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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 June 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_

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 July 15, 2005. All of such shares were owned
by Chevy Chase Bank; 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 June 30, 2005 and
                    December 31, 2004..............................................................2
         (b)      Statements of Operations for the Three and Six Months Ended
                    June 30, 2005 and 2004 ........................................................3
         (c)      Statement of Stockholders' Equity for the Six Months
                    Ended June 30, 2005............................................................4
         (d)      Statements of Cash Flows for the Six Months Ended
                    June 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...............................11

Item 4.  Controls and Procedures..................................................................11`

# 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.................................................................................12`

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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

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

Cash and interest-bearing deposits                       $    4,108,766     $    2,318,102
Residential mortgage loans (net of allowance for
   losses of $40,333 for both periods)                      373,947,615        374,458,643
Accounts receivable from parent                                 681,927          1,591,546
Accrued interest receivable                                   1,547,046          1,346,764
Prepaid expenses                                                 28,078              5,000
                                                        ----------------   ----------------
         Total assets                                    $  380,313,432     $  379,720,055
                                                        ================   ================

                                  LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Loan payable to parent                                   $   75,000,000     $   75,000,000
Accrued interest payable to parent                              261,875             81,500
Accounts payable to others and accrued expenses                  23,751             41,063
Dividends payable to parent                                           -            700,000
Dividends payable to others                                   3,890,625          3,890,625
                                                        ----------------   ----------------
    Total liabilities                                        79,176,251         79,713,188
                                                        ----------------   ----------------


Stockholders' Equity:
Preferred Stock, 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                                             1,137,181              6,867
                                                        ----------------   ----------------
Total stockholders' equity                                  301,137,181        300,006,867
                                                        ----------------   ----------------

         Total liabilities and stockholders' equity      $  380,313,432     $  379,720,055
                                                        ================   ================















                                          See the accompanying Notes to Financial Statements.`

---

# CHEVY CHASE
PREFERRED CAPITAL CORPORATIONSTATEMENTS
OF OPERATIONS(Unaudited)

`Three Months Ended                        Six Months Ended
                                           June 30,                                 June 30,
                             ----------------------------------   ----------------------------------
                                     2005              2004             2005               2004
                             ----------------  ----------------   ----------------  ----------------

Net Interest Income
  Residential mortgage loans    $  5,542,503      $  4,298,043       $ 10,926,442     $  8,651,523
  Other                                2,316             3,408              6,148            5,124
                             ----------------  ----------------   ----------------  ----------------
   Total interest income           5,544,819         4,301,451         10,932,590        8,656,647
   Interest expense                  735,018                 -          1,373,560                -
                             ----------------  ----------------   ----------------  ----------------
     Net interest income           4,809,801         4,301,451          9,559,030        8,656,647
                             ----------------  ----------------   ----------------  ----------------

Operating Expenses
   Loan servicing fees - parent      235,457           161,832            468,262          318,076
   Advisory fees - parent             50,000            50,000            100,000          100,000
   Directors' fees                     8,000             7,251             16,000           16,751
   General and administrative         49,351            34,959             63,204           70,154
                             ----------------  ----------------   ----------------  ----------------
Total operating expenses             342,808           254,042            647,466          504,981
                             ----------------  ----------------   ----------------  ----------------

NET INCOME                         4,466,993         4,047,409          8,911,564        8,151,666

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

EARNINGS AVAILABLE TO
COMMON STOCKHOLDER              $    576,368       $   156,784       $  1,130,314      $   370,416
                             ================  ================   ================  ================
AVERAGE COMMON SHARES                    100               100                100              100
                             ================  ================   ================  ================
EARNINGS PER COMMON SHARE       $   5,763.68      $   1,567.84       $  11,303.14      $  3,704.16
                             ================  ================   ================  ================


















                                          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                              -            -                -       8,911,564         8,911,564

Dividends on
  Preferred Stock                       -            -                -      (7,781,250)       (7,781,250)
                            --------------  -----------  ---------------  --------------  ----------------

Balance, June 30, 2005       $ 15,000,000      $   100    $ 284,999,900    $  1,137,181     $ 301,137,181
                            ==============  ===========  ===============  ==============  ================
































                                          See the accompanying Notes to Financial Statements.`

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

`Six Months Ended
                                                                            June 30,
                                                               ----------------------------------
                                                                     2005              2004
                                                               ----------------  ----------------
Cash flows from operating activities:
Net income                                                        $  8,911,564      $  8,151,666
Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
     (Increase) decrease in accounts receivable from parent            909,619          (843,504)
     Increase in accrued interest receivable                          (200,282)         (126,559)
     Increase in prepaid expenses                                      (23,078)           (9,541)
     Increase (decrease) in accounts payable to others
        and accrued expenses                                           (17,312)           22,931
     Increase in accrued interest payable to parent                    180,375                 -
                                                               ----------------  ----------------
 Net cash provided by operating activities                           9,760,886         7,194,993                                                                    -------------------    -------------------

