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CHEVY CHASE
PREFERRED CAPITAL CORPORATION
FORM 10-Q
June 30, 2002
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
Commission File Number: 333-10495
CHEVY CHASE PREFERRED CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 52-1998335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7501 Wisconsin Avenue
Bethesda, Maryland 20814
(Address of principal executive offices) (Zip Code)
(301) 986-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's sole class of common stock
was 100 shares, $1 par value, as of July 31, 2002.
______________________________________________________________________________
CHEVY CHASE PREFERRED CAPITAL CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements:..................................................1
(a) Statements of Financial Condition at June 30, 2002 and
December 31, 2001.......................................................2
(b) Statements of Operations for the Three Months and Six Months Ended
June 30, 2002 and 2001..................................................3
(c) Statement of Stockholders' Equity for the Six Months
Ended June 30, 2002.....................................................4
(d) Statements of Cash Flows for the Six Months Ended
June 30, 2002 and 2001..................................................5
(e) Notes to Financial Statements............................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................8
Item 3. Quantitative and Qualitative Disclosures about Market Risk...........12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................13
Item 2. Changes in Securities................................................13
Item 3. Defaults Upon Senior Securities......................................13
Item 4. Submission of Matters to a Vote of Security Holders..................13
Item 5. Other Information....................................................13
Item 6. Exhibits and Reports on Form 8-K.....................................13
PART I
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements and notes of Chevy Chase Preferred
Capital Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments necessary for a fair presentation of
the financial position and the results of operations for the interim period
presented have been included. Such unaudited financial statements and notes
should be read in conjunction with the Company's financial statements and notes
for the year ended December 31, 2001 included in the Company's Annual Report on
Form 10-K (File No. 333-10495) filed with the Securities and Exchange Commission
on March 29, 2002 (the "2001 10-K").
-1-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
2002 2001
---------------- ----------------
(Unaudited)
ASSETS
Cash and interest-bearing deposits $ 2,609,187 $ 5,764,867
Residential mortgage loans (net of allowance
for losses of $40,333 for both periods) 290,770,651 287,523,781
Accounts receivable from parent 9,903,439 11,825,608
Accrued interest receivable 1,307,819 1,196,337
Prepaid expenses 6,065 8,000
---------------- ----------------
Total assets $ 304,597,161 $ 306,318,593
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and accounts payable
to others 37,349 69,050
Dividends payable to parent - 2,700,000
Dividends payable to others 3,890,625 3,890,625
---------------- ----------------
Total liabilities 3,927,974 6,659,675
---------------- ----------------
10 3/8% Noncumulative Exchangeable Preferred
Stock, $5 par value, 10,000,000 shares
authorized, 3,000,000 shares issued and
outstanding (liquidation value of
$150,000,000 plus accrued and unpaid
dividends) 15,000,000 15,000,000
Common stock, $1 par value, 1,000 shares
authorized, 100 shares issued and
outstanding 100 100
Capital contributed in excess of par 284,999,900 284,658,818
Retained earnings 669,187 -
---------------- ----------------
Total stockholders' equity 300,669,187 299,658,918
---------------- ----------------
Total liabilities and stockholders' equity $ 304,597,161 $ 306,318,593
================ ================
The accompanying Notes to Financial Statements are an integral part of these statements.
-2-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
2002 2001 2002 2001
----------- ----------- ----------- ------------
Interest Income
Residential mortgage loans $4,518,771 $5,394,729 $9,032,294 $10,950,881
Other 15,776 54,701 45,731 84,617
----------- ----------- ----------- ------------
Total interest income 4,534,547 5,449,430 9,078,025 11,035,498
Gain on sales of real estate
acquired in settlement of
loans, net - - - 21,924
----------- ----------- ----------- ------------
Total income 4,534,547 5,449,430 9,078,025 11,057,422
----------- ----------- ----------- ------------
Operating Expenses
Loan servicing fees paid to
parent 228,633 269,896 469,317 540,601
Advisory fees paid to parent 50,000 50,000 100,000 100,000
Directors fees 12,000 8,000 20,000 16,000
General and administrative 20,999 13,653 38,271 20,340
----------- ----------- ----------- ------------
Total operating expenses 311,632 341,549 627,588 676,941
----------- ----------- ----------- ------------
Income before income taxes 4,222,915 5,107,881 8,450,437 10,380,481
Provision for income taxes - - - 2,300
----------- ----------- ----------- ------------
NET INCOME $4,222,915 $5,107,881 $8,450,437 $10,378,181
=========== =========== =========== ============
PREFERRED STOCK DIVIDENDS 3,890,625 3,890,625 7,781,250 7,781,250
----------- ----------- ----------- ------------
EARNINGS AVAILABLE TO
COMMON STOCKHOLDER $ 332,290 $1,217,256 $ 669,187 $ 2,596,931
=========== =========== =========== ============
EARNINGS PER COMMON SHARE $ 3,322.90 $12,172.56 $ 6,691.87 $ 25,969.31
=========== =========== =========== ============
The accompanying Notes to Financial Statements are an integral part of these statements.
