`CHEVY CHASE
                          PREFERRED CAPITAL CORPORATION
                                    FORM 10-Q
                                  June 30, 2002















______________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2002

                        Commission File Number: 333-10495

                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)

           Maryland                                      52-1998335
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                      Identification No.)

                              7501 Wisconsin Avenue
                            Bethesda, Maryland 20814
               (Address of principal executive offices) (Zip Code)

                                 (301) 986-7000
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes  X  No

The number of shares  outstanding of the registrant's sole class of common stock
was 100 shares, $1 par value, as of July 31, 2002.

______________________________________________________________________________





                    CHEVY CHASE PREFERRED CAPITAL CORPORATION

                                TABLE OF CONTENTS

                         PART I - FINANCIAL INFORMATION

                                                                            Page
Item 1. Financial Statements:..................................................1
  (a) Statements of Financial Condition at June 30, 2002 and
       December 31, 2001.......................................................2
  (b) Statements of Operations for the Three Months and Six Months Ended
       June 30, 2002 and 2001..................................................3
  (c) Statement of Stockholders' Equity for the Six Months
       Ended June 30, 2002.....................................................4
  (d) Statements of Cash Flows for the Six Months Ended
       June 30, 2002 and 2001..................................................5
  (e) Notes to Financial Statements............................................6

Item 2.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations..................................8

Item 3.  Quantitative and Qualitative Disclosures about Market Risk...........12

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings....................................................13

Item 2.  Changes in Securities................................................13

Item 3.  Defaults Upon Senior Securities......................................13

Item 4.  Submission of Matters to a Vote of Security Holders..................13

Item 5.  Other Information....................................................13

Item 6.  Exhibits and Reports on Form 8-K.....................................13









                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

The following unaudited financial  statements and notes of Chevy Chase Preferred
Capital  Corporation  (the  "Company")  have been  prepared in  accordance  with
generally accepted accounting principles for interim financial  information.  In
the opinion of management,  all adjustments necessary for a fair presentation of
the  financial  position and the results of  operations  for the interim  period
presented have been  included.  Such  unaudited  financial  statements and notes
should be read in conjunction with the Company's financial  statements and notes
for the year ended December 31, 2001 included in the Company's  Annual Report on
Form 10-K (File No. 333-10495) filed with the Securities and Exchange Commission
on March 29, 2002 (the "2001 10-K").



                                      -1-



                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                        STATEMENTS OF FINANCIAL CONDITION

                                                  June 30,          December 31,
                                                   2002                 2001
                                             ----------------   ----------------
                                               (Unaudited)
                                     ASSETS
Cash and interest-bearing deposits           $    2,609,187     $     5,764,867
Residential mortgage loans (net of allowance
 for losses of $40,333 for both periods)        290,770,651         287,523,781
Accounts receivable from parent                   9,903,439          11,825,608
Accrued interest receivable                       1,307,819           1,196,337
Prepaid expenses                                      6,065               8,000
                                             ----------------   ----------------
  Total assets                               $  304,597,161     $   306,318,593
                                             ================   ================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and accounts payable
 to others                                           37,349              69,050
Dividends payable to parent                             -             2,700,000
Dividends payable to others                       3,890,625           3,890,625
                                             ----------------   ----------------
  Total liabilities                               3,927,974           6,659,675
                                             ----------------   ----------------


10 3/8% Noncumulative Exchangeable Preferred
 Stock, $5 par value, 10,000,000 shares
 authorized, 3,000,000 shares issued and
 outstanding (liquidation value of
 $150,000,000 plus accrued and unpaid
 dividends)                                      15,000,000          15,000,000
Common stock, $1 par value, 1,000 shares
 authorized, 100 shares issued and
 outstanding                                            100                 100
Capital contributed in excess of par            284,999,900         284,658,818
Retained earnings                                   669,187                 -
                                             ----------------   ----------------
Total stockholders' equity                      300,669,187         299,658,918
                                             ----------------   ----------------
Total liabilities and stockholders' equity   $  304,597,161     $   306,318,593
                                             ================   ================






 The accompanying Notes to Financial Statements are an integral part of these statements.

