		1,006,987		1,037,515
Santander bonds in AUD		-		60,890
Santander bonds in JPY		185,710		179,426
Santander bonds in EUR		73,101		72,167
Total senior bonds		6,504,078		6,416,274

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

Placement of senior bonds:

During 2017 the Bank has placed bonds for UF 10,000,000 detailed as follows:

Series

Currency

Amount
placed (*)

Term

Issuance rate

Issue date

Series
Maximum
amount

Maturity date

5,000,000

7 years

2.60% annually

01-02-2016

5,000,000

02-01-2024

T13

5,000,000

9 years

2.75% annually

01-02-2016

5,000,000

02-01-2026

Total

10,000,000

During the first quarter of 2017, the Bank repurchased the following bonds.

Date		Type			Amount
03-06-2017		Senior			USD	6,900,000

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

During 2016 the Bank has placed bonds for UF62,000,000, CLP590,000,000,000, JPY3,000,000,000, USD215,000,000, EUR104,000,000, and CHF125,000,000 detailed as follows:

Series	Currency	Amount Placed		Term		Issuance rate	Issue date	Maximum amount		Maturity date
R1	UF		15,000,000		5.5	2.50%	09-01-2015		15,000,000	03-01-2021
R2	UF		10,000,000		7.5	2.60%	09-01-2015		10,000,000	03-01-2023
R3	UF		10,000,000		10.5	3.00%	09-01-2015		10,000,000	03-01-2026
R5	UF		7,000,000		7.0	2.55%	12-01-2015		7,000,000	12-01-2022
R6	UF		7,000,000		9.0	2.65%	12-01-2015		7,000,000	12-01-2024
P9	UF		3,000,000		10.5	2.60%	03-01-2015		5,000,000	09-01-2025
T2	UF		5,000,000		4.5	2.25%	02-01-2016		5,000,000	08-01-2020
T5	UF		5,000,000		6.0	2.40%	02-01-2016		5,000,000	02-01-2022
Total	UF		62,000,000
R4	CLP		100,000,000,000		5.5	5.50%	09-01-2015		100,000,000,000	03-01-2021
P4	CLP		50,000,000,000		5.0	4.80%	03-01-2015		150,000,000,000	03-01-2020
SD	CLP		140,000,000,000		5.0	5.50%	06-01-2014		200,000,000,000	06-01-2019
SC	CLP		200,000,000,000		10.0	5.95%	06-01-2014		200,000,000,000	06-01-2024
P3	CLP		50,000,000,000		7.0	5.50%	01-01-2015		50,000,000,000	01-01-2022
P1	CLP		50,000,000,000		10.0	5.80%	01-01-2015		50,000,000,000	01-01-2025
Total	CLP		590,000,000,000
JPY	JPY		3,000,000,000		5.0	0.115%	06-22-2016		3,000,000,000	06-29-2021
Total	JPY		3,000,000,000
DN	USD		10,000,000		5.0	Libor-USD 3M+1.05%	06-02-2016		10,000,000	06-09-2021
DN	USD		10,000,000		5.0	Libor-USD 3M+1.22%	06-08-2016		10,000,000	06-17-2021
DN	USD		10,000,000		5.0	Libor-USD 3M+1.20%	08-01-2016		10,000,000	08-16-2021
DN	USD		185,000,000		5.0	Libor-USD 3M+1.20%	11-10-2016		185,000,000	11-28-2021
Total	USD		215,000,000
EUR	EUR		54,000,000		12.0	1.307%	08-05-2016		54,000,000	08-17-2028
EUR	EUR		20,000,000		8.0	0.80%	08-04-2016		20,000,000	08-19-2024
EUR	EUR		30,000,000		3.0	0.25%	12-09-2016		30,000,000	12-20-2019
Total	EUR		104,000,000
CHF	CHF		125,000,000		8.5	0.35%	11-14-2016		125,000,000	05-30-2025
Total	CHF		125,000,000

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

During 2016, the Bank repurchased the following bonds:

Date	Type	Amount
01-13-2016	Senior	USD	600,000
01-27-2016	Senior	USD	960,000
03-08-2016	Senior	USD	418,853,000
03-08-2016	Senior	USD	140,104,000
05-10-2016	Senior	USD	10,000,000
11-29-2016	Senior	USD	6,895,000

ii.

Maturities of senior bonds are as follows:

	As of March 31,		As of December 31,
	2017 MCh$		2016 MCh$
Due within 1 year		1,002,940		1,135,713
Due after 1 year but within 2 years		435,007		321,509
Due after 2 years but within 3 years		984,300		816,919
Due after 3 years but within 4 years		894,355		663,289
Due after 4 years but within 5 years		374,267		754,768
Due after 5 years		2,813,191		2,724,076
Total senior bonds		6,504,060		6,416,274

Mortgage bonds

Detail of mortgage bonds per currency is as follows:

	As of March 31,		As of December 31,
	2017 MCh$		2016 MCh$

Mortgage bonds in UF		102,063		104,182
Total mortgage bonds		102,063		104,182

Placement of Mortgage bonds

No mortgage bonds have been placed during 2017 nor 2016.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

ii.

Maturities of mortgage bonds is as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Due within 1 year		5,792		4,318
Due after 1 year but within 2 years		6,932		6,932
Due after 2 years but within 3 years		7,156		7,156
Due after 3 years but within 4 years		7,386		7,386
Due after 4 years but within 5 years		7,624		7,626
Due after 5 years		67,173		70,764
Total mortgage bonds		102,063		104,182

Subordinated bonds

Detail of subordinated bonds per currency is as follows:

	As of March 31		As of December 31,
	2017		2016
	MCh$		MCh$

Subordinated bonds denominated in Ch$		4		4
Subordinated bonds denominated in USD		-		-
Subordinated bonds denominated in UF		762.563		759.661
Total subordinated bonds		762.567		759.665

Placement of subordinated bonds

No subordinated bonds have been placed during 2017 nor 2016.

ii.

Maturities of subordinated bonds are as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Due within 1 year		4		4
Due after 1 year but within 2 years		-		-
Due after 2 years but within 3 years		-		-
Due after 3 years but within 4 years		-		-
Due after 4 years but within 5 years		-		-
Due after 5 years		762,563		759,661
Total subordinated bonds		762,567		759,665

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 15

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES, continued

Other financial liabilities

The composition of other financial liabilities, by maturity, is detailed below:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Non-current portion:
Due after 1 year but within 2 years		34,156		33,777
Due after 2 year but within 3 years		25,107		24,863
Due after 3 year but within 4 years		5,567		5,794
Due after 4 year but within 5 years		2,078		1,973
Due after 5 years		14,439		15,121
Non-current portion subtotal		81,347		81,528

Current portion:
Amounts due to credit card operators		151,853		151,620
Acceptance of letters of credit		363		2,069
Other long-term financial obligations, short-term portion		4,768		4,799
Current portion subtotal		156,984		158,488

Total other financial liabilities		238,331		240,016

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 16

MATURITY OF FINANCIAL ASSETS AND LIABILITIES

As of March 31, 2017 and December 31, 2016, the detail of the maturities of assets and liabilities is as follows:

	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Subtotal up to 1 year		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Subtotal More than 1 year		Total
As of March 31, 2017	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Financial Assets
Cash and deposits in banks		1,828,411		-		-		-		1,828,411		-		-		-		-		1,828,411
Cash items in process of collection		800,901		-		-		-		800,901		-		-		-		-		800,901
Trading investments		-		1,215		-		123,720		124,935		109,308		91,819		61,129		262,256		387,191
Investments under resale agreements		-		-		-		-		-		-		-		-		-		-
Financial derivatives contracts		-		66,483		98,653		306,637		471,773		533,560		364,478		1,130,819		2,028,857		2,500,630
Interbank loans (1)		352,044		-		-		-		352,044		-		-		-		-		352,044
Loans and accounts receivables from customers (2)		830,142		2,072,702		2,539,936		4,267,386		9,710,166		4,954,527		2,942,322		9,493,592		17,390,441		27,100,607
Available for sale investments		-		1,680		-		1,078,831		1,080,511		94,971		582,888		1,049,604		1,727,463		2,807,974
Guarantee deposits (margin accounts)		346,254		-		-		-		346,254		-		-		-		-		346,254
Total financial assets		4,157,752		2,142,080		2,638,589		5,776,574		14,714,995		5,692,366		3,981,507		11,735,144		21,409,017		36,124,012

