SECURITIES AND EXCHANGE COMMISSION



Washington, DC 20549



FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006



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 offices) (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 a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one): Large accelerated filer[ ]Accelerated filer[ ]
Non-accelerated filer [ 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 April 17, 2006. All of
such shares were owned by Chevy Chase Bank, F.S.B.; therefore, no common stock
was held by non-affiliates.













CHEVY CHASE PREFERRED CAPITAL CORPORATION



TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

Page

|Item 1. Financial Statements: | 1                      
|----------------------------- | -----------------------
|                              | (a)                    
|                              | December 31, 2005      
|                              | (b)                    
|                              | March 31, 2006 and 2005
|                              | (c)                    
|                              | Ended March 31, 2006   
|                              |                        

| | (d) | Statements of Cash Flows for the Three Months
  Ended
| | --- | -----------------------------------------------------

| | March 31, 2006 and 2005 | 5                            
| | ----------------------- | -----------------------------
| | (e)                     | Notes to Financial Statements
| |                         |                              



Item 2. Management's Discussion and Analysis of Financial

| | Condition and Results of Operations | 8
| | ----------------------------------- | -



|Item 3. Quantitative and Qualitative Disclosures about Market
      Risk | 10
|------------------------------------------------------------------------ | --



|Item 4. Controls and Procedures | 11
|------------------------------- | --



PART II - OTHER INFORMATION



|Item 1. Legal Proceedings | 12
|------------------------- | --



|Item 1A. Risk Factors | 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
|---------------- | --













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, 2005 included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 24, 2006 (the "2005 10-K").



-1-











CHEVY CHASE PREFERRED CAPITAL CORPORATION

STATEMENTS OF FINANCIAL CONDITION



|                                                 |  | March 31,     |  | December 31, 
|------------------------------------------------ |  | ------------- |  | -------------
|                                                 |  | 2006          |  | 2005         
|                                                 |  | (Unaudited)   |  |              
|ASSETS                                          
|                                                 |  |               |  |              
|Cash and interest-bearing deposits               |  | $ 4,567,144   |  | $ 1,913,298  
|Residential mortgage loans (net of allowance for |  |               |  |              
|losses of $40,333 at both period ends)           |  | 373,014,906   |  | 376,814,496  
|Accounts receivable from parent                  |  | 1,034,035     |  | 1,458,559    
|Accrued interest receivable                      |  | 1,496,168     |  | 1,543,716    
|Prepaid expenses                                 |  | 58,803        |  | 5,000        
|Total assets                                     |  | $ 380,171,056 |  | $ 381,735,069



LIABILITIES AND STOCKHOLDERS' EQUITY

|Liabilities:                                                                                                                                                                                                                                               |               |  |              
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- |  | -------------
|Loan payable to parent                                                                                                                                                                                                                                     | $ 75,000,000  |  | $ 75,000,000 
|Accrued interest payable to parent                                                                                                                                                                                                                         | 353,917       |  | 319,523      
|Accounts payable to others and accrued expenses                                                                                                                                                                                                            | 31,185        |  | 9,624        
|Dividends payable to parent                                                                                                                                                                                                                                | 230,104       |  | 2,300,000    
|Dividends payable to others                                                                                                                                                                                                                                | 3,890,625     |  | 3,890,625    
|Total liabilities                                                                                                                                                                                                                                          | 79,505,831    |  | 81,519,772   
|                                                                                                                                                                                                                                                           |               |  |              
|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                                                                                                                                                                                                                                          | 665,225       |  | 215,297      
|Total stockholders' equity                                                                                                                                                                                                                                 | 300,665,225   |  | 300,215,297  
|                                                                                                                                                                                                                                                           |               |  |              
|Total liabilities and stockholders' equity                                                                                                                                                                                                                 | $ 380,171,056 |  | $ 381,735,069















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See the accompanying Notes to Financial Statements.



-3-











CHEVY CHASE PREFERRED CAPITAL CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)





|                             | Three Months Ended
      March 31,
|---------------------------- | ----------------------------------
|                             | 2006                              
|Interest Income              |                                   
|Residential mortgage loans   | $ 5,900,555                       
|Other                        | 6,043                             
|Total interest income        | 5,906,598                         
|Interest expense             | 1,008,177                         
|Net interest income          | 4,898,421                         
|                             |                                   
|Operating Expenses           |                                   
|Loan servicing fees - parent | 230,271                           
|Advisory fees - parent       | 50,000                            
|Directors' fees              | 6,000                             
|General and administrative   | 41,493                            
|Total operating expenses     | 327,764                           
|                             |                                   
|NET INCOME                   | $ 4,570,657                       
|                             |                                   
|PREFERRED STOCK DIVIDENDS    | 3,890,625                         
|                             |                                   
|EARNINGS AVAILABLE TO        |                                   
|COMMON STOCKHOLDER           | $ 680,032                         
|                             |                                   
|AVERAGE COMMON SHARES        | 100                               
|                             |                                   
|EARNINGS PER COMMON SHARE    | $ 6,800.32                        





















-4-













See the accompanying Notes to Financial Statements.