                                      -2-



                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)


                               Three Months Ended          Six Months Ended
                                    June 30,                   June 30,
                             ------------------------  -------------------------
                                 2002        2001         2002          2001
                             -----------  -----------  -----------  ------------
Interest Income
 Residential mortgage loans  $4,518,771   $5,394,729   $9,032,294   $10,950,881
 Other                           15,776       54,701       45,731        84,617
                             -----------  -----------  -----------  ------------
   Total interest income      4,534,547    5,449,430    9,078,025    11,035,498

Gain on sales of real estate
 acquired in settlement of
 loans, net                         -            -            -          21,924
                             -----------  -----------  -----------  ------------
     Total income             4,534,547    5,449,430    9,078,025    11,057,422
                             -----------  -----------  -----------  ------------

Operating Expenses
 Loan servicing fees paid to
  parent                        228,633      269,896      469,317       540,601
 Advisory fees paid to parent    50,000       50,000      100,000       100,000
 Directors fees                  12,000        8,000       20,000        16,000
 General and administrative      20,999       13,653       38,271        20,340
                             -----------  -----------  -----------  ------------
   Total operating expenses     311,632      341,549      627,588       676,941
                             -----------  -----------  -----------  ------------
Income before income taxes    4,222,915    5,107,881    8,450,437    10,380,481
Provision for income taxes          -            -            -           2,300
                             -----------  -----------  -----------  ------------
NET INCOME                   $4,222,915   $5,107,881   $8,450,437   $10,378,181
                             ===========  ===========  ===========  ============

PREFERRED STOCK DIVIDENDS     3,890,625    3,890,625    7,781,250     7,781,250
                             -----------  -----------  -----------  ------------

EARNINGS AVAILABLE TO
   COMMON STOCKHOLDER        $  332,290   $1,217,256   $  669,187   $ 2,596,931
                             ===========  ===========  ===========  ============

EARNINGS PER COMMON SHARE    $ 3,322.90   $12,172.56   $ 6,691.87   $ 25,969.31
                             ===========  ===========  ===========  ============








 The accompanying Notes to Financial Statements are an integral part of these statements.

                                      -3-



                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Unaudited)

                                                 Capital
                                               Contributed                   Total
                             Preferred  Common  In Excess   Retained     Stockholders'
                               Stock     Stock   of Par     Earnings        Equity
                            -----------  ----  ------------  -----------  -------------
Balance, December 31, 2001  $15,000,000  $100  $284,658,818  $      -     $299,658,918                                                                            $

Net income                          -     -             -     8,450,437      8,450,437

Capital contribution from
 common stockholder                 -     -         341,082         -          341,082

Dividends on 10 3/8%
  Noncumulative Exchangeable
  Preferred Stock, Series A         -     -             -    (7,781,250)    (7,781,250)
                            -----------  ----  ------------  -----------  --------------

Balance, June 30, 2002      $15,000,000  $100  $284,999,900  $  669,187   $300,669,187
                            ===========  ====  ========-===  ===========  ==============





















 The accompanying Notes to Financial Statements are an integral part of this statement.

                                      -4-



                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                      Six Months Ended
                                                          June 30,
                                               ---------------------------------
                                                    2002              2001
                                               ---------------   ---------------
Cash flows from operating activities:

 Net income                                      $ 8,450,437       $ 10,378,181
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Gain on sales of real estate acquired in
   settlement of loans, net                              -              (21,924)
  (Increase) decrease in accounts receivable
    from parent                                    1,922,169         (3,002,708)
  (Increase) decrease in accrued interest
    receivable                                      (111,482)            39,257
  (Increase) decrease in prepaid expenses              1,935               (566)
  Decrease in accrued expenses and accounts
   payable to others                                 (31,701)           (53,756)
                                               ---------------   ---------------
  Net cash provided by operating activities       10,231,358          7,338,484
                                               ---------------   ---------------

