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# SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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# FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                                      OF THE SECURITIES EXCHANGE ACT OF 1934
                                   For the quarterly period ended September 30, 2005

# Commission
File Number: 001-12477

# 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 office) (Zip Code)

# (301) 987-2265(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 ___

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes __  No_X_

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
Yes __  No_X_

The number of shares
outstanding of the registrants sole class of common stock was 100 shares,
$1.00 par value per share, as of October 15, 2005. All of such shares were owned
by Chevy Chase Bank, F.S.B.; therefore, no common stock was held by
non-affiliates.

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# CHEVY CHASE
PREFERRED CAPITAL CORPORATION

# TABLE OF
CONTENTS

# PART I - FINANCIAL
INFORMATION

`Page
Item 1. Financial Statements:......................................................................1
         (a)      Statements of Financial Condition as of September 30, 2005 and
                    December 31, 2004..............................................................2
         (b)      Statements of Operations for the Three and Nine Months Ended
                    September 30, 2005 and 2004 ...................................................3
         (c)      Statement of Stockholders' Equity for the Nine Months
                    Ended September 30, 2005.......................................................4
         (d)      Statements of Cash Flows for the Nine Months Ended
                    September 30, 2005 and 2004 ...................................................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

Item 4.  Controls and Procedures..................................................................12`

# PART II
 OTHER INFORMATION

`Item 1.  Legal Proceedings........................................................................12

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds..............................12

Item 3.  Defaults Upon Senior Securities..........................................................12

Item 4.  Submission of Matters to a Vote of Security Holders......................................12

Item 5.  Other Information........................................................................12

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

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# 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 accounting principles
generally accepted in the United States 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. These unaudited financial statements and notes
should be read in conjunction with the Companys financial statements and
notes for the year ended December 31, 2004 included in the Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March
29, 2005 (the 2004 10-K).

---

# CHEVY CHASE
PREFERRED CAPITAL CORPORATION
STATEMENTS OF FINANCIAL CONDITION

`September 30,         December 31,
                                                              2005                 2004
                                                        -------------------   -----------------
                                                           (Unaudited)
                                             ASSETS

Cash and interest-bearing deposits                          $    11,310,163     $    2,318,102
Residential mortgage loans (net of allowance for
   losses of $40,333 for both periods)                          364,661,891        374,458,643
Accounts receivable from parent                                   3,343,447          1,591,546
Accrued interest receivable                                       1,499,465          1,346,764
Prepaid expenses                                                     11,395              5,000
                                                        --------------------   -----------------
         Total assets                                       $   380,826,361    $   379,720,055
                                                        ====================   =================

                                              LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Loan payable to parent                                      $    75,000,000    $    75,000,000
Accrued interest payable to parent                                  222,063             81,500
Accounts payable to others and accrued expenses                       6,750             41,063
Dividends payable to parent                                               -            700,000
Dividends payable to others                                       3,890,625          3,890,625
                                                        --------------------   -----------------
    Total liabilities                                       $    79,119,438    $    79,713,188
                                                        --------------------   -----------------

Stockholders' Equity:
PreferredStock, 10,000,000 shares authorized:
  10 3/8% Noncumulative Exchangeable Preferred Stock,
  Series A, $5 par value, 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        284,999,900
Retained earnings                                                 1,706,923              6,867
                                                        --------------------   -----------------
Total stockholders' equity                                      301,706,923        300,006,867
                                                        --------------------   -----------------

         Total liabilities and stockholders' equity         $   380,826,361    $   379,720,055
                                                        ====================   =================














               See the accompanying Notes to Financial Statements.`

---

# CHEVY CHASE
PREFERRED CAPITAL CORPORATIONSTATEMENTS
OF OPERATIONS(Unaudited)

`Three Months Ended                    Nine Months Ended
                                                 September 30,                        September 30,
                                     ----------------------------------  -----------------------------------
                                        2005                2004               2005              2004
                                     ---------------    ---------------  -----------------   ----------------

  Net Interest Income
   Residential mortgage loans          $  5,604,297     $   4,256,960      $ 16,530,739     $  12,908,483
   Other                                      1,322             2,134             7,470             7,258
                                     ---------------    ---------------  -----------------   ----------------
     Total interest income                5,605,619         4,259,094        16,538,209        12,915,741
   Interest expense                         844,163                 -         2,217,723                 -
                                     ---------------    ---------------  -----------------   ----------------
     Net interest income                  4,761,456         4,259,094        14,320,486        12,915,741
                                     ---------------    ---------------  -----------------   ----------------