-3-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Capital
Contributed Total
Preferred Common In Excess Retained Stockholders'
Stock Stock of Par Earnings Equity
----------- ---- ------------ ----------- -------------
Balance, December 31, 2001 $15,000,000 $100 $284,658,818 $ - $299,658,918 $
Net income - - - 8,450,437 8,450,437
Capital contribution from
common stockholder - - 341,082 - 341,082
Dividends on 10 3/8%
Noncumulative Exchangeable
Preferred Stock, Series A - - - (7,781,250) (7,781,250)
----------- ---- ------------ ----------- --------------
Balance, June 30, 2002 $15,000,000 $100 $284,999,900 $ 669,187 $300,669,187
=========== ==== ========-=== =========== ==============
The accompanying Notes to Financial Statements are an integral part of this statement.
-4-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
---------------------------------
2002 2001
--------------- ---------------
Cash flows from operating activities:
Net income $ 8,450,437 $ 10,378,181
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sales of real estate acquired in
settlement of loans, net - (21,924)
(Increase) decrease in accounts receivable
from parent 1,922,169 (3,002,708)
(Increase) decrease in accrued interest
receivable (111,482) 39,257
(Increase) decrease in prepaid expenses 1,935 (566)
Decrease in accrued expenses and accounts
payable to others (31,701) (53,756)
--------------- ---------------
Net cash provided by operating activities 10,231,358 7,338,484
--------------- ---------------
Cash flows from investing activities:
Purchases of residential mortgage loans (68,993,512) (45,214,500)
Repayments of residential mortgage loans 65,746,642 48,389,516
Net proceeds on sales of real estate acquired
in settlement of loans - 138,330
--------------- ---------------
Net cash provided by (used in) investing
activities (3,246,870) 3,313,346
--------------- ---------------
Cash flows from financing activities:
Capital contribution from common stockholder 341,082 1,255
Dividends paid on preferred stock (7,781,250) (7,781,250)
Dividends paid on common stock (2,700,000) (3,775,000)
--------------- ---------------
Net cash used in financing activities (10,140,168) (11,554,995)
--------------- ---------------
Net decrease in cash and cash equivalents (3,155,680) (903,165)
Cash and cash equivalents at beginning of period 5,764,867 5,122,692
---------------- --------------
Cash and cash equivalents at end of period $ 2,609,187 $ 4,219,527
================ ==============
Supplemental disclosures of cash flow information:
Income taxes paid during the year $ 2,300 $ -
================ ==============
The accompanying Notes to Financial Statements are an integral part of these statements.
-5-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
The Company is a Maryland corporation which acquires, holds and manages real
estate assets. Chevy Chase Bank, F.S.B. (the "Bank"), a federally insured stock
savings bank, owns all of the Company's common stock. The Bank is in compliance
with its regulatory capital requirements.
Certain reclassifications of prior periods' information have been made to
conform with the presentation for the three months and six months ended June 30,
2002.