Cash flows from investing activities:
  Purchases of residential mortgage loans        (68,993,512)       (45,214,500)
  Repayments of residential mortgage loans        65,746,642         48,389,516
  Net proceeds on sales of real estate acquired
   in settlement of loans                                -              138,330
                                               ---------------   ---------------
  Net cash provided by (used in) investing
   activities                                     (3,246,870)         3,313,346
                                               ---------------   ---------------

Cash flows from financing activities:
  Capital contribution from common stockholder       341,082              1,255
  Dividends paid on preferred stock               (7,781,250)        (7,781,250)
  Dividends paid on common stock                  (2,700,000)        (3,775,000)
                                               ---------------   ---------------
  Net cash used in financing activities          (10,140,168)       (11,554,995)
                                               ---------------   ---------------

Net decrease in cash and cash equivalents         (3,155,680)          (903,165)
Cash and cash equivalents at beginning of period   5,764,867          5,122,692
                                               ----------------   --------------
Cash and cash equivalents at end of period       $ 2,609,187        $ 4,219,527
                                               ================   ==============

Supplemental disclosures of cash flow information:

 Income taxes paid during the year               $     2,300        $       -
                                               ================   ==============





 The accompanying Notes to Financial Statements are an integral part of these statements.

                                      -5-



                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:

The Company is a Maryland  corporation  which  acquires,  holds and manages real
estate assets.  Chevy Chase Bank, F.S.B. (the "Bank"), a federally insured stock
savings bank, owns all of the Company's  common stock. The Bank is in compliance
with its regulatory capital requirements.

Certain  reclassifications  of prior  periods'  information  have  been  made to
conform with the presentation for the three months and six months ended June 30,
2002.

NOTE 2 - RESIDENTIAL MORTGAGE LOANS:

Residential   mortgage  loans  consist  of  monthly  adjustable  rate  mortgages
("ARMs"), one-year ARMs, three-year ARMs and five-year,  seven-year and ten-year
fixed-rate loans with automatic conversion to one-year ARMs after the end of the
respective  fixed rate period,  and 30 year  fixed-rate  mortgages.  Each of the
mortgage  loans is  secured  by a  mortgage,  deed of  trust  or other  security
instrument  which created a first lien on the residential  dwellings  located in
their  respective  jurisdictions.  The  following  table  shows the  residential
mortgage loan portfolio by type at the dates indicated:

                                       June 30,               December 31,
                                         2002                    2001
                                 --------------------    --------------------
 Monthly ARMs                       $   73,576,889          $   79,541,872
 One-year ARMs                          18,798,461              21,583,666
 Three-year ARMs                        24,112,067              19,462,468
 5/1 ARMs                               50,397,703              49,804,806
 7/1 ARMs                               11,978,462               8,378,308
 10/1 ARMs                              84,807,837              99,255,916
 30 year fixed-rate                     27,139,565               9,537,078
                                 --------------------    --------------------
  Total                                290,810,984             287,564,114
 Less:
  Allowance for loan losses                 40,333                  40,333
                                 --------------------    --------------------
  Total                             $  290,770,651          $  287,523,781
                                 ====================    ====================

NOTE 3 - PREFERRED STOCK:

Cash  dividends on the Company's 10 3/8%  Noncumulative  Exchangeable  Preferred
Stock,  Series A ("the  Series A Preferred  Shares")  are payable  quarterly  in
arrears.  The  liquidation  value of each Series A  Preferred  Share is $50 plus
accrued and unpaid  dividends.  The Series A Preferred Shares are not redeemable
until  January 15, 2007 (except upon the  occurrence  of certain tax events) and
are  redeemable  thereafter  at the option of the Company.  Except under certain
limited

                                      -6-




                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 3 - PREFERRED STOCK (continued):

circumstances,  the  holders of the  Series A  Preferred  Shares  have no voting
rights.  The Series A Preferred Shares are automatically  exchangeable for a new
series of  preferred  stock of the Bank upon the  occurrence  of certain  events
relating to the Bank.