 Operating Expenses
   Loan servicing fees - parent             227,094           167,393           695,356           485,469
   Advisory fees - parent                    50,000            50,000           150,000           150,000
   Directors' fees                            8,000             8,000            24,000            24,751
   General and administrative                15,995            36,797            79,199           106,951
                                     ---------------    ---------------  -----------------   ----------------
     Total operating expenses               301,089           262,190           948,555           767,171
                                     ---------------    ---------------  -----------------   ----------------
NET INCOME                                4,460,367         3,996,904        13,371,931        12,148,570

PREFERRED STOCK DIVIDENDS                 3,890,625         3,890,625        11,671,875        11,671,875
                                     ---------------    ---------------  -----------------   ----------------

EARNINGS AVAILABLE TO
  COMMON STOCKHOLDER                    $   569,742      $    106,279      $  1,700,056       $   476,695
                                     ===============    ===============  =================   ================
AVERAGE COMMON SHARES                           100               100               100               100
                                     ===============    ===============  =================   ================
EARNINGS PER COMMON SHARE              $   5,697.42      $   1,062.79      $  17,000.56      $   4,766.95
                                     ===============    ===============  =================   ================

















               See the accompanying Notes to Financial Statements.`

---

# CHEVY CHASE
PREFERRED CAPITAL CORPORATIONSTATEMENTS
OF STOCKHOLDERS' EQUITY(Unaudited)

`Capital
                                                               Contributed
                                  Preferred       Common        In Excess         Retained        Stockholders'
                                    Stock         Stock          of Par           Earnings            Equity
                               ---------------- ------------- --------------- ------------------- ------------------

Balance, December 31, 2004        $ 15,000,000     $   100     $ 284,999,900      $    6,867       $ 300,006,867

Net income                                   -           -                 -      13,371,931          13,371,931

Dividends on
  Preferred Stock                            -           -                 -     (11,671,875)        (11,671,875)
                               ----------------- ------------ ---------------- ------------------ ------------------

Balance, September 30, 2005       $ 15,000,000     $   100     $ 284,999,900     $ 1,706,923       $ 301,706,923
                               ================== =========== ================= ================ ===================
































              See the accompanying Notes to Financial Statements.`

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# CHEVY CHASE
PREFERRED CAPITAL CORPORATIONSTATEMENTS
OF CASH FLOWS(Unaudited)

`Nine Months Ended
                                                                                September 30,
                                                                 -----------------------------------------
                                                                        2005                  2004
                                                                 -------------------   -------------------
Cash flows from operating activities:

Net income                                                           $  13,371,931         $  12,148,570
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
     (Increase) decrease in accounts receivable from parent             (1,751,901)              894,828
     Increase in accrued interest receivable                              (152,701)              (98,676)
     Increase in prepaid expenses                                           (6,395)               (6,521)
     Increase (decrease) in accounts payable to others
        and accrued expenses                                               (34,313)               54,462
     Increase in accrued interest payable to parent                        140,563                     -
                                                                 -------------------   -------------------
     Net cash provided by operating activities                       $  11,567,184         $  12,992,663
                                                                 -------------------   -------------------

Cash flows from investing activities:
     Purchases of residential mortgage loans                          (102,080,073)         (106,060,522)
     Repayments of residential mortgage loans                          111,876,825           103,373,407
                                                                 -------------------   -------------------
     Net cash provided by (used in) investing activities                 9,796,752            (2,687,115)
                                                                 -------------------   -------------------
Cash flows from financing activities:
     Dividends paid on preferred stock                                 (11,671,875)          (11,671,875)
     Dividends paid on common stock                                       (700,000)             (392,614)
                                                                 -------------------   -------------------
     Net cash used in financing activities                             (12,371,875)          (12,064,489)
                                                                 -------------------   -------------------

Net increase (decrease) in cash and cash equivalents                     8,992,061            (1,758,941)
Cash and cash equivalents at beginning of period                         2,318,102             5,411,004
                                                                  -------------------   -------------------
Cash and cash equivalents at end of period                           $  11,310,163          $  3,652,063
                                                                  ===================   ===================

















               See the accompanying Notes to Financial Statements.`

---

# 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.

The accompanying financial
statements of the Company have been prepared in accordance with the instructions
for Form 10-Q and, therefore, certain information and notes normally included in
the financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to such rules and regulations. The accompanying financial statements should be
read in conjunction with the audited financial statements included in the Form
10-K of the Company for the year ended December 31, 2004.