Financial Liabilities
Deposits and other demand liabilities		7,408,618		-		-		-		7,408,618		-		-		-		-		7,408,618
Cash items in process of collection		602,307		-		-		-		602,307		-		-		-		-		602,307
Obligations under repurchase agreements		-		205,151		-		-		205,151		-		-		-		-		205,151
Time deposits and other time liabilities		123,170		5,815,631		3,315,151		3,219,172		12,473,124		150,652		16,840		59,594		227,086		12,700,210
Financial derivatives contracts		1		59,626		117,752		345,345		522,724		662,346		328,364		780,310		1,771,020		2,293,744
Interbank borrowings		29,924		17,087		243,622		934,482		1,225,115		252,707		13,865		-		266,572		1,491,687
Issued debts instruments		-		396,649		352		622,496		1,019,497		1,447,860		1,294,342		3,649,946		6,392,148		7,411,645
Other financial liabilities		153,184		401		619		2,780		156,984		59,263		7,644		14,440		81,347		238,331
Guarantees received (margin accounts)		419,875		-		-		-		419,875		-		-		-		-		419,875
Total financial liabilities		8,737,079		6,494,545		3,677,496		5,124,275		24,033,395		2,572,828		1,661,055		4,504,290		8,738,173		32,771,568

(1)

Interbank loans are presented on a gross basis. The amount of allowances is Ch$164 million.

(2)

Loans and accounts receivables from customers are presented on a gross basis. Provisions amounts according to type of loan are detailed as follows: Commercial loans Ch$446,067 million, Mortgage loans Ch$59,186 million, Consumer loans Ch$300,588 million.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 16

MATURITY OF FINANCIAL ASSETS AND LIABILITIES, continued

	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Subtotal up to 1 year		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Subtotal More than 1 year		Total
As of December 31, 2016	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Assets
Cash and deposits in banks		2,279,389		-		-		-		2,279,389		-		-		-		-		2,279,389
Cash items in process of collection		495,283		-		-		-		495,283		-		-		-		-		495,283
Trading investments		-		52,443		13,252		118,845		184,540		75,378		106,808		30,261		212,447		396,987
Investments under resale agreements		-		6,736		-		-		6,736		-		-		-		-		6,736
Financial derivatives contracts		-		82,243		120,653		292,801		495,697		531,094		357,833		1,116,158		2,005,085		2,500,782
Interbank loans (1)		-		12,859		135,756		124,143		272,758		44		-		5		49		272,807
Loans and accounts receivables from customers (2)		717,306		2,393,216		2,108,001		4,488,993		9,707,516		4,937,271		2,909,140		9,379,697		17,226,108		26,933,624
Available for sale investments		-		1,581,682		250,222		314,842		2,146,746		37,974		379,976		824,210		1,242,160		3,388,906
Guarantee deposits (margin accounts)		396,289		-		-		-		396,289		-		-		-		-		396,289
Total assets		3,888,267		4,129,179		2,627,884		5,339,624		15,984,954		5,581,761		3,753,757		11,350,331		20,685,849		36,670,803

Liabilities
Deposits and other demand liabilities		7,539,315		-		-		-		7,539,315		-		-		-		-		7,539,315
Cash items in process of collection		288,473		-		-		-		288,473		-		-		-		-		288,473
Obligations under repurchase agreements		-		212,437		-		-		212,437		-		-		-		-		212,437
Time deposits and other time liabilities		121,527		6,105,767		4,193,906		2,537,299		12,958,499		118,101		13,913		61,196		193,210		13,151,709
Financial derivatives contracts		-		92,335		122,565		263,893		478,793		494,539		346,948		971,881		1,813,368		2,292,161
Interbank borrowings		4,557		373,423		115,769		1,154,063		1,647,812		233,542		35,014		-		268,556		1,916,368
Issued debts instruments		-		43,141		185,425		922,705		1,151,271		1,168,117		1,444,593		3,562,391		6,175,101		7,326,372
Other financial liabilities		153,049		1,461		1,161		2,817		158,488		58,641		7,766		15,121		81,528		240,016
Guarantees received (margin accounts)		480,926		-		-		-		480,926		-		-		-		-		480,926
Total liabilities		8,587,847		6,828,564		4,618,826		4,880,777		24,916,014		2,072,940		1,848,234		4,610,589		8,531,763		33,447,777

(1)

Interbank loans are presented on a gross basis. The amount of allowances is Ch$172 million.

(2)

Loans and accounts receivables from customers are presented on a gross basis. Provisions on loans amounts according to customer type: Commercial loans Ch$459,079 million, Mortgage loans Ch$61,041 million, Consumer loans Ch$300,019 million.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 17

OTHER LIABILITIES

Other liabilities consist of:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Accounts and notes payable		164,639		154,159
Income received in advance		492		509
Guarantees received (margin accounts) (1)		419,875		480,926
Notes payable through brokerage and simultaneous transactions		259,896		27,745
Other payable obligations		32,667		80,100
Withheld VAT		1,883		1,964
Accounts payable by insurance companies		100,965		21,644
Other liabilities		16,896		28,738
Total		997,313		795,785

(1)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 18

CONTINGENCIES AND COMMITMENTS

Lawsuits and legal procedures

At the date these financial statements were issued, the Bank and its affiliates were subject to certain legal actions in the normal course of their business. As of March 31, 2017, the Banks and its subsidiaries have provisions for this item of Ch$1,453 million and Ch$0 million, respectively (Ch$1,194 million and Ch$ 48 million as of December 31, 2016) which is included in “Provisions” in the Unaudited Consolidated Financial Statements of Financial Position as provisions for contingencies.

As of March 31, 2017, the following legal situations are pending:

i) Trial of "Bilbao with Santander Investment S.A. Corredores de Bolsa ", the predecessor of Santander S.A. Corredores de Bolsa (currently Santander Corredores de Bolsa Ltda.) Followed before the 20th Civil Court of Santiago, Role 15549-2012 on obligation to render account. On May 6, 2014, the interposed complaint was accepted, which was confirmed in the second instance. The appeal is pending before the Supreme Court by Santander Investment S.A. Banco Santander Chille paid the bill. On August 19, 2016, the court rendered the account and gave the counterpart a period of 30 days for review, a period that was fulfilled without any comments being made. It is pending the payment of the costs of the trial ($1,145,000.-) circumstance that was informed to Santander Investment.

ii) Trial "Echeverria with Santander Corredora" (currently Santander Corredores de Bolsa Ltda.), followed before the 21st Civil Court of Santiago, Role C-21.366-2014, on compensation for damages due to failures in the purchase of shares. Amount: $59,594,764. As for its current status, it is pending to summon the parties to hear sentence.

Santander Corredora de Seguros Limitada

i) There are no pending lawsuits for leased assets. Our lawyers have closed the cases for leasing contracts coming from the merger with Ex Santiago Leasing S.A.

Contingent loans

In order to meet clients' needs, the Bank has acquired several irrevocable commitments and contingent liabilities, although these obligations should not be recognized in the Consolidated Financial Statements, these contain credit risks and are therefore part of the Bank's overall risk.

The following table shows the Bank`s contractual obligations to issue loans:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Letters of credit issued		152,985		158,800
Foreign letters of credit confirmed		93,040		57,686
Performance guarantees		1,727,243		1,752,610
Personal guarantees		123,460		125,050
Subtotal		2,096,728		2,094,146
Available on demand credit lines		7,320,464		7,548,820
Other irrevocable credit commitments		309,432		260,266
Total		9,726,624		9,903,232

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 18

CONTINGENCIES AND COMMITMENTS

Held securities

The Bank holds securities in the normal course of its business as follows:

	As of March 31,		As of December 31,
	2017		2016
	MCh$		MCh$

Third party operations
Collections		162,370		163,303
Transferred financial assets managed by the Bank		39,306		42,054
Assets from third parties managed by the Bank and its affiliates (1)		1,662,067		1,586,405
Subtotal		1,863,743		1,791,762
Custody of securities
Securities held in custody		373,660		390,155
Securities held in custody deposited in other entity		760,083		687,610
Issued securities held in custody		19,223,738		18,768,572
Subtotal		20,357,481		19,846,337
Total		22,221,224		21,638,099

(1) During 2016, the Bank classified the portfolios managed by private banking in “Assets from third parties managed by the Bank and its affiliates”. At the end of March 2017, the balance for this was Ch$1,662,032 million (Ch$1,586,370 million at December 31, 2016).