NOTE 4 - DIVIDENDS:

During the three months ended June 30, 2002,  the  Company's  Board of Directors
declared a cash dividend of $3,890,625 on the Company's  preferred stock, out of
the retained earnings of the Company. The dividend was paid on July 15, 2002.

During the six months  ended June 30,  2002,  the  Company's  Board of Directors
declared cash dividends of $7,781,250 on the Company's  preferred  stock, out of
the retained earnings of the Company.

There were no common  dividends  declared  during the three and six months ended
June 30, 2002.

                                      -7-



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FINANCIAL CONDITION

Recent Developments  Regarding Arthur Andersen LLP. On August 13, 2002 the Board
of Directors of the Company  approved  the  dismissal of Arthur  Andersen LLP as
independent  public  accountants  of the Company and the engagement of Ernst and
Young LLP to serve as  independent  public  accountants  to audit the  financial
statements of the Company for the year ending December 31, 2002.

Residential Mortgage Loans

At June 30,  2002,  the Company had  $290,770,651  invested in loans  secured by
first  mortgages  or deeds of trust on  single-family  residential  real  estate
properties  ("Residential  Mortgage  Loans").  The $3,246,870  increase from the
balance at December 31, 2001, resulted from Residential  Mortgage Loan purchases
of  $68,993,512,  offset by principal  collections  of  $65,746,642.  Management
intends to continue to reinvest  proceeds  received from  repayments of loans in
additional  Residential  Mortgage  Loans to be purchased from either the Bank or
its affiliates.

At June 30, 2002, the Company had three  non-accrual loans  (contractually  past
due 90 days or more or with respect to which other  factors  indicate  that full
payment of  principal  and interest is  unlikely)  with an  aggregate  principal
balance of $754,042 (or 0.26% of loans).  At December 31, 2001,  the Company had
three  non-accrual  loans with an aggregate  principal balance of $1,088,562 (or
0.38% of loans).

At June 30, 2002, the Company had six loans,  which were  delinquent  30-89 days
with an aggregate principal balance of $932,769 (or 0.32% of loans). At December
31, 2001,  the Company had eight  delinquent  loans with an aggregate  principal
balance of $1,320,986 (or 0.46% of loans)

Allowance for Loan Losses

An analysis is performed periodically to determine whether an allowance for loan
loss is required. An allowance may be provided after considering such factors as
the economy in lending areas,  delinquency  statistics and past loss experience.
The allowance for loan losses are based on  estimates,  and ultimate  losses may
vary from current  estimates.  As adjustments to the allowance become necessary,
provisions  for loan losses are reported in  operations  in the periods they are
determined  to be  necessary.  There was no activity in the  allowance  for loan
losses during the three months ended June 30, 2002 and 2001.  The balance of the
allowance for loan losses was $40,333 at each of June 30, 2002 and 2001.

                                      -8-



Interest Rate Risk

The Company's  income  consists  primarily of interest  payments on  Residential
Mortgage Loans.  If there is a decline in interest rates,  then the Company will
experience a decrease in income available to be distributed to its stockholders.
Certain  Residential  Mortgage Loans which the Company holds allow  borrowers to
convert an ARM to a fixed-rate mortgage, thus "locking in" a fixed interest rate
at a time when interest  rates have declined.  In addition,  when interest rates
decline,  holders  of  fixed-rate  mortgages  are more  likely  to  prepay  such
mortgages.  In recent  periods,  primarily  as a result of a decline in interest
rates, the Company has experienced an increase in prepayments on its Residential
Mortgage Loans.

Based on the outstanding balance of the Company's  Residential Mortgage Loans at
June 30, 2002 and the interest rates on such loans,  anticipated annual interest
income, net of servicing fees, on the Company's loan portfolio was approximately
108.2% of the projected annual dividend on the Series A Preferred Shares.  There
can be no  assurance  that an  interest  rate  environment  in which  there is a
continued  decline in interest  rates would not  adversely  affect the Company's
ability to pay dividends on the Series A Preferred Shares. The Company, to date,
has not used any derivative instruments to manage its interest rate risk.