## NOTE 2 
RESIDENTIAL MORTGAGE LOANS:

Residential mortgage loans
consist of adjustable-rate mortgages (ARMs) and fixed-rate
mortgages. The ARMs have interest rates which are fixed for the indicated period
(one month, one year, three years, five years, seven years or ten years) and
which adjust thereafter based on the margin, index and frequency, subject to
interest rate adjustment caps, all as specified in the related mortgage notes.
Each of the mortgage loans is secured by a mortgage, deed of trust or other
security instrument which created a first lien on a residential dwelling. The
following table shows the residential mortgage loan portfolio by type at the
dates indicated:

`September 30, 2005                        December 31, 2004
                          -------------------------------------     -------------------------------------
Type                          Aggregate            Weighted             Aggregate            Weighted
---                      Principal Balance      Average Yield      Principal Balance     Average Yield
                         ------------------     --------------     -------------------   ---------------
Monthly ARMs                  $  90,104,779          6.46%               $ 107,438,487        4.93%
One-year ARMs                    10,353,243          5.62%                  13,985,393        4.48%
Three-year ARMs                  25,055,657          6.01%                  13,040,178        5.35%
Five-year ARMs                  143,408,064          5.76%                 110,068,100        5.56%
7/1 ARMs                          3,641,757          6.68%                   6,229,074        6.71%
10/1 ARMs                        12,254,420          6.70%                  17,658,506        6.70%
Fixed-rate                       79,884,304          6.44%                 106,079,238        6.48%
                          ------------------     --------------     -------------------   ---------------
     Total                      364,702,224          6.13%                 374,498,976        5.67%
                                                 ==============                           ===============
Less:
     Allowance for loan loss         40,333                                     40,333
                           ------------------                        ------------------
     Total                    $ 364,661,891                              $ 374,458,643
                           ==================                        ===================`

## 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 limitedcircumstances, 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 and nine
months ended September 30, 2005, the Companys Board of Directors declared
cash dividends of $3,890,625 and $11,671,875, respectively, on the
Companys preferred stock out of the retained earnings of the Company.
Dividends were paid on April 15, 2005, July 15, 2005 and October 17, 2005.

No cash dividends on common
stock were declared during the three and nine months ended September 30, 2005.

In January 2005, the
Company paid dividends of $700,000 and $3,890,625 on its common stock and
preferred stock, respectively, which were declared in December 2004.

## NOTE 5 
LOAN PAYABLE TO PARENT:

The Company borrowed
$75,000,000 from the Bank on December 20, 2004, and used the proceeds to
purchase adjustable-rate Residential Mortgage Loans from the Bank. The loan is
secured by a portion of the Residential Mortgage Loan portfolio and the interest
rate on the loan adjusts monthly based on changes in one-month LIBOR.

The loan requires no
payment of principal until it matures on August 31, 2007, but can be prepaid
without penalty at any time. Interest is payable monthly at a variable rate
equal to the sum of one-month LIBOR plus 0.85%. At September 30, 2005, the
interest rate was 4.69%.

---

## ITEM 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations

## FINANCIAL
CONDITION

## Dividend
Coverage

Based on the outstanding
balance of the Companys Residential Mortgage Loans (as defined below) at
September 30, 2005 and the interest rates on such loans, anticipated annual
income, net of interest and operating expenses, on the Companys loan
portfolio was approximately 112.7% of the projected annual dividend on the
Series A Preferred Shares. As of September 30, 2005, the weighted average yield
on the Residential Mortgage Loans included in the Companys portfolio was
6.13%.

## Residential
Mortgage Loans

At September 30, 2005 and
December 31, 2004, the Company had $364,661,891 and $374,458,643, respectively,
invested in loans secured by first mortgages or deeds of trust on single-family
residential real estate properties (Residential Mortgage Loans), net
of allowance for loan losses. During the nine months ended September 30, 2005,
Residential Mortgage Loan purchases were $102,080,073 and principal collections
were $111,876,825. 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 subsidiaries.