NOTE 2 - RESIDENTIAL MORTGAGE LOANS:
Residential mortgage loans consist of monthly adjustable rate mortgages
("ARMs"), one-year ARMs, three-year ARMs and five-year, seven-year and ten-year
fixed-rate loans with automatic conversion to one-year ARMs after the end of the
respective fixed rate period, and 30 year fixed-rate mortgages. Each of the
mortgage loans is secured by a mortgage, deed of trust or other security
instrument which created a first lien on the residential dwellings located in
their respective jurisdictions. The following table shows the residential
mortgage loan portfolio by type at the dates indicated:
June 30, December 31,
2002 2001
-------------------- --------------------
Monthly ARMs $ 73,576,889 $ 79,541,872
One-year ARMs 18,798,461 21,583,666
Three-year ARMs 24,112,067 19,462,468
5/1 ARMs 50,397,703 49,804,806
7/1 ARMs 11,978,462 8,378,308
10/1 ARMs 84,807,837 99,255,916
30 year fixed-rate 27,139,565 9,537,078
-------------------- --------------------
Total 290,810,984 287,564,114
Less:
Allowance for loan losses 40,333 40,333
-------------------- --------------------
Total $ 290,770,651 $ 287,523,781
==================== ====================
NOTE 3 - PREFERRED STOCK:
Cash dividends on the Company's 10 3/8% Noncumulative Exchangeable Preferred
Stock, Series A ("the Series A Preferred Shares") are payable quarterly in
arrears. The liquidation value of each Series A Preferred Share is $50 plus
accrued and unpaid dividends. The Series A Preferred Shares are not redeemable
until January 15, 2007 (except upon the occurrence of certain tax events) and
are redeemable thereafter at the option of the Company. Except under certain
limited
-6-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - PREFERRED STOCK (continued):
circumstances, the holders of the Series A Preferred Shares have no voting
rights. The Series A Preferred Shares are automatically exchangeable for a new
series of preferred stock of the Bank upon the occurrence of certain events
relating to the Bank.
NOTE 4 - DIVIDENDS:
During the three months ended June 30, 2002, the Company's Board of Directors
declared a cash dividend of $3,890,625 on the Company's preferred stock, out of
the retained earnings of the Company. The dividend was paid on July 15, 2002.
During the six months ended June 30, 2002, the Company's Board of Directors
declared cash dividends of $7,781,250 on the Company's preferred stock, out of
the retained earnings of the Company.
There were no common dividends declared during the three and six months ended
June 30, 2002.
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
Recent Developments Regarding Arthur Andersen LLP. On August 13, 2002 the Board
of Directors of the Company approved the dismissal of Arthur Andersen LLP as
independent public accountants of the Company and the engagement of Ernst and
Young LLP to serve as independent public accountants to audit the financial
statements of the Company for the year ending December 31, 2002.
Residential Mortgage Loans
At June 30, 2002, the Company had $290,770,651 invested in loans secured by
first mortgages or deeds of trust on single-family residential real estate
properties ("Residential Mortgage Loans"). The $3,246,870 increase from the
balance at December 31, 2001, resulted from Residential Mortgage Loan purchases
of $68,993,512, offset by principal collections of $65,746,642. Management
intends to continue to reinvest proceeds received from repayments of loans in
additional Residential Mortgage Loans to be purchased from either the Bank or
its affiliates.
At June 30, 2002, the Company had three non-accrual loans (contractually past
due 90 days or more or with respect to which other factors indicate that full
payment of principal and interest is unlikely) with an aggregate principal
balance of $754,042 (or 0.26% of loans). At December 31, 2001, the Company had
three non-accrual loans with an aggregate principal balance of $1,088,562 (or
0.38% of loans).
At June 30, 2002, the Company had six loans, which were delinquent 30-89 days
with an aggregate principal balance of $932,769 (or 0.32% of loans). At December
31, 2001, the Company had eight delinquent loans with an aggregate principal
balance of $1,320,986 (or 0.46% of loans)
Allowance for Loan Losses
An analysis is performed periodically to determine whether an allowance for loan
loss is required. An allowance may be provided after considering such factors as
the economy in lending areas, delinquency statistics and past loss experience.
The allowance for loan losses are based on estimates, and ultimate losses may
vary from current estimates. As adjustments to the allowance become necessary,
provisions for loan losses are reported in operations in the periods they are
determined to be necessary. There was no activity in the allowance for loan
losses during the three months ended June 30, 2002 and 2001. The balance of the
allowance for loan losses was $40,333 at each of June 30, 2002 and 2001.
-8-
Interest Rate Risk
The Company's income consists primarily of interest payments on Residential
Mortgage Loans. If there is a decline in interest rates, then the Company will
experience a decrease in income available to be distributed to its stockholders.
Certain Residential Mortgage Loans which the Company holds allow borrowers to
convert an ARM to a fixed-rate mortgage, thus "locking in" a fixed interest rate
at a time when interest rates have declined. In addition, when interest rates
decline, holders of fixed-rate mortgages are more likely to prepay such
mortgages. In recent periods, primarily as a result of a decline in interest
rates, the Company has experienced an increase in prepayments on its Residential
Mortgage Loans.