There have been no material  changes to the  Company's  market risk  disclosures
from the disclosures made in the 2001 10-K.

Significant Concentration of Credit Risk

Concentration of credit risk arises when a number of customers engage in similar
business  activities,  or activities in the same  geographical  region,  or have
similar  economic  features that would cause their  ability to meet  contractual
obligations  to  be  similarly  affected  by  changes  in  economic  conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance  to both positive and negative  developments  affecting a particular
industry.

The Company's exposure to geographic  concentrations directly affects the credit
risk of the  Residential  Mortgage  Loans within the  portfolio.  A majority (or
57.9%) of the Company's  Residential  Mortgage  Loans are secured by residential
real estate properties located in the Washington,  DC metropolitan area. Service
industries and Federal, state and local governments employ a significant portion
of the Washington, DC area labor force. Consequently, these loans may be subject
to a greater risk of default than other comparable residential mortgage loans in
the event of adverse  economic,  political or business  developments and natural
hazards in the region that may affect the ability of residential property owners
in the region to make  payments of  principal  and  interest  on the  underlying
mortgages.

                                      -9-



Liquidity and Capital Resources

The  objective  of  liquidity  management  is  to  ensure  the  availability  of
sufficient  cash flows to meet all of the Company's  financial  commitments.  In
managing  liquidity,  the Company takes into account  various legal  limitations
placed on a real estate investment trust (a "REIT"),  as discussed below in "Tax
Status of the Company."

The  Company's  principal  liquidity  needs will be to fund the  acquisition  of
additional  mortgage  assets as current  mortgage assets held by the Company are
repaid and to pay dividends on the Series A Preferred Shares. The acquisition of
such additional  mortgage assets will be funded with the proceeds from principal
repayments  on its current  portfolio of mortgage  assets.  The Company does not
anticipate  that it will  have any  other  material  capital  expenditures.  The
Company  believes that cash generated from the payment of principal and interest
on its  mortgage  asset  portfolio  will  provide  sufficient  funds to meet its
operating  requirements and to pay dividends in accordance with the requirements
to be treated as a REIT for income tax purposes for the foreseeable  future. The
Company may borrow funds as it deems necessary.

Tax Status of the Company

The Company has elected to be taxed as a REIT under  Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended.  As a REIT, the Company generally
will not be subject to federal income tax on its net income  (excluding  capital
gains) provided that it distributes  annually 100% of its REIT taxable income to
its stockholders, meets certain organizational,  stock ownership and operational
requirements  and meets certain income and asset tests. To remain qualified as a
REIT,  the Company must  distribute  each year at least 90% of its "REIT taxable
income" (not including capital gains) for that year to stockholders.  If, in any
taxable year,  the Company fails to qualify as a REIT,  the Company would not be
allowed a deduction for  distributions  to stockholders in computing its taxable
income  and would be  subject to federal  and state  income tax  (including  any
applicable  alternative  minimum tax) on its taxable income at regular corporate
rates. In addition,  the Company would also be disqualified  from treatment as a
REIT for the four taxable years  following  the year during which  qualification
was lost.

During the six months  ended June 30,  2001,  the Company  paid $2,300 in income
taxes  related to capital  gains of $20,209 on the sale of two Real Estate Owned
("REO") properties in the year 2000.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

During the three months ended June 30, 2002 and 2001,  the Company  reported net
income of $4,222,915 and $5,107,881, respectively.


                                      -10-





Interest income on Residential  Mortgage Loans totaled  $4,518,771 for the three
months ended June 30, 2002 (the "2002 quarter"),  compared to $5,394,729 for the
three months ended June 30, 2001 (the "2001 quarter").  The decrease in interest
income  resulted  from a decrease in the average yield on such loans to 6.18% in
the 2002  quarter  from 7.43% in the 2001  quarter.  Partially  offsetting  this
decrease in interest  income was an increase in the average  loan balance of the
Residential  Mortgage Loan  portfolio to  $292,338,160  in the 2002 quarter from
$290,569,569 in the 2001 quarter.  The Company would have recorded an additional
$7,282 and $10,113 in interest  income for the three  months ended June 30, 2002
and 2001,  had its  non-accrual  loans  been  current in  accordance  with their
original terms.