Guarantees

Banco Santander Chile has a comprehensive officer fidelity insurance policy, No. 4356192, with Compañía de Seguros Chilena Consolidada S.A., for USD 5,000,000, which jointly covers both the Bank and its affiliates for the period from July 1, 2016 to June 30, 2017.

Santander Agente de Valores Limitada

In accordance with the provisions of Article No.30 and onward of Law No.18,045 on the Securities Market, the Company provided a guarantee in the amount of UF4,000 through Insurance Policy No. 216113821, underwritten by the Compañía de Seguros de Crédito Continental S.A., which matures on December 19, 2017.

Santander S.A. Corredores de Bolsa

The Company has given guarantees to the Bolsa de Comercio de Santiago for a current value of Ch$27,122 million to cover default risk on transactions entered into instantaneously or within short timeframes.

ii)

In addition, the Company has issued a guarantee to CCLV Contraparte Central S.A. (formerly known as Cámara de Compensación) in cash, for a total Ch$5,330 million and additional guarantees entered at the Electronical Stock Market for Ch$1,018 million as of December 31, 2016.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 18

CONTINGENCIES AND COMMITMENTS

Santander Corredora de Seguros Limitada

In accordance with Circular No. 1,160 of the Chilean Securities and Insurance Superintendent, the Company has taken out an insurance policy In order to secure correct and full compliance with all its obligations as an insurance broker.

ii)

The company purchased a guarantee policy No. 10031521, covering UF500 and professional liability policy No. 10031528 for insurance brokers, covering UF 60,000 from the Compañía de Seguros Generales Consorcio Nacional de Seguros S.A. Both policies are valid run from April 15, 2016 to April 14, 2017.

iii)

There are performance guarantees with Banco Santander Chile to guarantee full compliance with public bidding of payment protection insurance and payment protection plus 2/3 permanent disability insurance for the mortgage loan portfolio of Banco Santander Chile. The values of these policies are UF 5,000 and UF 2,500 respectively, both valid till July 31, 2017. For the same reason, the Company also has a performance guarantee for compliance with public bidding of fire insurance which amounts to UF 3,200 with the same Bank, valid till December 31, 2018.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 19

EQUITY

Capital

As of March 31, 2017 and December 31, 2016 the Bank had 188,446,126,794 shares outstanding, all of which are subscribed for and paid in full, amounting to Ch$ 891,303 million. All shares have the same rights, and have no preferences or restrictions.

The movement in shares during 2017 and 2016 is as follows:

	Shares
	As of March 31, 2017		As of December 31, 2016

Issued as of January 1		188,446,126,794		188,446,126,794
Issuance of paid shares		-		-
Issuance of outstanding shares		-		-
Stock options exercised		-		-
Issued as period end		188,446,126,794		188,446,126,794

As of March 31, 2017 and December 31, 2016 the Bank does not own any of its shares in treasury, nor do any of the consolidated companies.

As of March 31, 2017 the shareholder composition is as follows:

Corporate Name or Shareholder`s Name	Shares		ADRs (*)		Total		% share holding

Santander Chile Holding S.A.		66,822,519,695		-		66,822,519,695		35,46
Teatinos Siglo XXI Inversiones Limitada		59,770,481,573		-		59,770,481,573		31,72
The Bank of New York Mellon		-		34,349,210,871		34,349,210,871		18.23
Banks on behalf of third parties		12,226,044,355		-		12,226,044,355		6,49
Pension funds (AFP)		7,018,886,971		-		7,018,886,971		3,72
Stock brokers on behalf of third parties		3,190,962,218		-		3,190,962,218		1,69
Other minority holders		5,068,021,111		-		5,068,021,111		2,69
Total		154,096,915,923		34,349,210,871		188,446,126,794		100,00

(*)

American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 19

EQUITY, continued

As of December 31, 2016 the shareholder composition is as follows:

Corporate Name or Shareholder`s Name	Shares		ADRs (*)		Total		% of equity holding

Santander Chile Holding S.A.		66,822,519,695		-		66,822,519,695		35,46
Teatinos Siglo XXI Inversiones Limitada		59,770,481,573		-		59,770,481,573		31,72
The Bank of New York Mellon		-		34,800,933,671		34,800,933,671		18,47
Banks on behalf of third parties		12,257,100,312		-		12,257,100,312		6,50
Pension fund (AFP) on behalf of third parties		6,990,857,997		-		6,990,857,997		3,71
Stock brokers on behalf of third parties		3,071,882,351		-		3,071,882,351		1,63
Other minority holders		4,732,351,195		-		4,732,351,195		2,51
Total		153,645,193,123		34,800,933,671		188,446,126,794		100,00

(*)

American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.

Dividends

The distribution of dividends has been disclosed in the Unaudited Consolidated Interim Statements of Changes in Equity.

Diluted earnings per share and basic earnings per share

As of March 31, 2017 and 2016, the composition of diluted earnings per share and basic earnings per share are as follows:

	As of March 31,
	2017		2016
	MCh$		MCh$

a) Basic earnings per share
Total attributable to equity holders of the Bank		142,375		125,439
Weighted average number of outstanding shares		188,446,126,794		188,446,126,794
Basic earnings per share (in Ch$)		0,756		0,666

b) Diluted earnings per share
Total attributable to equity holders of the Bank		142,375		125,439
Weighted average number of outstanding shares		188,446,126,794		188,446,126,794
Adjusted number of shares		188,446,126,794		188,446,126,794
Diluted earnings per share (in Ch$)		0,756		0,666

As of March 31, 2017 and 2016, the Bank does not own instruments with dilutive effects.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 19

EQUITY, continued

Other comprehensive income of available for sale investments and cash flow hedges:

	As of March 31,			As of December 31,
	2017			2016
	MCh$			MCh$

Available for sale investments
As of January 1,		7,375			(7,093	)
Gain (losses) on the re-valuation of available for sale investments, before tax		13,074			2,267
Reclassification from other comprehensive income to net income for the year		-			-
Net income realized		1,292			12,201
Subtotal		14,366			14,468
Total		21,741			7,375

Cash flow hedges
As of January 1,		2,288			8,626
Gains (losses) on the re-valuation of cash flow hedges, before tax		(13,891	)		(6,261	)
Reclassification and adjustments on cash flow hedges, before tax		(115	)		(77	)
Amounts removed from equity and included in carrying amount of non-financial asset (liability) whose acquisition or assignment was hedged as a highly probable transaction		-			-
Subtotal		(14,006	)		(6,338	)
Total		(11,718	)		2,288

Other comprehensive income, before tax		10,023			9,663

Income tax related to other comprehensive income components
Income tax relating to available for sale investments		(5,544	)		(1,770	)
Income tax relating to cash flow hedges		2,990			(549	)
Total		(2,554	)		(2,319	)

Other comprehensive income, net of tax		7,469			7,344
Attributable to:
Equity holders of the Bank		6,762			6,640
Non-controlling interest		707			704

The Bank expects that the results included in "Other comprehensive income" will be reclassified to profit or loss when the specific conditions have been met.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 20

CAPITAL REQUIREMENTS (BASEL)

In accordance with Chilean General Banking Law, the Bank must maintain a minimum ratio of effective equity to risk-weighted consolidated assets of 8% net of required allowances, and a minimum ratio of basic equity to consolidated total assets of 3%, net of required allowances. However, as a result of the Bank’s merger in 2002, the SBIF has determined that the Bank’s combined effective equity cannot be lower than 11% of its risk-weighted assets. Effective net equity is defined for these purposes as basic equity (capital and reserves) plus subordinated bonds, up to a maximum of 50% of basic equity.

Assets are allocated to different risk categories, each of which is assigned a weighting percentage according to the amount of capital required to be held for each type of asset. For example, cash, deposits in banks and financial instruments issued by the Central Bank of Chile have a 0% risk weighting, meaning that it is not necessary to hold equity to back these assets according to current regulations. Property, plant and equipment have a 100% risk weighting, meaning that a minimum capital equivalent to 11% of these assets must be held. All derivatives traded off the exchanges are also assigned a risk weighting, using a conversion factor applied to their notional values, to determine the amount of their exposure to credit risk. Off-balance-sheet contingent credits are also included for weighting purposes, as “Credit equivalents.”