Cash flows from investing activities:
     Purchases of residential mortgage loans                       (65,259,416)      (75,351,563)
     Repayments of residential mortgage loans                       65,770,444        71,086,383
                                                               ----------------   ---------------
     Net cash provided by (used in) investing activities               511,028        (4,265,180)
                                                               ----------------   ---------------
Cash flows from financing activities:
     Dividends paid on preferred stock                              (7,781,250)       (7,781,250)
     Dividends paid on common stock                                   (700,000)         (392,614)
                                                               ----------------   ---------------
     Net cash used in financing activities                          (8,481,250)       (8,173,864)
                                                               ----------------   ---------------

Net increase (decrease) in cash and cash equivalent                  1,790,664        (5,244,051)
Cash and cash equivalents at beginning of period                     2,318,102         5,411,004
                                                               ----------------   ---------------
Cash and cash equivalents at end of period                        $  4,108,766       $   166,953
                                                               ================   ===============

















                                          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:

`June 30, 2005                      December 31, 2004
                             ---------------------------------    --------------------------------
                                 Aggregate        Weighted            Aggregate        Weighted
Type                         Principal Balance  Average Yield     Principal Balance  Average Yield
----                         -----------------  --------------    -----------------  -------------
Monthly ARMs                    $ 105,359,056           5.93%        $ 107,438,487          4.93%
One-year ARMs                       9,727,480           5.09%           13,985,393          4.48%
Three-year ARMs                    22,306,973           5.83%           13,040,178          5.35%
Five-year ARMs                    128,378,972           5.65%          110,068,100          5.56%
7/1 ARMs                            4,379,918           6.69%            6,229,074          6.71%
10/1 ARMs                          13,802,398           6.67%           17,658,506          6.70%
Fixed-rate                         90,033,151           6.45%          106,079,238          6.48%
                             -----------------  --------------    -----------------  -------------
     Total                        373,987,948           5.96%          374,498,976          5.67%
                                                ==============                       =============
Less:
   Allowance for loan losses           40,333                               40,333
                             -----------------                    -----------------

     Total                      $ 373,947,615                        $ 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 six
months ended June 30, 2005, the Companys Board of Directors declared cash
dividends of $3,890,625 and $7,781,250, respectively, on the Companys
preferred stock out of the retained earnings of the Company. Dividends were paid
on April 15, 2005 and July 15, 2005.

---

No cash dividends on common
stock were declared during the six months ended June 30, 2005.

## 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 June 30, 2005, the interest
rate was 3.96%.

---

## 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
June 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 117.1% of the projected annual dividend on the Series A Preferred
Shares. As of June 30, 2005, the weighted average yield on the Residential
Mortgage Loans included in the Companys portfolio was 5.96%.

## Residential
Mortgage Loans

At June 30, 2005 and
December 31, 2004, the Company had $373,947,615 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).
During the six months ended June 30, 2005, Residential Mortgage Loan purchases
were $65,259,416 and principal collections were $65,770,444. 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 June 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 $900,295 (or 0.24%
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 June 30, 2005, the
Company had six loans which were delinquent 30-89 days with a principal balance
of $1,192,394 (or 0.32% 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 six months ended
June 30, 2005 and 2004. The balance of the allowance for loan losses was $40,333
at June 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, the Company has 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.

---

There can be no assurance
that an interest rate environment in which there is 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.

41.4% of the Companys
Residential Mortgage Loans are secured by residential real estate properties
located in the Washington, DC metropolitan area. In addition, 10.5% of 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 June 30,
2005, is 117.1% 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 June 30, 2005.

## Tax Status of
the Company

The Company has elected to
be taxed as a REIT under Sections 856 through 860 of the Code. 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 June 30,
2005, the Company met the requirements of all applicable tests.

---

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

## RESULTS OF OPERATIONS

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

During the three months
ended June 30, 2005 and 2004, the Company reported net income of $4,466,993 and
$4,047,409, respectively, or an increase of 10.4%. 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 $508,350 (or 11.8%) in the 2005 quarter. The Company would have
recorded an additional $12,479 in interest income for the three months ended
June 30, 2005 had its non-accrual loans been current in accordance with their
original terms.