-5-











CHEVY CHASE PREFERRED CAPITAL CORPORATION

STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)





|                                   | Preferred
      Stock |  | Common
      Stock |  | Capital
      Contributed
      In Excess
      of Par |  | Retained
      Earnings |  | Stockholders'
      Equity
|---------------------------------- | --------------------- |  | ------------------ |  | ------------------------------------------------------ |  | ----------------------- |  | --------------------------
|                                   |                       |  |                    |  |                                                        |  |                         |  |                           
|Balance, December 31, 2005         | $ 15,000,000          |  | $ 100              |  | $ 284,999,900                                          |  | $ 215,297               |  | $ 300,215,297             
|                                   |                       |  |                    |  |                                                        |  |                         |  |                           
|Net income                         | -                     |  | -                  |  | -                                                      |  | 4,570,657               |  | 4,570,657                 
|                                   |                       |  |                    |  |                                                        |  |                         |  |                           
|Dividends on
      Preferred Stock | -                     |  | -                  |  | -                                                      |  | (3,890,625)             |  | (3,890,625)               
|Dividends on Common Stock          | -                     |  | -                  |  | -                                                      |  | (230,104)               |  | (230,104)                 
|                                   |                       |  |                    |  |                                                        |  |                         |  |                           
|Balance, March 31, 2006            | $ 15,000,000          |  | $ 100              |  | $ 284,999,900                                          |  | $ 665,225               |  | $ 300,665,225             



































-6-











See the accompanying Notes to Financial Statements.



-7-











CHEVY CHASE PREFERRED CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                                                                  | Three Months Ended
      March 31,
|------------------------------------------------------------------------------------------------- | ----------------------------------
|                                                                                                 
|                                                                                                  | 2006                              
|Cash flows from operating activities:                                                             |                                   
|                                                                                                  |                                   
|Net income                                                                                        | $ 4,570,657                       
|Adjustments to reconcile net income to net cash
      provided by (used in) operating activities: |                                   
|Decrease in accounts receivable from parent                                                       | 424,524                           
|(Increase) decrease in accrued interest receivable                                                | 47,548                            
|Increase in prepaid expenses                                                                      | (53,803)                          
|Increase (decrease) in accounts payable to others and accrued
      expenses                      | 21,561                            
|Increase in accrued interest payable to parent                                                    | 34,394                            
|Net cash provided by operating activities                                                         | 5,044,881                         
|                                                                                                  |                                   
|Cash flows from investing activities:                                                             |                                   
|Purchases of residential mortgage loans                                                           | (17,689,956)                      
|Repayments of residential mortgage loans                                                          | 21,489,546                        
|Net cash provided by investing activities                                                         | 3,799,590                         
|                                                                                                  |                                   
|Cash flows from financing activities:                                                             |                                   
|Dividends paid on preferred stock                                                                 | (3,890,625)                       
|Dividends paid on common stock                                                                    | (2,300,000)                       
|Net cash used in financing activities                                                             | (6,190,625)                       
|                                                                                                  |                                   
|Net increase in cash and cash equivalents                                                         | 2,653,846                         
|Cash and cash equivalents at beginning of period                                                  | 1,913,298                         
|Cash and cash equivalents at end of period                                                        | $ 4,567,144                       
|                                                                                                  |                                   



















See the accompanying Notes to Financial Statements.



-8-







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, 2005.



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 a
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:



|                          | March 31, 2006              |  | December 31, 2005           
|------------------------- | --------------------------- |  | ----------------------------
|                          | Aggregate Principal Balance |  | Weighted Average
      Yield
|Payment Option ARMs       | $ 62,198,036                |  | 7.41%                       
|One-year ARMs             | 7,173,295                   |  | 6.43%                       
|Three-year ARMs           | 24,467,405                  |  | 6.40%                       
|Five-year ARMs            | 193,085,403                 |  | 5.95%                       
|7/1 ARMs                  | 3,450,602                   |  | 7.08%                       
|10/1 ARMs                 | 11,017,107                  |  | 6.66%                       
|Fixed-rate                | 71,663,391                  |  | 6.41%                       
|Total                     | 373,055,239                 |  | 6.35%                       
|Less:                     |                             |  |                             
|Allowance for loan losses | 40,333                      |  |                             
|                          |                             |  |                             
|Total                     | $ 373,014,906               |  |                             



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.