According to Chapter 12-1 of the SBIF’s Recopilación Actualizada de Normas [Updated Compilation of Rules] effective January 2010, the SBIF changed existing regulation with the enforcement of Chapter B-3 from the Compendium of Accounting Standards, which changed the risk exposure of contingent allocations from 100% exposure to the following:

Type of contingent loan	Exposure

a) Pledges and other commercial commitments		100	%
b) Foreign letters of credit confirmed		20	%
c) Letters of credit issued		20	%
d) Guarantees		50	%
e) Interbank guarantee letters		100	%
f) Available lines of credit		35	%
g) Other loan commitments:
- Higher education loans Law No. 20,027		15	%
- Other		100	%
h) Other contingent loans		100	%

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 20

CAPITAL REQUIREMENTS (BASEL), Continued

The levels of basic capital and effective net equity as of March 31, 2017 and December 31, 2016, are as follows:

	Consolidated assets				Risk-weighted assets
	As of March 31,		As of December 31,		As of March 31,		As of December 31,
	2017		2016		2017		2016
	MCh$		MCh$		MCh$		MCh$

Balance-sheet assets (net of allowances)
Cash and deposits in banks		1,828,411		2,279,389		-		-
Cash in process of collection		800,901		495,283		184,708		80,623
Trading investments		387,190		396,987		24,938		24,709
Investments under resale agreements		-		6,736		-		6,736
Financial derivative contracts (*)		1,113,387		1,285,157		748,526		943,727
Interbank loans, net		351,880		272,635		73,388		80,200
Loans and accounts receivables from customers, net		26,294,766		26,113,485		22,785,020		22,655,553
Available for sale investments		2,807,974		3,388,906		281,483		263,016
Investments in associates and other companies		24,501		23,780		24,501		23,780
Intangible assets		59,118		58,085		59,118		58,085
Property, plant, and equipment		249,485		257,379		249,485		257,379
Current taxes		-		-		-		-
Deferred taxes		368,276		372,699		36,828		37,270
Other assets		1,035,406		840,499		824,659		585,739
Off-balance-sheet assets
Contingent loans		3,884,824		3,922,023		2,199,989		2,221,018
Total		39,206,119		39,713,043		27,492,643		27,237,835

(*)

“Financial derivative contracts” are presented at their “Credit Equivalent Risk” value as established in Chapter 12-1 of the Updated Compilation of Rules issued by the SBIF.

The ratios of basic capital and effective net equity at the close of each period are as follows:

					Ratio
	As of March 31,		As of December 31,		As of March 31,		As of December 31,
	2017		2016		2017		2016
	MCh$		MCh$		%		%

Basic capital		2,968,491		2,868,706		7,57		7,22
Effective net equity		3,761,040		3,657,707		13,68		13,43

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 21

NON-CONTROLLING INTEREST

The non-controlling interest included in the equity and the income from the subsidiaries is summarized as follows:

							Other comprehensive income
	Non- controlling interest		Equity		Income		Available for sale investments		Deferred tax			Total other comprehensive income		Comprehensive income
As of March 31, 2017	%		MCh$		MCh$		MCh$		MCh$			MCh$		MCh$

Subsidiaries:
Santander Agente de Valores Limitada		0,97		524		32		-		-			-		32
Santander S.A. Sociedad Securitizadora		0,36		1		-		-		-			-		-
Santander Corredores de Bolsa Limitada (1)		49,41		20,151		184		21		(18	)		3		187
Santander Corredora de Seguros Limitada		0,25		166		2		-		-			-		2
Subtotal				20,842		218		21		(18	)		3		221

Entities controlled through other considerations:
Bansa Santander S.A.		100,00		6,763		230		-		-			-		230
Santander Gestión de Recaudación y Cobranzas Limitada		100,00		2,382		195		-		-			-		195
Subtotal				9,145		425		-		-			-		425

Total				29,987		643		21		(18	)		3		646

(1) Formerly Santander S.A. Corredores de Bolsa. See Note1.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 21

NON-CONTROLLING INTEREST, continued

							Other comprehensive income
	Non- controlling interest		Equity		Income		Available for sale investments			Deferred tax			Total other comprehensive income			Comprehensive income
As of March 31, 2016	%		MCh$		MCh$		MCh$			MCh$			MCh$			MCh$

Subsidiaries:
Santander Agente de Valores Limitada		0,97		402		26		(1	)		-			(1	)		25
Santander S.A. Sociedad Securitizadora		0,36		2		-		-			-			-			-
Santander S.A. Corredores de Bolsa (1)		49,41		22,003		188		132			(30	)		102			290
Santander Corredora de Seguros Limitada		0,25		157		1		-			-			-			1
Subtotals				22,564		215		131			(30	)		101			316

Entities controlled through other considerations:
Bansa Santander S.A.		100,00		6,209		205		-			-			-			205
Santander Gestión de Recaudación y Cobranzas Limitada		100,00		1,783		181		-			-			-			181
Subtotals				7,992		386		-			-			-			386

Total				30,556		601		131			(30	)		101			702

(1) Formerly Santander S,A, Corredores de Bolsa, See Note1.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 21

NON-CONTROLLING INTEREST, continued

A summary of the financial information of subsidiaries included in the consolidation with non-controlling interests (before consolidation or conforming adjustments) is as follows:

	As of March 31,									As of December 31,
	2017									2016
	Assets		Liabilities		Capital		Net Income			Assets		Liabilities		Capital		Net Income
	MCh$		MCh$		MCh$		MCh$			MCh$		MCh$		MCh$		MCh$
Santander Corredora de Seguros Limitada		58,778		4,635		50,820		3,323			75,000		10,065		62,276		2,659
Santander Corredores de Bolsa Limitada (1)		483		73		432		(22	)		86,473		45,724		38,356		2,393
Santander Agente de Valores Limitada		312,168		271,046		40,749		373			54,486		3,666		38,851		11,969
Santander S.A. Sociedad Securitizadora		75,490		9,698		64,934		858			509		77		512		(80	)
Santander Gestión de Recaudación y Cobranzas Ltda.		31,292		24,530		6,532		230			8,547		6,363		1,602		582
Bansa Santander S.A.		8,951		6,569		2,184		198			31,301		24,768		6,004		529
Total		487,162		316,551		165,651		4,960			256,316		90,663		147,601		18,052

(1) Formerly Santander S,A, Corredores de Bolsa, See Note1.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 22

INTEREST INCOME

This item refers to interest earned in the period from the financial assets whose return, whether implicitly or explicitly, is determined by applying the effective interest rate method, regardless of the value at fair value, as well as the effect of hedge accounting (see c).

For the periods ended March 31, 2017 and 2016, the income from interest income, not including income from hedge accounting, is attributable to the following items:

	For the three months ended March 31,
	2017								2016
	Interest		Inflation adjustments		Prepaid fees		Total		Interest		Inflation adjustments		Prepaid fees		Total
Items	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Resale agreements		253		-		-		253		347		-		-		347
Interbank loans		58		-		-		58		199		-		-		199
Commercial loans		190,197		23,243		2,199		215,639		178,035		32,545		1,701		212,281
Mortgage loans		79,037		40,576		98		119,711		67,917		56,703		6,644		131,264
Consumer loans		154,663		111		1,105		155,879		146,166		185		927		147,278
Investment instruments		24,963		163		-		25,126		17,776		1,002		-		18,778
Other interest income		3,115		317		-		3,432		2,529		616		-		3,145

Interest income less income from hedge accounting		452,286		64,410		3,402		520,098		412,969		91,051		9,272		513,292

As indicated in section i) of Note 1, suspended interest relates to loans with payments over 90 days overdue, which are recorded in off-balance sheet accounts until they are effectively received.