At September 30, 2005, 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 $898,666 (or 0.25%
of loans). At December 31, 2004, the Company had two non-accrual loans with an
aggregate principal balance of $546,701 (or 0.15% of loans).

At September 30, 2005, the
Company had six loans which were delinquent 30-89 days with a principal balance
of $971,648 (or 0.27% of loans). At December 31, 2004, the Company had two loans
which were delinquent 30-89 days with an aggregate principal balance of $576,811
(or 0.15% of loans).

## Allowance for
Loan Losses

An analysis is performed
periodically to determine the level of allowance for loan losses required and
takes into consideration such factors as the economy in lending areas,
delinquency statistics and past loss experience. The allowance for loan losses
is 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 nine months ended
September 30, 2005 and 2004. The balance of the allowance for loan losses was
$40,333 at September 30, 2005 and 2004.

## 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 may have declined. In addition, when interest rates decline,
holders of fixed-rate mortgages are more likely to prepay such mortgages.

In response to reduced
market interest rates in prior periods, the Company has previously taken steps
to increase the funds available to pay dividends on the Series A Preferred
Shares. On December 20, 2004, the Company borrowed $75,000,000 from the Bank and
used the proceeds to purchase adjustable-rate Residential Mortgage Loans from
the Bank. The loan is secured by a portion of the Residential Mortgage Loan
portfolio and the interest rate on the loan adjusts monthly based on changes in
one-month LIBOR.

During more recent periods
including the current quarter, market interest rates have risen resulting in an
increase in the Companys income available for distribution to its
stockholders.

There can be no assurance
that a decline in interest rates would not adversely affect the Companys
ability to pay dividends on the Series A Preferred Shares or the Common Stock.
See Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations  Financial Condition  Dividend
Coverage. 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 2004 10-K.

## Significant
Concentration of Credit Risk

Concentration of credit risk
exists when a number of customers are engaged 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.

At September 30, 2005,
approximately 43.2% of the Companys Residential Mortgage Loans are secured
by residential real estate properties located in the Washington, DC metropolitan
area. In addition, 10.6% the Residential Mortgage Loans are secured by
residential real estate properties located in California. Consequently, a
concentration of risk exists and the Company may be subject to a greater risk of
default in the event of adverse economic, political or business developments in
Washington DC; Maryland; Virginia and California that may affect the ability of
residential property owners in any of these areas to make payments of principal
and interest on the underlying mortgages.

## 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 are primarily the funding of the acquisition of
additional mortgage assets as current mortgage assets held by the Company are
repaid and the payment of 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 the 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. As discussed earlier under Item 2 Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Financial Condition  Dividend Coverage, the Companys
anticipated annual income, based on its mortgage loan portfolio at September 30,
2005, is 112.7% of the projected annual dividend on the Series A Preferred
Shares.

The Company believes that
it will be able to continue to meet the requirements to qualify as a REIT for
income tax purposes for the foreseeable future.

The Company has no off
balance sheet transactions, contractual obligations, contingent liabilities, or
commitments as of September 30, 2005.

## 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
(a) distribute to stockholders each year at least 90% of its REIT taxable income
(not including capital gains) for that year, (b) meet certain income tests, (c)
meet certain asset tests and (d) meet certain ownership tests. 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 be disqualified from treatment as a REIT for the
four taxable years following the year during which qualification was lost. As of
September 30, 2005, the Company met the requirements of all applicable tests.

No income tax was paid
during either of the nine month periods ended September 30, 2005 and 2004.

## RESULTS OF OPERATIONS

## Three Months
Ended September 30, 2005 Compared to Three Months Ended September 30, 2004

During the three months
ended September 30, 2005 and 2004, the Company reported net income of $4,460,367
and $3,996,904, respectively, an increase of 11.6%. The increase in net income
is primarily attributable to increased interest income on Residential Mortgage
Loans, which was partially offset by increased interest expense.

Net interest income
increased $502,362 (or 11.8%) in the 2005 quarter. The Company would have
recorded an additional $13,242 in interest income for the three months ended
September 30, 2005 had its non-accrual loans been current in accordance with
their original terms.