-9-







CHEVY CHASE PREFERRED CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)





NOTE 4 - DIVIDENDS:



During the three months ended March 31, 2006, the Company's Board of
Directors declared cash dividends of $3,890,625 on the Company's preferred stock
out of the retained earnings of the Company. Dividends were paid on April 17,
2006. During the three months ended March 31, 2006, the Company's Board of
Directors declared cash dividends of $230,104 on the Company's common stock out
of the retained earnings of the Company. Dividends were paid on April 17,
2006.



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
March 31, 2006, the interest rate was 5.48%.



-10-













|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 March 31, 2006 and the interest rates on such loans,
anticipated annual income on the Company's loan portfolio, net of interest
expense and operating expenses, was approximately 117.1% of the projected annual
dividend of $15,562,500 on the Series A Preferred Shares. As of March 31, 2006,
the weighted average yield on the Residential Mortgage Loans included in the
company's portfolio was 6.34%.



Residential Mortgage Loans



At March 31, 2006 and December 31, 2005, the Company had $373,014,906 and
$376,814,496, 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 three months
ended March 31, 2006, Residential Mortgage Loan purchases were $17,689,956 and
principal collections were $21,489,546. 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 March 31, 2006, the Company had two 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 $512,819 (or 0.14% of loans). At December 31, 2005, the Company had
three non-accrual loans with an aggregate principal balance of $689,796 (or
0.18% of loans).



At March 31, 2006, the Company had six delinquent loans (delinquent 30-89
days) with an aggregate principal balance of $1,017,505 (or 0.27% of loans). At
December 31, 2005, the Company had six delinquent loans with an aggregate
principal balance of $1,406,900 (or 0.37% of loans).



Allowance for Loan Losses



Management reviews the loan portfolio to establish an allowance for
estimated losses if deemed necessary. An analysis to determine whether an
allowance for loan loss is required is performed periodically, and an allowance
is provided after considering such factors as historical loss performance,
delinquency status, current economic conditions and geographical concentrations.
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. Based on a review of
delinquent and nonaccrual loans, management determined that the allowance for
loan losses was appropriate at March 31, 2006 and 2005. There was no activity in
the allowance for loan losses during the three months ended March 31, 2006 and
2005. The balance of the allowance for loan losses was $40,333 at March 31, 2006
and 2005.



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. See "Risk Factors" in the 2005 10-K.



The Company took steps in prior years to increase the funds available to
pay dividends on the Series A Preferred Shares. In addition to a reduction in
2003 in the Bank's servicing fee, the Company borrowed $75,000,000 from the Bank
in December 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.





-11-











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 2005 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.



Residential Mortgage Loans secured by residential real estate properties
located in the Washington, DC metropolitan area comprised of 44.6% of total
loans at March 31, 2006. In addition, 12.9% of the Residential Mortgage Loans
are secured by residential real estate properties located in California.
Consequently, adverse economic, political or business developments in
Washington, DC, Maryland, Virginia and California may affect the Company's loan
portfolio to a greater degree than a more diversified portfolio.



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 to fund the acquisition of
additional Mortgage Assets as current Mortgage Assets held by the Company are
repaid and to pay dividends on the Series A Preferred Shares. The acquisition of
such additional Mortgage Assets will be funded with the proceeds of principal
repayments on its current portfolio of Mortgage Assets. The Company does not
anticipate that it will have any 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," our anticipated annual income, based on our mortgage loan portfolio
at March 31, 2006, 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 March 31,
2006.



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



-12-









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 March 31, 2006, the Company met
the requirements of all applicable tests.



No income tax was paid during either of the three month periods ended
March 31, 2006 or 2005.



RESULTS OF OPERATIONS



Three Months Ended March 31, 2006 Compared to Three Months Ended March
31, 2005



During the three months ended March 31, 2006 and 2005, the Company
reported net income of $4,570,657 and $4,444,572, respectively, an increase of
2.8%.



Net interest income increased $149,191 (or 3.1%) in the 2006 quarter. The
Company would have recorded an additional $15,259 and $14,649 in interest income
for the three months ended March 31, 2006 and 2005, respectively, had its
non-accrual loans been current in accordance with their original
terms.



Total interest income was $5,906,598 for the three months ended March 31,
2006 (the "2006 quarter") compared to $5,387,772 for the three months ended
March 31, 2005 (the "2005 quarter"), or an increase of 9.6%. Interest income on
Residential Mortgage Loans totaled $5,900,555 for the 2006 quarter compared to
$5,383,940 for the 2005 quarter, or an increase of 9.6%. The increase in
interest income resulted from an increase in the average yield on such loans to
6.32% in the 2006 quarter from 5.75% in the 2005 quarter. The average balance of
the Residential Mortgage Loan portfolio was $373,746,643 in the 2006 quarter
compared to $374,360,093 in the 2005 quarter.