As of March 31, 2017 and as of December 31, 2016, the suspended interest and adjustments income consists of the following:

	As of March 31,						As of December 31,
	2017						2016
	Interest		Inflation adjustments		Total		Interest		Inflation adjustments		Total
Items	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans		13,661		9,099		22,760		13,060		9,029		22,089
Mortgage loans		4,999		451		5,450		4,785		486		5,271
Consumer loans		2,960		6,253		9,213		2,924		6,635		9,559

Total		21,620		15,803		37,423		20,769		16,150		36,919

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 22

INTEREST INCOME, continued

For the periods ended March 31, 2017 and 2016, the expenses from interest expense, excluding expense from hedge accounting, are as follows:

	For the three months ended March 31,
	2017									2016
	Interest			Inflation adjustments			Total			Interest			Inflation adjustments			Total
Items	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Demand deposits		(2,777	)		(212	)		(2,989	)		(3,941	)		(245	)		(4,186	)
Repurchase agreements		(2,026	)		-			(2,026	)		(692	)		-			(692	)
Time deposits and liabilities		(98,060	)		(6,012	)		(104,072	)		(100,631	)		(8,993	)		(109,624	)
Interbank borrowings		(5,327	)		-			(5,327	)		(4,519	)		-			(4,519	)
Issued debt instruments		(56,449	)		(21,076	)		(77,525	)		(44,375	)		(22,556	)		(66,931	)
Other financial liabilities		(729	)		(124	)		(853	)		(752	)		(204	)		(956	)
Other interest expense		(1,245	)		(1,373	)		(2,618	)		(950	)		(2,950	)		(3,900	)
Interest expense less expenses from hedge accounting		(166,613	)		(28,797	)		(195,410	)		(155,860	)		(34,948	)		(190,808	)

d) For the periods ended March 31, 2017 and 2016, the income and expense from interest is as follows:

	For the three months ended March 31,
	2017			2016
Items	MCh$			MCh$

Interest income less income from hedge accounting		520,098			513,292
Interest expense less expense from hedge accounting		(195,410	)		(190,808	)

Net Interest income (expense) from hedge accounting		324,688			322,484

Hedge accounting (net)		(6,113	)		(9,611	)

Total net interest income		318,575			312,873

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 23

FEES AND COMMISSIONS

Fees and commissions includes the value of fees earned and paid during the year, except those which are an integral part of the financial instrument`s effective interest rate:

	For the three months ended March 31,
	2017		2016
	MCh$		MCh$

Fee and commission income
Fees and commissions for lines of credits and overdrafts		1,442		1,345
Fees and commissions for guarantees and letters of credit		9,488		9,284
Fees and commissions for card services		50,576		47,621
Fees and commissions for management of accounts		7,920		7,848
Fees and commissions for collections and payments		8,926		7,961
Fees and commissions for intermediation and management of securities		2,385		2,178
Insurance brokerage fees		10,057		9,659
Office banking		3,746		3,499
Fees for other services rendered		10,029		8,876
Other fees earned		10,726		6,237
Total		115,295		104,508

	For the three months ended March 31,
	2017			2016
	MCh$			MCh$

Fee and commission expense
Compensation for card operations		(35,886	)		(33,437	)
Fees and commissions for securities transactions		(185	)		(138	)
Office banking		(4,143	)		(3,485	)
Other fees		(2,258	)		(4,457	)
Total		(42,472	)		(41,517	)

Net fees and commissions income		72,823			62,991

The fees earned in transactions with letters of credit are presented on the Unaudited Consolidated Interim Statement of Income in the item “Interest income”.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 24

NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS

Includes the amount of the adjustments for the variation of the financial instruments, except those attributable to the interest accrued by the application of the effective interest rate method of the value adjustments of the assets, as well as the results obtained in their sale.

For the periods ended March 31, 2017 and 2016, the detail of income from financial operations is as follows:

	For the three months ended March 31,
	2017			2016
	MCh$			MCh$

Profit and loss from financial operations
Trading derivatives		(7,734	)		(178,095	)
Trading investments		5,011			3,967
Sale of loans and accounts receivables from customers
Current portfolio		2,211			-
Charged-off portfolio		746			(28	)
Available for sale investments		1,637			3,076
Repurchase of issued bonds(1)		-			(8,631	)
Other profit and loss from financial operations		(595	)		12
Total		1,276			(179,699	)

(1) As of March 31, 2017 the Bank has repurchased bonds, see Note 2.

NOTE 25

NET FOREIGN EXCHANGE INCOME

Net foreign exchange income includes the income earned from foreign currency trading, differences arising from converting monetary items in a foreign currency to the functional currency, and those generated by non-monetary assets in a foreign currency at the time of their sale.

For the periods ended March 31, 2017 and 2016, net foreign exchange income is as follows:

	For the three months ended March 31,
	2017			2016
	MCh$			MCh$

Net foreign exchange gain (loss)
Net gain (loss) from currency exchange differences		(84,107	)		51,158
Hedging derivatives		120,684			169,727
Income from assets indexed to foreign currency		(1,133	)		(7,027	)
Income from liabilities indexed to foreign currency		12			103
Total		35,456			213,961

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 26

PROVISIONS FOR LOAN LOSSES

The movement in provisions for loan losses for the periods ended March 31, 2017 and 2016 is as follows:

				Loans and accounts receivable from customers
	Interbank loans			Commercial loans						Mortgage loans			Consumer loans			Contingent loans
	Individual			Individual			Group			Group			Group			Individual			Group			Total
For the three months ended March 31, 2017	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off individually significant loans		-			(4,055	)		(15,034	)		(4,446	)		(26,589	)		-			-			(50,124	)
Provisions established		(29	)		(17,943	)		(11,953	)		(2,589	)		(38,517	)		(1,796	)		(544	)		(73,371	)
Total provisions and charge-offs		(29	)		(21,998	)		(26,987	)		(7,035	)		(65,106	)		(1,796	)		(544	)		(123,495	)
Provisions released(1)		37			16,413			3,194			3,858			4,322			1,452			1,039			30,315
Recovery of loans previously charged-off		-			3,196			4,691			2,507			8,924			-			-			19,318
Net charge to income		8			(2,389	)		(19,102	)		(670	)		(51,860	)		(344	)		495			(73,862	)

(1) See Note 1 p) III.

				Loans and accounts receivable from customers
	Interbank loans			Commercial loans						Mortgage loans			Consumer loans			Contingent loans
	Individual			Individual			Group			Group			Group			Individual			Group			Total
For the three months ended March 31, 2016	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off individually significant loans		-			(2,147	)		(14,052	)		(4,785	)		(27,185	)		-			-			(48,169	)
Provisions established		(18	)		(12,218	)		(24,600	)		(20,657	)		(47,539	)		(998	)		(2,030	)		(108,060	)
Total provisions and charge-offs		(18	)		(14,365	)		(38,652	)		(25,442	)		(74,724	)		(998	)		(2,030	)		(156,229	)
Provisions released(1)		4			10,820			10,016			19,145			18,806			1,557			100			60,448
Recovery of loans previously charged-off		-			2,978			3,944			1,933			9,000			-			-			17,855
Net charge to income		(14	)		(567	)		(24,692	)		(4,364	)		(46,918	)		559			(1,930	)		(77,926	)

(1) See Note 1 p) III.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 26

PROVISIONS FOR LOAN LOSSES, continued

b) The detail of Charge-off of individually significant loans, is as follows:

	Loans and accounts receivable from customers
	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
As of March 31, 2017	MCh$			MCh$			MCh$			MCh$			MCh$
Charge-off loans		17,479			24,911			5,033			60,214			107,637
Provision applied		(13,424	)		(9,877	)		(587	)		(33,625	)		(57,513	)
Net charge offs of individually significant loans		4,055			15,034			4,446			26,589			50,124

	Loans and accounts receivables from customers
	Commercial loans						Mortgage loans			Consumer loans
	Individual			Group			Group			Group			Total
As of March 31, 2016	MCh$			MCh$			MCh$			MCh$			MCh$
Charge-off loans		10,475			25,512			5,267			58,748			100,002
Provision applied		(8,328	)		(11,460	)		(482	)		(31,563	)		(51,833	)
Net charge offs of individually significant loans		2,147			14,052			4,785			27,185			48,169

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 27

PERSONNEL SALARIES AND EXPENSES

Composition of personnel salaries and expenses:

For the periods ended March 31, 2017 and 2016, the composition of personnel salaries and expenses is as follows:

	For the three months ended March 31,
	2017			2016
	MCh$			MCh$

Personnel compensation		56,607			56,517
Bonuses or gratuities		19,238			19,599
Stock-based benefits		(99	)		(25	)
Seniority compensation:		6,155			6,473
Pension plans		213			(141	)
Training expenses		628			576
Day care and kindergarden		742			948
Health and welfare funds		1,402			1,388
Other personnel expenses		7,790			7,632
Total		92,676			92,967

Share-based compensation (settled in cash)

In accordance with IFRS 2, equity instruments settled in cash are allocated to executives of the Bank and its Subsidiaries as a form of compensation for their services. The Bank measures the services received and the cash obligation at fair value at the end of each reporting period and on the settlement date, recognizing any change in fair value in the income statement for the period.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 28

ADMINISTRATIVE EXPENSES

For the periods ended March 31, 2017 and 2016, the composition of administrative expenses is as follows:

	For the three months ended March 31,
	2017		2016
	MCh$		MCh$

General administrative expenses		35,954		35,916
Maintenance and repair of property, plant and equipment		5,526		5,517
Office lease		6,923		7,000
Equipment lease		103		93
Insurance premiums		833		979
Office supplies		1,767		1,530
IT and communication expenses		9,236		9,036
Lighting, heating, and other utilities		1,413		1,451
Security and valuables transport services		3,658		4,359
Representation and personnel travel expenses		1,127		1,364
Judicial and notarial expenses		249		423
Fees for technical reports and auditing		2,771		1,870
Other general administrative expenses		2,348		2,294
Outsourced services		13,830		14,687
Data processing		9,004		9,610
Archive service		975		973
Valuation service		692		811
Outsourced staff		1,465		1,563
Other		1,694		1,730
Board expenses		338		393
Marketing expenses		4,972		4,577
Taxes, payroll taxes, and contributions		3,388		3,121
Real estate taxes		418		394
Patents		507		431
Other taxes		5		6
Contributions to SBIF		2,458		2,290
Total		58,482		58,694

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 29

DEPRECIATION, AMORTIZATION AND IMPAIRMENT

The values of depreciation and amortization during the first quarter of 2017 and 2016 are detailed below:

	For the three months ended March 31,
	2017			2016
	MCh$			MCh$

Depreciation and amortization
Depreciation of property, plant, and equipment		(12,323	)		(9,836	)
Amortizations of intangible assets		(5,229	)		(4,509	)
Total depreciation and amortization		(17,622	)		(14,345	)
Impairment of property, plant and equipment		(184	)		(37	)
Total		(17,806	)		(14,382	)

The changes in book value due to depreciation and amortization for the three month periods ended March 31, 2017 and 2016 are as follows:

	Depreciation and amortization
	2017
	Property, plant, and equipment			Intangible assets			Total
	MCh$			MCh$			MCh$

Balances as of January 1, 2017		(235,622	)		(239,629	)		(475,251	)
Depreciation and amortization for the period		(12,323	)		(5,299	)		(17,622	)
Sales and disposals in the period		3			-			3
Other		-			-			-
Balances as of March 31, 2017		(247,942	)		(244,928	)		(492,870	)

	Depreciation and amortization
	2016
	Property, plant, and equipment			Intangible assets			Total
	MCh$			MCh$			MCh$

Balances as of January 1, 2016		(190,781	)		(219,295	)		(410,076	)
Depreciation and amortization for the period		(9,836			(4,509	)		(14,345	)
Sales and disposals in the period		7			-			7
Other		-			-			-
Balances as of March 31, 2016		(200,610	)		(223,804	)		(424,414	)

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 30

OTHER OPERATING INCOME AND EXPENSES

Other operating income is as follows:

	For the three months ended March 31,
	2017		2016
	MCh$		MCh$

Income from assets received in lieu of payment
Income from sale of assets received in lieu of payment		560		511
Recovery of charge-offs and income from assets received in lieu of payment		3,505		1,647
Other income from assets received in lieu of payment		2,277		2,035
Subtotal		6,342		4,193
Other income
Leases		66		148
Income from sale of property, plant and equipment		17		320
Recovery of provisions for contingencies		-		-
Compensation from insurance companies due to damages		453		333
Other		3,136		254
Subtotal		3,672		1,055

Total		13,019		5,248

Other operating expenses are as follows:

	For the three months ended March 31,
	2017		2016
	MCh$		MCh$
Allowances and expenses for assets received in lieu of payment
Charge-offs of assets received in lieu of payment		5,520		2,615
Provisions on assets received in lieu of payment		1,771		2,573
Expenses for maintenance of assets received in lieu of payment		620		634
Subtotal		7,911		5,822

Credit card expenses		815		1,044

Customer services		820		902

Other expenses
Operating charge-offs		843		2,191
Life insurance and general product insurance policies		4,835		3,051
Additional tax on expenses paid overseas		-		296
Provisions for contingencies		-		1,287
Expense for the Retail Association		183		134
Other		3,410		1,507
Subtotal		9,271		8,466

Total		18,817		16,234

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 31

TRANSACTIONS WITH RELATED PARTIES

Associated and dependent entities are the Bank’s “related parties”, However, this also includes its “key personnel” from the executive staff (members of the Bank’s Board of Directors and Managers of Banco Santander Chile and its affiliates, together with their close relatives), as well as the entities over which the key personnel could exercise significant influence or control.

The Bank also includes those companies that are part of the Santander Group worldwide as related parties, given that all of them have a common parent, i,e,, Banco Santander S,A, (located in Spain).

Article 89 of the Ley de Sociedades Anónimas (Public Companies Act), which is also applicable to banks, states that any transaction with a related party must be made under equitable conditions similar to those that customarily prevail in the market.

Article 84 of the Ley General de Bancos (General Banking Act) establishes limits for loans that can be granted to related parties and prohibits lending to the Bank’s directors, General Manager, or representatives.

Transactions between the Bank and its related parties are specified below and have been divided into four categories:

Santander Group companies

This category includes all the companies that are controlled by the Santander Group around the world, and hence, it also includes the companies over which the Bank exercises any degree of control (Affiliates and special-purpose entities).

Associated companies

This category includes the entities over which the Bank exercises a significant degree of influence, in accordance with section b) of Note 1, and which generally belong to the group of entities known as “business support companies”.

Key personnel

This category includes members of the Bank’s Board of Directors and managers of Banco Santander Chile and its affiliates, together with their close relatives.

Other

This category encompasses the related parties that are not included in the groups identified above and which are, in general, entities over which the key personnel could exercise significant influence or control.

The terms for transactions with related parties are equivalent to those which prevail in transactions made under market conditions or to which the corresponding considerations in kind have been attributed.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

100

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 31

TRANSACTIONS WITH RELATED PARTIES, continued

Loans to related parties

Loans and receivables as well as contingent loans are as follows:

	As of March 31,												As of December 31,
	2017												2016
	Santander Group companies			Associated companies			Key personnel			Other			Santander Group companies			Associated companies			Key personnel			Other
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Loans and accounts receivables:
Commercial loans		80,719			502			4,512			7,013			81,687			533			4,595			7,100
Mortgage loans		-			-			18,926			-			-			-			18,046			-
Consumer loans		-			-			3,288			-			-			-			3,783			-
Loans and account receivables:		80,719			502			26,726			7,013			81,687			533			26,424			7,100

Allowance for loan losses		(210	)		(36	)		(70	)		(32	)		(209	)		(35	)		(87	)		(34	)
Net loans		80,509			466			26,656			6,981			81,478			498			26,337			7,066

Guarantees		411,739			-			23,431			5,847			434,141			-			23,636			5,486

Contingent loans
Personal guarantees		-			-			-			-			-			-			-			-
Letters of credit		30,340			-			-			2			27,268			-			-			-
Performance guarantees		420,529			-			-			-			437,101			-			-			-
Contingent loans		450,869			-			-			2			464,369			-			-			-

Allowance for contingent loans		(3	)		-			-			-			(5	)		-			-			-

Net contingent loans		450,866			-			-			2			464,364			-			-			-

Loans activity to related parties during the periods ended March 31, 2017 and December 31, 2016 is as follows:

	As of March 31,												As of December 31,
	2017												2016
	Santander Group companies			Associated companies			Key personnel			Other			Santander Group companies			Associated companies			Key personnel			Other
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Opening balances as of January 1,		546,058			532			26,423			7,100			616,968			565			28,675			1,966
Loans granted		5,780			-			1,709			3			122,729			203			8,580			6,808
Loans payments		(20,247	)		(30	)		(1,408	)		(88	)		(193,189	)		(236	)		(10,832	)		(1,674	)

Total		531,591			502			26,724			7,015			546,508			532			26,423			7,100

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

101

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 31

TRANSACTIONS WITH RELATED PARTIES, continued

Assets and liabilities with related parties

	As of March 31,								As of December 31,
	2017								2016
	Santander Group companies		Associated companies		Key personnel		Other		Santander Group companies		Associated companies		Key personnel		Other
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Assets
Cash and deposits in banks		21,888		-		-		-		187,701		-		-		-
Trading investments		-		-		-		-		-		-		-		-
Investments under resale agreements		-		-		-		-		-		-		-		-
Financial derivative contracts		-		32,212		-		-		742,851		33,433		-		-
Available for sale investments		-		-		-		-		-		-		-		-
Other assets		12,329		66,758		-		-		4,711		67,454		-		-