Total interest income was
$5,605,619 for the three months ended September 30, 2005 (the 2005
quarter) compared to $4,259,094 for the three months ended September 30,
2004 (the 2004 quarter), or an increase of 31.6%. Interest income on
Residential Mortgage Loans totaled $5,604,297 for the 2005 quarter compared to
$4,256,960 for the 2004 quarter, or an increase of 31.7%. The increase in
interest income resulted from the higher average balance of loans receivable and
an increase in the average yield on such loans to 6.09% in the 2005 quarter from
5.72% in the 2004 quarter. The average balance of the Residential Mortgage Loan
portfolio was $368,306,175 in the 2005 quarter compared to $297,793,618 in the
2004 quarter.

Interest income of $1,322
and $2,134 was recognized on the Companys interest bearing deposits during
the three months ended September 30, 2005 and 2004, respectively. During the
2005 quarter, the Company incurred interest expense totaling $844,163 related to
the Companys $75,000,000 loan from the Bank. There was no interest expense
in the 2004 quarter.

No provision for loan
losses was recorded for the three months ended September 30, 2005 and 2004.

Operating expenses totaling
$301,089 and $262,190 for the three months ended September 30, 2005 and 2004,
respectively, or an increase of 14.8%, 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 were $227,094
and $167,393, for the three months ended September 30, 2005 and 2004,
respectively, or an increase of 35.7%. The increase in loan servicing fees paid
to parent for the quarter ended September 30, 2005 is attributable to an
increase in the average balance of Residential Mortgage Loans. Advisory fees
paid to parent for the three months ended September 30, 2005 and 2004 totaled
$50,000 for each quarter. Directors fees paid for the three months ended
September 30, 2005 and 2004 totaled $8,000 for each quarter, and represent
compensation to the two independent members of the Board of Directors. General
and administrative expenses totaled $15,995 and $36,797 for the three months
ended September 30, 2005 and 2004, respectively, or a decrease of 56.5%. The
decrease in general and administrative expenses is largely due to decreases in
the fees paid to the Companys external auditors and legal expenses.

On September 13, 2005, 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 which was paid on October 17, 2005.

## Nine Months
Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

During the nine months
ended September 30, 2005 and 2004, the Company reported net income of
$13,371,931 and $12,148,570, respectively, or an increase of 10.1%. The increase
in net income is primarily attributable to increased interest income on
Residential Mortgage Loans, which was partially offset by increased interest
expense.

Net interest income
increased $1,404,745 (or 10.9%) in the 2005 period. The Company would have
recorded an additional $40,370 in interest income for the nine months ended
September 30, 2005 had its non-accrual loans been current in accordance with
their original terms.

Total interest income was
$16,538,209 for the nine months ended September 30, 2005 (the 2005
period) compared to $12,915,741 for the nine months ended September 30,
2004 (the 2004 period), an increase of 28.0%. Interest income on
Residential Mortgage Loans totaled $16,530,739 for the nine months ended
September 30, 2005, compared to $12,908,483 for the nine months ended September
30, 2004, an increase of 28.1%. The increase in interest income resulted from
higher average balances of loans receivable and, to a lesser extent, an increase
in the average yield on such loans to 5.94% in the 2005 period from 5.77% in the
2004 period. The average balance of the Residential Mortgage Loan portfolio was
$371,226,235 in the 2005 period compared to $298,043,203 in the 2004 period.

Other interest income of
$7,470 and $7,258 was recognized on the Companys interest bearing deposits
during the nine months ended September 30, 2005 and 2004, respectively. No
provision for loan losses was recorded for the nine months ended September 30,
2005 and 2004.

During the 2005 period, the
Company incurred interest expense totaling $2,217,723 related to the
Companys $75,000,000 loan from the Bank. There was no interest expense in
the 2004 period.

Operating expenses totaling
$948,555 and $767,171 for the nine months ended September 30, 2005 and 2004,
respectively, or an increase of 23.6%, 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 were $695,356
and $485,469 for the nine months ended September 30, 2005 and 2004, or an
increase of 43.2%. The increase in loan servicing fees paid to parent for the
period ended September 30, 2005 is attributable to an increase in the average
balance of Residential Mortgage Loans. Advisory fees paid to parent for the nine
months ended September 30, 2005 and 2004 totaled $150,000 for each period.
Directors fees paid for the nine months ended September 30, 2005 and 2004
totaled $24,000 and $24,751, respectively, and represent compensation to the two
independent members of the Board of Directors. General and administrative
expenses totaled $79,199 and $106,951 for the nine months ended September 30,
2005 and 2004, respectively, or a decrease of 25.9%. The decrease in general and
administrative expenses is largely due to decreases in transfer agent fees and
legal expenses.