Other  interest  income of $15,776 and $54,701 was  recognized  on the Company's
interest  bearing deposits during the three months ended June 30, 2002 and 2001,
respectively.

No  provision  for loan losses was  recorded for the three months ended June 30,
2002 and 2001.

The Company did not sell any REO  properties  during the three months ended June
30, 2002 and 2001.

Operating  expenses  totaling  $311,632  and $341,549 for the three months ended
June 30, 2002 and 2001, respectively, were comprised of loan servicing fees paid
to  parent,  advisory  fees  paid to  parent,  directors  fees and  general  and
administrative  expenses.  Loan  servicing  fees paid to parent of $228,633  and
$269,896, for the three months ended June 30, 2002 and 2001, respectively,  were
based on a servicing fee rate of 0.375% per annum of the  outstanding  principal
balances of  Residential  Mortgage  Loans,  pursuant  to a  servicing  agreement
between  the Company  and the Bank.  Advisory  fees paid to parent for the three
months ended June 30, 2002 and 2001 totaled $50,000 for each quarter. Directors'
fees paid for the three  months  ended June 30,  2002 and 2001 were  $12,000 and
$8,000, respectively,  and represent compensation to the two independent members
of the Board of Directors.  General and administrative  expenses totaled $20,999
and $13,653 for the three months ended June 30, 2002 and 2001, respectively.

On June 25, 2002 the Company's Board of Directors declared,  out of the retained
earnings  of  the  Company,  a cash  dividend  of  $1.296875  per  share  on the
outstanding Series A Preferred Shares. Dividends of $3,890,625 were subsequently
paid on July 15, 2002.

There were no common dividends declared during the 2002 quarter.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

During the six months  ended June 30, 2002 and 2001,  the Company  reported  net
income of $8,450,437 and $10,378,181, respectively.

Interest  income on Residential  Mortgage  Loans totaled  $9,032,294 for the six
months ended June 30, 2002 (the "2002 period"),  compared to $10,950,881 for the
six months  ended June 30, 2001 (the "2001  period").  The  decrease in interest
income  resulted  from a decrease in the average yield on such loans to 6.22% in
the 2002 period from 7.49% in the 2001 period. Also contributing to the decrease
in interest income was a decrease in the average loan balance of the Residential
Mortgage Loan portfolio to $290,557,239 in the 2002 period from  $292,587,171 in
the 2001  period.  The  Company  would have  recorded an  additional  $6,175 and
$12,413 in interest  income for the 2002 period and 2001  period,  respectively,
had its non-accrual loans been current in accordance with their original terms.

                                      -11-


Other  interest  income of $45,731 and $84,617 was  recognized  on the Company's
interest bearing deposits during the 2002 period and 2001 period, respectively.

No provision  for loan losses was  recorded for the periods  ended June 30, 2002
and 2001.  The Company did not sell any REO  properties  during the 2002 period.
The Company  recognized a gain of $21,924 on the sale of one REO property during
the 2001 period.

Operating  expenses  totaling $627,588 and $676,941 for the 2002 period and 2001
period,  respectively,  were  comprised of loan  servicing  fees paid to parent,
advisory  fees paid to parent,  directors  fees and general  and  administrative
expenses.  Loan servicing fees paid to parent of $469,317 and $540,601,  for the
2002 period and 2001 period, respectively, were based on a servicing fee rate of
0.375% per annum of the outstanding  principal balances of Residential  Mortgage
Loans,  pursuant  to a  servicing  agreement  between  the Company and the Bank.
Advisory fees paid to parent for the 2002 and 2001 periods totaled  $100,000 for
each period.  Directors' fees paid for the 2002 and 2001 periods totaled $20,000
and $16,000,  respectively,  and represent  compensation  to the two independent
members of the Board of Directors.  General and administrative  expenses totaled
$38,271 and $20,340 for the 2002 and 2001 periods, respectively.