Liabilities
Deposits and other demand liabilities		15,429		7,141		2,883		630		6,988		7,141		2,883		630
Obligations under repurchase agreements		-		-		-		-		56,167		-		-		-
Time deposits and other time liabilities		1,276,456		621		2,365		1,984		1,545,771		621		2,365		1,984
Financial derivative contracts		-		41,009		-		-		954,575		54,691		-		-
Issued debts instruments		306,896		-		-		-		484,548		-		-		-
Other financial liabilities		6,499		-		-		-		8,970		-		-		-
Other liabilities		509		58,613		-		-		446		44,329		-		-

Income (expenses) with related parties

	For the three months ended March 31,
	2017										2016
	Santander Group companies			Associated companies			Key personnel		Other		Santander Group companies			Associated companies			Key personnel			Other
	MCh$			MCh$			MCh$		MCh$		MCh$			MCh$			MCh$			MCh$

Income (expense) recorded
Income and expenses from interest and inflation		-			40			1,164		115		(6,219	)		12			365			24
Fee and commission income and expenses		10,046			45			204		20		8,839			10			63			5
Net income (expense) from financial operations and foreign exchange transactions (*)		80,510			(303	)		1		-		262,628			-			(82	)		3
Other operating income and expenses		136			(2,239	)		-		-		226			-			-			-
Key personnel compensation and expenses		-			-			8,944		-		-			-			(9,070	)		-
Administrative and other expenses		(8,848	)		(13,863	)		-		-		(8,581	)		(11,682	)		-			-

Total		81,844			(16,320	)		10,313		135		256,893			(11,660	)		(8,724	)		32

(*)

Primarily relates to derivative contracts used to hedge economically the exchange risk of assets and liabilities that hedge positions of the Bank and its subsidiaries.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

102

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 31

TRANSACTIONS WITH RELATED PARTIES, continued

Payment to Board members and key management personnel

The compensation received by key management personnel, including Board members and all the executives holding Manager positions, is shown in the “Personnel salaries and expenses” and/or “Administrative expenses” of the Unaudited Consolidated Interim Statements of Income, and detailed as follows:

	For the three months ended March 31,
	2017			2016
	MCh$			MCh$

Personnel compensation		4,274			4,588
Board member`s salaries and expenses		322			335
Bonuses or gratuity		3,842			3,322
Compensation in stock		(99	)		(25	)
Training expenses		12			81
Seniority compensation		141			642
Health funds		70			76
Other personnel expenses		169			192
Pension Plans		213			(141	)
Total		8,944			9,070

Composition of key personnel

As of March 31, 2017 and December 31, 2016, the composition of the Bank`s key personnel is as follows:

Position	No, of executives
	As of March 31,		As of December 31,
	2017		2016

Director		13		13
Division manager		14		17
Department manager		68		76
Manager		49		61

Total key personnel		144		167

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

103

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 32

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement of fair value assumes the sale transaction of an asset or the transference of the liability happens within the main asset or liability market, or the most advantageous market for the asset or liability.

For financial instruments with no available market prices, fair values have been estimated by using recent transactions in analogous instruments, and in the absence thereof, the present values or other valuation techniques based on mathematical valuation models sufficiently accepted by the international financial community. In the use of these models, consideration is given to the specific particularities of the asset or liability to be valued, and especially to the different kinds of risks associated with the asset or liability.

These techniques are significantly influenced by the assumptions used, including the discount rate, the estimates of future cash flows and prepayment expectations. Hence, the fair value estimated for an asset or liability may not coincide exactly with the price at which that asset or liability could be delivered or settled on the date of its valuation, and may not be justified in comparison with independent markets.

Except as detailed in the following table, the management consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values.

Determination of fair value of financial instruments

Below is a comparison between the value at which the Bank’s financial assets and liabilities are recorded and their fair value as of March 31, 2017 and December 31, 2016:

	As of March 31,				As of December 31,
	2017				2016
	Book value		Fair value		Book value		Fair value
	MCh$		MCh$		MCh$		MCh$

Assets
Trading investments		387,190		387,190		396,987		396,987
Financial derivative contracts		2,500,630		2,500,630		2,500,782		2,500,782
Loans and accounts receivable from customers and interbank loans, (net)		26,646,646		30,461,548		26,386,120		29,976,931
Investments available for sale		2,807,974		2,807,974		3,388,906		3,388,906
Guarantee deposits (margin accounts)		346,254		346,254		396,289		396,289

Liabilities
Deposits and interbank borrowings		21,600,515		21,856,224		22,607,392		22,833,009
Financial derivative contracts		2,293,744		2,293,744		2,292,161		2,292,161
Issued debt instruments and other financial liabilities		7,649,976		8,333,200		7,566,388		8,180,322
Guarantees received (margin accounts)		419,875		419,875		480,926		480,926

The fair value approximates the carrying amount of the following line items due to their short-term nature: cash and deposits-banks, cash items in process of collection and investments under resale or repurchase agreements.

In addition, the fair value estimates presented above do not attempt to estimate the value of the Bank’s profits generated by its business activity, nor its future activities, and accordingly, they do not represent the Bank’s value as a going concern. Below is a detail of the methods used to estimate the financial instruments’ fair value.

Trading investments and available for sale investment instruments

The estimated fair value of these financial instruments was established using market values or estimates from an available dealer, or quoted market prices of similar financial instruments, Investments are evaluated at recorded value since they are considered as having a fair value not significantly different from their recorded value. To estimate the fair value of debt investments or representative values in these lines of businesses, we take into consideration additional variables and elements, as long as they apply, including the estimate of prepayment rates and credit risk of issuers.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

104

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 32

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued

Loans and accounts receivable from customers and interbank loans

Fair value of commercial, mortgage and consumer loans and credit cards is measured through a discounted cash flow (DCF) analysis. To do so, we use current market interest rates considering product, term, amount and similar loan quality. Fair value of loans with 90 days or more of delinquency are measured by means of the market value of the associated guarantee, minus the rate and term of expected payment. For variable rate loans whose interest rates change frequently (monthly or quarterly) and that are not subjected to any significant credit risk change, the estimated fair value is based on their book value.

Deposits

Disclosed fair value of deposits that do not bear interest and saving accounts is the amount payable at the reporting date and, therefore, equals the recorded amount. Fair value of time deposits is calculated through a discounted cash flow calculation that applies current interest rates from a monthly calendar of scheduled maturities in the market.

Short and long term issued debt instruments

The fair value of these financial instruments is calculated by using a discounted cash flow analysis based on the current incremental lending rates for similar types of loans having similar maturities.

Financial derivative contracts

The estimated fair value of financial derivative contracts is calculated using the prices quoted on the market for financial instruments having similar characteristics.

The fair value of interest rate swaps represents the estimated amount that the Bank determines as exit price in accordance with IFRS 13.

If there are no quoted prices from the market (either direct or indirect) for any derivative instrument, the respective fair value estimates have been calculated by using models and valuation techniques such as Black-Scholes, Hull, and Monte Carlo simulations, taking into consideration the relevant inputs/outputs such as volatility of options, observable correlations between underlying assets, counterparty credit risk, implicit price volatility, the velocity with which the volatility reverts to its average value, and the straight-line relationship (correlation) between the value of a market variable and its volatility, among others.

Measurement of fair value and hierarchy

IFRS 13 - Fair Value Measurement, provides a hierarchy of reasonable values which separates the inputs and/or valuation technique assumptions used to measure the fair value of financial instruments, The hierarchy reflects the significance of the inputs used in making the measurement, The three levels of the hierarchy of fair values are the following:

• Level 1: the inputs are quoted prices (unadjusted) on active markets for identical assets and liabilities that the Bank can access on the measurement date.

• Level 2: inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: inputs are unobservable inputs for the asset or liability i,e, they are not based on observable market data.

The hierarchy level within which the fair value measurement is categorized in its entirety is determined based on the lowest level of input that is significant to the fair value measurement in its entirety.

The best evidence of a financial instrument’s fair value at the initial time is the transaction price (Level 1).

In cases where quoted market prices cannot be observed, Management makes its best estimate of the price that the market would set using its own internal models which in most cases use data based on observable market parameters as a significant input (Level 2) and, in very specific cases, significant inputs not observable in market data (Level 3). Various techniques are employed to make these estimates, including the extrapolation of observable market data.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

105

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 32

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued

Financial instruments at fair value and determined by quotations published in active markets (Level 1) include:

Chilean Government and Department of Treasury bonds

Instruments which cannot be 100% observable in the market are valued according to other inputs observable in the market (Level 2).

