```

                   CHEVY CHASE PREFERRED CAPITAL CORPORATION

                       STATEMENTS OF FINANCIAL CONDITION

                                  (Unaudited)

                                                       March 31,    December 31,
                                                         2001       2000
                                                   --------------- -------------

                                     ASSETS

Cash and interest-bearing deposits                  $   2,989,341    $ 5,122,692
Residential mortgage loans (net of allowance for
   losses of $40,333 for both periods)                294,123,592    298,145,029
Real estate acquired in settlement of loans, net          116,406              -
Accounts receivable from parent                         6,686,504      2,519,665
Accrued interest receivable                             1,545,887      1,604,979
Prepaid expenses                                            9,529          8,000
                                                   --------------- -------------

         Total assets                                 305,354,853    307,516,771
                                                   =============== =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and accounts payable to others     $      84,553  $     127,401
Dividends payable to parent                               275,000      3,500,000
Dividends payable to others                             3,890,625      3,890,625
                                                   --------------- -------------

   Total liabilities                                    4,250,178      7,518,026
                                                   --------------- -------------

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    284,998,645
Retained earnings                                       1,104,675              -
                                                   --------------- -------------

Total stockholders' equity                            301,104,675    299,998,745
                                                   --------------- -------------

     Total liabilities and stockholders' equity     $ 305,354,853  $ 307,516,771
                                                   =============== =============

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

```

                   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, 2000                $15,000,000       $  100      $284,998,645    $    -            $ 299,998,745

Net income                                      -               -              -         5,270,300            5,270,300

Capital contribution from
  common stockholder                            -               -              1,255         -                    1,255

Dividends on 10 3/8%
  Noncumulative Exchangeable
  Preferred Stock, Series A                     -               -              -        (3,890,625)          (3,890,625)

Dividends on Common Stock                       -               -              -          (275,000)            (275,000)
                                      ---------------------------------------------------------------- -------------------

Balance, March 31, 2001                   $15,000,000       $  100      $284,999,900    $1,104,675        $ 301,104,675
                                      ================================================================ ===================
```