Total interest income was
$5,544,819 for the three months ended June 30, 2005 (the 2005
quarter) compared to $4,301,451 for the three months ended June 30, 2004
(the 2004 quarter), or an increase of 28.9%. Interest income on
Residential Mortgage Loans totaled $5,542,503 for the 2005 quarter compared to
$4,298,043 for the 2004 quarter, or an increase of 29.0%. 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 5.94% in the 2005 quarter from
5.79% in the 2004 quarter. The average balance of the Residential Mortgage Loan
portfolio was $373,212,634 in the 2005 quarter compared to $297,107,068 in the
2004 quarter.

Interest income of $2,316
and $3,408 was recognized on the Companys interest bearing deposits during
the three months ended June 30, 2005 and 2004, respectively.

During the 2005 quarter,
the Company incurred interest expense totaling $735,018 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 June 30, 2005 and 2004.

Operating expenses totaling
$342,808 and $254,042 for the three months ended June 30, 2005 and 2004,
respectively, or an increase of 34.9%, 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 $235,457
and $161,832, for the three months ended June 30, 2005 and 2004, respectively,
or an increase of 45.5%. The increase in loan servicing fees paid to parent for
the quarter ended June 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 June 30, 2005 and 2004 totaled $50,000 for each quarter.
Directors fees paid for the three months ended June 30, 2005 and 2004 were
$8,000 and $7,251, respectively, and represent compensation to the two
independent members of the Board of Directors. General and administrative
expenses totaled $49,351 and $34,959 for the three months ended June 30, 2005
and 2004, respectively, or an increase of 41.2%.

On June 14, 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 July 15, 2005.

---

## Six Months
Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

During the six months ended
June 30, 2005 and 2004, the Company reported net income of $8,911,564 and
$8,151,666, respectively, or an increase of 9.3%. 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 $902,383 (or 10.4%) in the 2005 period. The Company would have
recorded an additional $27,128 in interest income for the six months ended June
30, 2005 had its non-accrual loans been current in accordance with their
original terms.

Total interest income was
$10,932,590 for the six months ended June 30, 2005 (the 2005 period)
compared to $8,656,647 for the six months ended June 30, 2004 (the 2004
period), an increase of 26.3%. Interest income on Residential Mortgage
Loans totaled $10,926,442 for the six months ended June 30, 2005, compared to
$8,651,523 for the six months ended June 30, 2004, an increase of 26.3%. 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 5.86% in the 2005 period from 5.80% in the 2004 period. The average
balance of the Residential Mortgage Loan portfolio was $372,686,265 in the 2005
period compared to $298,167,996 in the 2004 period.

Interest income of $6,148
and $5,124 was recognized on the Companys interest bearing deposits during
the six months ended June 30, 2005 and 2004, respectively. The increase was
primarily due to higher average yields and was partially offset by lower average
balances of interest bearing deposits during the 2005 period.

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

During the 2005 period, the
Company incurred interest expense totaling $1,373,560 related to the
Companys $75,000,000 loan from the Bank. There was no interest expense in
the 2004 period.

Operating expenses totaling
$647,466 and $504,981 for the six months ended June 30, 2005 and 2004,
respectively, or an increase of 28.2%, 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 $468,262 and
$318,076 for the six months ended June 30, 2005 and 2004, or an increase of
47.2%. The increase in loan servicing fees paid to parent for the period ended
June 30, 2005 is attributable to an increase in the average balance of
Residential Mortgage Loans. Advisory fees paid to parent for the six months
ended June 30, 2005 and 2004 totaled $100,000 for each period. Directors
fees paid for the six months ended June 30, 2005 and 2004 totaled $16,000 and
$16,751, respectively, and represent compensation to the two independent members
of the Board of Directors. General and administrative expenses totaled $63,204
and $70,154 for the six months ended June 30, 2005 and 2004, respectively, or a
decrease of 9.9%.

During the six months ended
June 30, 2005, the Companys Board of Directors declared $7,781,250 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 June 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 June 30, 2005.

During the three months
ended June 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 3.
Defaults Upon Senior Securities

## ITEM 5. Other
Information

## 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
------------------------
   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)

`August 12, 2005                                          By:  /s/ STEPHEN R. HALPIN, JR.
                                                         --------------------------
                                                         Stephen R. Halpin, Jr.
                                                         Executive Vice President and
                                                         Chief Financial Officer
                                                         (Principal Financial Officer)


August 12, 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 June 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.



August 12, 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 June 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.




August 12, 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 June 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.


August 12, 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 June 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.


August 12, 2005                                               /s/ STEPHEN R. HALPIN, JR.
                                                              --------------------------
                                                              Stephen R. Halpin, Jr.
                                                              Executive Vice President, Treasurer
                                                              and Chief Financial Officer`

---