The following financial instruments are classified under Level 2:

Type of financial instrument	Model used in valuation	Description
ž Mortgage and private bonds	Present Value of Cash Flows Model	Internal Rates of Return (“IRRs”) are provided by RiskAmerica, according to the following criterion: If, at the valuation day, there are one or more valid transactions at the Santiago Stock Exchange for a given mnemonic, the reported rate is the weighted average amount of the observed rates. In the case there are no valid transactions for a given mnemonic on the valuation day, the reported rate is the IRR base from a reference structure, plus a spread model based on historical spread for the same item or similar ones.

ž Time deposits	Present Value of Cash Flows Model	IRRs are provided by RiskAmerica, according to the following criterion: If, at the valuation day, there are one or more valid transactions at the Santiago Stock Exchange for a given mnemonic, the reported rate is the weighted average amount of the observed rates. In the case there are no valid transactions for a given mnemonic on the valuation day, the reported rate is the IRR base from a reference structure, plus a spread model based on issuer curves.

ž Constant Maturity Swaps (CMS), FX and Inflation Forward (Fwd) , Cross Currency Swaps (CCS), Interest Rate Swap (IRS)	Present Value of Cash Flows Model	IRRs are provided by ICAP, GFI, Tradition, and Bloomberg according to this criterion: With published market prices, a valuation curve is created by the bootstrapping method and is then used to value different derivative instruments.

ž FX Options	Black-Scholes	Formula adjusted by the volatility smile (implicit volatility), Prices (volatility) are provided by BGC Partners, according to this criterion: With published market prices, a volatility surface is created by interpolation and then these volatilities are used to value options.

In limited occasions significant inputs not observable in market data are used (Level 3). To carry out this estimate, several techniques are used, including extrapolation of observable market data or a mix of observable data.

The following financial instruments are classified under Level 3:

Type of financial instrument	Model used in valuation	Description
ž Caps/ Floors/ Swaptions	Black Normal Model for Cap/Floors and Swaptions	There is no observable input of implicit volatility.

ž UF options	Black – Scholes	There is no observable input of implicit volatility.

ž Cross currency swap with window	Hull-White	Hybrid HW model for rates and Brownian motion for FX. There is no observable input of implicit volatility.

ž CCS (special contracts)	Implicit Forward Rate Agreement (FRA)	Start Fwd unsupported by MUREX (platform) due to the UF forward estimate.

ž Cross currency swap, Interest rate swap, Call money swap in Tasa Activa Bancaria (Active Bank Rate) TAB	Present Value of Cash Flows Model	Validation obtained by using the interest curve and interpolating at flow maturities, but TAB is not a directly observable variable and is not correlated to any market input.

ž Bonds (in our case, low liquidity bonds)	Present Value of Cash Flows Model	Valued by using similar instrument prices plus a charge-off rate by liquidity.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

106

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 32

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued

The Bank does not believe that any change in unobservable inputs with respect to level 3 instruments would result in a significantly different fair value measurement.

The following table presents the assets and liabilities that are measured at fair value on a recurring basis, as of March 31, 2017 and December 31, 2016.

	Fair value measurement
	2017		Level 1		Level 2		Level 3
As of March 31,	MCh$		MCh$		MCh$		MCh$

Assets
Trading investments		387,190		381,893		5,297		-
Available for sale investments		2,807,974		2,000,793		806,501		680
Derivatives		2,500,630		-		2,461,300		39,330
Guarantee deposits (margin accounts)		346,254		-		346,254		-
Total		6,042,048		2,382,686		3,619,352		40,010


Liabilities
Derivatives		2,293,744		-		2,293,744		-
Guarantees received (margin accounts)		419,875		-		419,875		-
Total		2,713,619		-		2,713,619		-

	Fair value measurement
	2016		Level 1		Level 2		Level 3
As of December 31,	MCh$		MCh$		MCh$		MCh$

Assets
Trading investments		396,987		396,011		976		-
Available for sale investments		3,388,906		2,471,439		916,808		659
Derivatives		2,500,782		-		2,461,407		39,375
Guarantee deposits (margin accounts)		396,289		396,289		-		-
Total		6,682,964		3,263,739		3,379,191		40,034


Liabilities
Derivatives		2,292,161		-		2,292,118		43
Guarantees received (margin accounts)		480,926		480,926		-		-
Total		2,773,087		480,926		2,292,118		43

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

107

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 32

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued

The following table presents the Bank’s activity for assets and liabilities measured at fair value on a recurrent basis using unobserved significant entries (Level 3) as of March 31, 2017 and 2016:

	Assets			Liabilities
	MCh$			MCh$

As of January 1, 2017		40,034			43

Total realized and unrealized profits (losses)
Included in statement of income		(46	)		(43	)
Included in other comprehensive income		23			-
Purchases, issuances, and loans (net)		-			-

As of March 31, 2017		40,011			-

Total profits or losses included in comprehensive income at March 31, 2017 that are attributable to change in unrealized profit (losses) related to assets or liabilities as of March 31, 2016		(23	)		(43	)

	Assets		Liabilities
	MCh$		MCh$

As of January 1, 2016		39,913		-

Total realized and unrealized profits (losses)
Included in statement of income		3,026		277
Included in other comprehensive income		37		-
Purchases, issuances, and loans (net)		-		-

As of March 31, 2016		42,976		277

Total profits or losses included in comprehensive income at March 31, 2016 that are attributable to change in unrealized profit (losses) related to assets or liabilities as of March 31, 2015		3,063		277

The realized and unrealized profits (losses) included in comprehensive income for 2017 and 2016, in the assets and liabilities measured at fair value on a recurrent basis through unobservable market data (Level 3) are recorded in the Statement of Comprehensive Income in the associate line item.

The potential effect as of March 31, 2017 and 2016 on the valuation of assets and liabilities valued at fair value on a recurrent basis through unobservable significant entries (level 3), generated by changes in the principal assumptions if other reasonably possible assumptions that are less or more favorable were used, is not considered by the Bank to be significant.

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

108

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 32

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES, continued

The following tables show the financial instruments subject to compensation in accordance with IAS 32, for 2017 and 2016:

As of March 2017
	Linked financial instruments, compensated in balance
Financial instruments Assets	Gross amounts Ch$ Million		Compensated in balance Ch$ Million		Net amount presented in balance Ch$ Million		Remains of unrelated and / or unencumbered financial instruments Ch$ Million		Amount in Statements of Financial Position
Financial derivative contracts		2,228,133		-		2,228,133		272,497		2,500,630
Investments under resale agreements		-		-		-		-		-
Loans and accounts receivable from customers, and Interbank loans, net		-		-		-		26,646,646		26,646,646
Total		2,228,133		-		2,228,133		26,919,143		29,147,276
Liabilities
Financial derivative contracts		2,075,461		-		2,075,461		218,283		2,293,744
Investments under resale agreements		205,151		-		205,151		-		205,151
Déposits and interbank borrowings		-		-		-		21,600,515		21,600,515
Total		2,280,612		-		2,280,612		21,818,798		24,099,410

As of December 2016
	Linked financial instruments, compensated in balance
Financial instruments Assets	Gross amounts Ch$ Million		Compensated in balance Ch$ Million		Net amount presented in balance Ch$ Million		Remains of unrelated and / or unencumbered financial instruments Ch$ Million		Amount in Statements of Financial Position
Financial derivative contracts		2,237,731		-		2,237,731		263,051		2,500,782
Obligations under repurchase agreements		6,736		-		6,736		-		6,736
Loans and accounts receivable from customers, and Interbank loans, net		-		-		-		26,386,120		26,386,120
Total		2,244,467		-		2,244,467		26,649,171		28,893,638
Loabilities
Financial derivative contracts		2,100,955		-		2,100,955		191,206		2,292,161
Investments under resale agreements		212,437		-		212,437		-		212,437
Déposits and interbank borrowings		-		-		-		22,607,392		22,607,392
Total		2,313,392		-		2,313,392		22,798,598		25,111,990

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

109

Banco Santander Chile and Subsidiaries

Notes to the Unaudited Consolidated Interim Financial Statements

AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2016

NOTE 33

SUBSEQUENT EVENTS

Between April 1, 2017 and the date on which these Unaudited Consolidated Interim Financial Statements were issued (April 11, 2017), no other events have occurred which could significantly affect their interpretation.

FELIPE CONTRERAS FAJARDO

Chief Accounting Officer

CLAUDIO MELANDRI HINOJOSA

Chief Executive Officer

Consolidated Interim Financial Statements March 2017 / Banco Santander Chile

110