During the nine months
ended September 30, 2005, the Companys Board of Directors declared
$11,671,875 of preferred stock dividends.

## 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.

## ITEM 4.
Controls and Procedures

The Company maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Companys reports filed under SEC
regulations is recorded, processed, summarized and reported within the time
periods specified in the rules and forms adopted by the SEC, which the Company
must comply with under SEC regulations, and that such information is accumulated
and communicated to the Companys management, including its Chief Executive
Officer and its Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure, based closely on the definition of
disclosure controls and procedures in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended. In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

The Company carried out an
evaluation, under the supervision and with the participation of the
Companys management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of September 30, 2005.
Based upon the foregoing, the Companys Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures were effective at the reasonable assurance level as of September 30,
2005.

During the three months
ended September 30, 2005, there were no changes in the Companys internal
control over financial reporting that materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial
reporting.

# PART II -
OTHER INFORMATION

## ITEM 1. Legal
Proceedings

The Company is not involved
in any material litigation.

## ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds

## ITEM 3.
Defaults Upon Senior Securities

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

## ITEM 5. Other
Information

## ITEM 6.
Exhibits and Reports on Form 8-K

`Exhibit
   No.          Exhibit
------------------------
   31.1        Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
   31.2        Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
   32.1        Section 1350 Certification of Chief Executive Officer.
   32.2        Section 1350 Certification of Chief Financial Officer.`

---

# 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)

`November 14, 2005                                   By:  /s/ STEPHEN R. HALPIN, JR.
                                                         -----------------------------
                                                         Stephen R. Halpin, Jr.
                                                         Executive Vice President and
                                                         Chief Financial Officer
                                                         (Principal Financial Officer)


November 14, 2005                                   By:  /s/ JOEL A. FRIEDMAN
                                                         -----------------------------
                                                         Joel A. Friedman
                                                         Senior Vice President and Controller
                                                         (Principal Accounting Officer)`

---

# CERTIFICATION

`I, B. Francis Saul II, certify that:

1.       I have reviewed this quarterly report on Form 10-Q for the three months ended September 30, 2005 of Chevy Chase Preferred
         Capital Corporation;

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
         with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
         all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
         periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
         procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


         (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
         our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
         made known to us by others within those entities, particularly during the period in which this report is being prepared;


         (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
         conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this
         report based on such evaluation; and


         (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
         the registrant's most recent quarter that has materially affected, or is reasonably likely to materially affect, the
         registrant's internal control over financial reporting; and

5.       The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
         financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
         performing the equivalent functions):


         (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
         reporting which  are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report
         financial information; and


         (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
         registrant's internal control over financial reporting.



November 14, 2005                                    /s/ B. FRANCIS SAUL II
                                                     ------------------------------------------
                                                     B. Francis Saul II
                                                     Chairman and Chief Executive Officer`

---

# CERTIFICATION

`I, Stephen R. Halpin, Jr., certify that:

1.       I have reviewed this quarterly report on Form 10-Q for the three months ended September 30, 2005 of Chevy Chase Preferred
         Capital Corporation;

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
         with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
         all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
         periods presented in this report;

4.       The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
         procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


         (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
         our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
         made known to us by others within those entities, particularly during the period in which this report is being prepared;


         (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and  presented in this report our
         conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this
         report based on such evaluation; and


         (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
         the registrant's most recent quarter that has materially affected, or is reasonably likely to materially affect, the
         registrant's internal control over financial reporting; and

5.       The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
         financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
         performing the equivalent functions):


         (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
         reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report
         financial information; and


         (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
         registrant's internal control over financial reporting.




November 14, 2005                                    /s/ STEPHEN R. HALPIN, JR.
                                                     --------------------------
                                                     Stephen R. Halpin, Jr.
                                                     Executive Vice President, Treasurer
                                                     and Chief Financial 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 three months ended
September 30, 2005 (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.


November 14, 2005                                    /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, Treasurer 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 three months ended September 30, 2005 (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.


November 14, 2005                                    /s/ STEPHEN R. HALPIN, JR.
                                                     ---------------------------
                                                         Stephen R. Halpin, Jr.
                                                         Executive Vice President, Treasurer
                                                         and Chief Financial Officer`

---