During the six months  ended June 30,  2002,  the  Company's  Board of Directors
declared $7,781,250 of preferred stock dividends out of the retained earnings of
the Company.

There were no common dividends declared during the 2002 period.

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

Information  required  by  this  item  is  included  in  Item  2,  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Interest Rate Risk," which is hereby incorporated herein by reference.

                                      -12-



                           PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

The Company is not the subject of any material litigation.  None of the Company,
the Bank or any  affiliate  of the Bank is  currently  involved  in nor,  to the
Company's  knowledge,  is currently threatened with any material litigation with
respect to the Residential Mortgage Loans included in the portfolio,  other than
routine litigation arising in the ordinary course of business,  most of which is
covered by liability insurance.

ITEM 2.  Changes in Securities

None.


ITEM 3.  Defaults Upon Senior Securities

None.


ITEM 4.  Submission of Matters to a Vote of Security Holders

None.

ITEM 5.  Other Information

None.


ITEM 6.  Exhibits and Reports on Form 8-K

(a) Exhibits required by Item 601 of Regulation S-K are set forth below.

Exhibit
 No.      Exhibit
-------   -------------------------------------------------------
 11       Computation of Earnings Per Common Share included in Part I, Item 1
           of this report

(b) A current  report on Form  8-K,  dated  August  13,  2002,  was filed by the
Company with the SEC reporting the Company had dismissed  Arthur Andersen LLP as
independent public accountants of the Company and engaged Ernst and Young LLP to
serve as independent public accountants to audit the financial statements of the
Company for the year ending December 31, 2002.

                                      -13-




                                   SIGNATURES

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.

                    CHEVY CHASE PREFERRED CAPITAL CORPORATION
                                  (Registrant)


August 14, 2002                By:  /s/ ALEXANDER R. M. BOYLE
                                    Alexander R. M. Boyle
                                    Vice Chairman of the Board


August 14, 2002                By:  /s/ STEPHEN R. HALPIN, JR.
                                    Stephen R. Halpin, Jr.
                                    Executive Vice President and
                                    Chief Financial Officer
                                    (Principal Financial Officer)


August 14, 2002                By:  /s/ JOEL A. FRIEDMAN
                                    Joel A. Friedman
                                    Senior Vice President and Controller
                                    (Principal Accounting Officer)




                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     The  undersigned,  B. Francis  Saul,  II, the Chairman and Chief  Executive
Officer of Chevy  Chase  Preferred  Capital  Corporation  (the  "Company"),  has
executed this  certification  in connection  with the filing with the Securities
and Exchange  Commission of the Company's  Quarterly Report on Form 10-Q for the
period ending June 30, 2002 (the  "Report").  The undersigned  hereby  certifies
that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) the  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.



August 13, 2002                By:  /s/ B. FRANCIS SAUL, II
                                    B. Francis Saul, II
                                    Chairman and Chief Executive Officer



                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

            PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     The undersigned,  Stephen R. Halpin,  Jr., the Executive Vice President and
Chief  Financial  Officer of Chevy  Chase  Preferred  Capital  Corporation  (the
"Company"),  has executed this  certification in connection with the filing with
the Securities and Exchange Commission of the Company's Quarterly Report on Form
10-Q for the period ending June 30, 2002 (the "Report").  The undersigned hereby
certifies that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) the  information  contained in the Report fairly  presents,  in all material
respects, the financial condition and results of operations of the Company.


August 13, 2002                By:  /s/ STEPHEN R. HALPIN, JR.
                                    Stephen R. Halpin, Jr.
                                    Executive Vice President and
                                    Chief Financial Officer
                                    (Principal Financial Officer)






                                  Exhibit Index


Exhibit
  No.     Exhibit
-------   ------------------------------------------------------------
  11      Computation of Earnings Per Common Share included in Part I, Item 1 of
           this report.`