Other interest income of $6,043 and $3,832 was recognized on the
Company's interest bearing deposits during the three months ended March 31, 2006
and 2005, respectively.



The Company incurred interest expense totaling $1,008,177 during the 2006
quarter compared to $638,542 during the 2005 quarter, or an increase of 57.9%.
The increase was due to an increase in the average rate paid on the $75,000,000
loan in the 2006 quarter to 5.38% from 3.41% in the 2005 quarter.



No provision for loan losses was recorded for the three months ended
March 31, 2006 and 2005.



Operating expenses totaling $327,764 and $304,658 for the three months
ended March 31, 2006 and 2005, respectively, or an increase of 7.6%, 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 $230,271 and $232,805, for the three months ended March 31,
2006 and 2005, respectively, or a decrease of 1.1%. Advisory fees paid to parent
for the three months ended March 31, 2006 and 2005 totaled $50,000 for each
quarter. Directors' fees paid for the three months ended March 31, 2006 and 2005
were $6,000 and $8,000, respectively, and represent compensation to the two
independent members of the Board of Directors. General and administrative
expenses totaled $41,493 and $13,853 for the three months ended March 31, 2006
and 2005, respectively, or an increase of 199.5%, primarily due to increases in
external auditor fees, rating agency fees and New York Stock Exchange
fees.



During the three months ended March 31, 2006, the Company's Board of
Directors declared cash dividends of $3,890,625 on the Company's preferred stock
out of the retained earnings of the Company. Dividends were paid on April 17,
2006. During the three months ended March 31, 2006, the Company's Board of
Directors declared cash dividends of $230,104 on the Company's common stock out
of the retained earnings of the Company. Dividends were paid on April 17,
2006.





-13-











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 provide reasonable assurance 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 March 31, 2006. 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 March 31, 2006.

During the three months ended March 31, 2006, 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.



-14-











PART II - OTHER INFORMATION



ITEM 1. Legal Proceedings



The Company is not involved in any material litigation.



ITEM 1A. Risk Factors



There were no changes from the December 31, 2005 Form 10-K.



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



None.



ITEM 3. Defaults Upon Senior Securities



None.



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



None.



ITEM 5. Other Information



None.



ITEM 6. Exhibits and Reports on Form 8-K



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



Exhibit

| | No.
                    
      Exhibit
| | --------------------------------------

| | 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.  





-15-











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)





|May 12, 2006 | By:                           | /s/ STEPHEN R. HALPIN, JR.
|------------ | ----------------------------- | --------------------------
|             | Stephen R. Halpin, Jr.        |                           
|             | Executive Vice President and  |                           
|             | Chief Financial Officer       |                           
|             | (Principal Financial Officer) |                           
|             |                               |                           





|May 12, 2006 | By:                                  | /s/ JOEL A. FRIEDMAN | 
|------------ | ------------------------------------ | -------------------- | 
|             | Joel A. Friedman                     |                     
|             | Senior Vice President and Controller
|             | (Principal Accounting Officer)       |                     
|             |                                      |                      | 













Exhibit 31.1



CERTIFICATION



I,
B. Francis Saul II, certify that:

| | 1. | I have reviewed this quarterly report on Form 10-Q for the three
      months ended March 31, 2006 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.





|May 12, 2006 | /s/ B. FRANCIS SAUL
      II              
|------------ | ------------------------------------------
|             | B. Francis Saul
    II                    
|             | Chairman and Chief Executive
      Officer
|             |                                           













Exhibit 31.2

CERTIFICATION



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

| | 1. | I have reviewed this quarterly report on Form 10-Q for the three
      months ended March 31, 2006 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.





|May 12, 2006 | /s/ STEPHEN R. HALPIN, JR.                | 
|------------ | ----------------------------------------- | 
|             | Stephen R. Halpin,
      Jr.              | 
|             | Executive Vice President,
      Treasurer
|             | and Chief Financial
      Officer         | 
|             |                                           | 

















Exhibit 32.1





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 March 31, 2006 (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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------





|May 12, 2006 | /s/ B. FRANCIS SAUL
      II         | 
|------------ | ------------------------------------ | 
|             | B. Francis Saul II                   | 
|             | Chairman and Chief Executive Officer
|             |                                      | 































Exhibit 32.2





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 March 31, 2006 (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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------





|May 12, 2006 | /s/ STEPHEN R. HALPIN,
      JR.
|------------ | --------------------------------
|             | Stephen R. Halpin, Jr.          
|             |                                 

Executive Vice President, Treasurer

and Chief Financial Officer