NOTE 23 INTEREST INCOME AND EXPENSE
This item comprises interest and readjustments accrued in the period by all financial assets whose implicit or explicit performance, is obtained by applying the effective interest rate method, independently if these are valued at fair value, as well as of the effect from accounting hedges.
a) The composition of interest income and inflation-indexing for the years ended December 31, 2017, 2016 and 2015 was as follows:
| 2017 | 2016 | 2015 | |||||||||||||||||
| Interest | Inflation (1) | Total | Interest | Inflation (1) | Total | Interest | Inflation (1) | Total | |||||||||||
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||
| Investments under agreements to resell | 6,643 | 2 | 6,645 | 25,550 | — | 25,550 | 916 | — | 916 | ||||||||||
| Loans and receivables to banks | 5,460 | — | 5,460 | 8,180 | — | 8,180 | 1,459 | — | 1,459 | ||||||||||
| Commercial loans | 872,416 | 68,729 | 941,145 | 772,704 | 100,381 | 873,085 | 198,585 | 67,977 | 266,562 | ||||||||||
| Mortgage loans | 188,094 | 59,149 | 247,243 | 155,101 | 79,655 | 234,756 | 60,188 | 58,433 | 118,621 | ||||||||||
| Consumer loans | 360,268 | 64 | 360,332 | 283,005 | 31 | 283,036 | 98,684 | 195 | 98,879 | ||||||||||
| Financial investmens | 70,556 | 8,274 | 78,830 | 67,683 | 11,032 | 78,715 | 9,576 | 11,305 | 20,881 | ||||||||||
| Other interest income | 9,656 | 545 | 10,201 | 8,427 | 466 | 8,893 | 4,557 | 1,488 | 6,045 | ||||||||||
| Gain (loss) from accounting hedges (*) | (3,527 | ) | — | (3,527 | ) | (3,012 | ) | — | (3,012 | ) | (11,381 | ) | — | (11,381 | ) | ||||
| Total | 1,509,566 | 136,763 | 1,646,329 | 1,317,638 | 191,565 | 1,509,203 | 362,584 | 139,398 | 501,982 | ||||||||||
b) The amount recorded as of interest expenses for the years ended December 31, 2017, 2016 and 2015 was as follows:
| 2017 | 2016 | 2015 | |||||||||||||||||
| Interest | Inflation (1) | Total | Interest | Inflation (1) | Total | Interest | Inflation (1) | Total | |||||||||||
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||||||||||
| Demand deposits | (72,732 | ) | (139 | ) | (72,871 | ) | (78,147 | ) | (173 | ) | (78,320 | ) | — | — | — | ||||
| Investment under agreements to repurchase | (32,677 | ) | — | (32,677 | ) | (48,086 | ) | — | (48,086 | ) | (1,772 | ) | — | (1,772 | ) | ||||
| Deposuts and time deposits | (420,190 | ) | (13,047 | ) | (433,237 | ) | (419,661 | ) | (39,720 | ) | (459,381 | ) | (122,326 | ) | (38,575 | ) | (160,901 | ) | |
| Borrowings from financial institutions | (51,922 | ) | (2,463 | ) | (54,385 | ) | (45,801 | ) | — | (45,801 | ) | (16,790 | ) | — | (16,790 | ) | |||
| Debt issued | (210,104 | ) | (72,780 | ) | (282,884 | ) | (156,168 | ) | (79,126 | ) | (235,294 | ) | (45,468 | ) | (50,274 | ) | (95,742 | ) | |
| Other financial obligations | (114 | ) | — | (114 | ) | (142 | ) | (197 | ) | (339 | ) | (204 | ) | (291 | ) | (495 | ) | ||
| Other interest expenses | (556 | ) | (1,962 | ) | (2,518 | ) | (905 | ) | (2,261 | ) | (3,166 | ) | — | (2,992 | ) | (2,992 | ) | ||
| Gain (loss) from accounting hedges (*) | 15,339 | — | 15,339 | 359 | — | 359 | — | — | — | ||||||||||
| Total interest expenses | (772,956 | ) | (90,391 | ) | (863,347 | ) | (748,551 | ) | (121,477 | ) | (870,028 | ) | (186,560 | ) | (92,132 | ) | (278,692 | ) | |
(1) The inflation indexing is the result of changes in the Unidades de Fomento (“UF”). The UF is an inflation-index 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 effect of any changes in the nominal peso value of our UF-denominated interest earning assets and interest bearing liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense respectively.
(*) The mark to market adjustments are presented in this line for hedging derivatives used in hedging of assets except in the case of foreign currency hedges and cash flow hedges (cross-currency), their all-in mark to market adjustment is included in the foreign exchange gain (losses) (see Note 26 “Net foreign exchange income (losses)”).