Based on the outstanding balance of the Company's Residential Mortgage Loans at
June 30, 2002 and the interest rates on such loans, anticipated annual interest
income, net of servicing fees, on the Company's loan portfolio was approximately
108.2% of the projected annual dividend on the Series A Preferred Shares. There
can be no assurance that an interest rate environment in which there is a
continued decline in interest rates would not adversely affect the Company's
ability to pay dividends on the Series A Preferred Shares. The Company, to date,
has not used any derivative instruments to manage its interest rate risk.
There have been no material changes to the Company's market risk disclosures
from the disclosures made in the 2001 10-K.
Significant Concentration of Credit Risk
Concentration of credit risk arises when a number of customers engage in similar
business activities, or activities in the same geographical region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance to both positive and negative developments affecting a particular
industry.
The Company's exposure to geographic concentrations directly affects the credit
risk of the Residential Mortgage Loans within the portfolio. A majority (or
57.9%) of the Company's Residential Mortgage Loans are secured by residential
real estate properties located in the Washington, DC metropolitan area. Service
industries and Federal, state and local governments employ a significant portion
of the Washington, DC area labor force. Consequently, these loans may be subject
to a greater risk of default than other comparable residential mortgage loans in
the event of adverse economic, political or business developments and natural
hazards in the region that may affect the ability of residential property owners
in the region to make payments of principal and interest on the underlying
mortgages.
-9-
Liquidity and Capital Resources
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. In
managing liquidity, the Company takes into account various legal limitations
placed on a real estate investment trust (a "REIT"), as discussed below in "Tax
Status of the Company."
The Company's principal liquidity needs will be to fund the acquisition of
additional mortgage assets as current mortgage assets held by the Company are
repaid and to pay dividends on the Series A Preferred Shares. The acquisition of
such additional mortgage assets will be funded with the proceeds from principal
repayments on its current portfolio of mortgage assets. The Company does not
anticipate that it will have any other material capital expenditures. The
Company believes that cash generated from the payment of principal and interest
on its mortgage asset portfolio will provide sufficient funds to meet its
operating requirements and to pay dividends in accordance with the requirements
to be treated as a REIT for income tax purposes for the foreseeable future. The
Company may borrow funds as it deems necessary.
Tax Status of the Company
The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended. As a REIT, the Company generally
will not be subject to federal income tax on its net income (excluding capital
gains) provided that it distributes annually 100% of its REIT taxable income to
its stockholders, meets certain organizational, stock ownership and operational
requirements and meets certain income and asset tests. To remain qualified as a
REIT, the Company must distribute each year at least 90% of its "REIT taxable
income" (not including capital gains) for that year to stockholders. If, in any
taxable year, the Company fails to qualify as a REIT, the Company would not be
allowed a deduction for distributions to stockholders in computing its taxable
income and would be subject to federal and state income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. In addition, the Company would also be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification
was lost.
During the six months ended June 30, 2001, the Company paid $2,300 in income
taxes related to capital gains of $20,209 on the sale of two Real Estate Owned
("REO") properties in the year 2000.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001
During the three months ended June 30, 2002 and 2001, the Company reported net
income of $4,222,915 and $5,107,881, respectively.
-10-
Interest income on Residential Mortgage Loans totaled $4,518,771 for the three
months ended June 30, 2002 (the "2002 quarter"), compared to $5,394,729 for the
three months ended June 30, 2001 (the "2001 quarter"). The decrease in interest
income resulted from a decrease in the average yield on such loans to 6.18% in
the 2002 quarter from 7.43% in the 2001 quarter. Partially offsetting this
decrease in interest income was an increase in the average loan balance of the
Residential Mortgage Loan portfolio to $292,338,160 in the 2002 quarter from
$290,569,569 in the 2001 quarter. The Company would have recorded an additional
$7,282 and $10,113 in interest income for the three months ended June 30, 2002
and 2001, had its non-accrual loans been current in accordance with their
original terms.
Other interest income of $15,776 and $54,701 was recognized on the Company's
interest bearing deposits during the three months ended June 30, 2002 and 2001,
respectively.
No provision for loan losses was recorded for the three months ended June 30,
2002 and 2001.
The Company did not sell any REO properties during the three months ended June
30, 2002 and 2001.
Operating expenses totaling $311,632 and $341,549 for the three months ended
June 30, 2002 and 2001, respectively, were comprised of loan servicing fees paid
to parent, advisory fees paid to parent, directors fees and general and
administrative expenses. Loan servicing fees paid to parent of $228,633 and
$269,896, for the three months ended June 30, 2002 and 2001, respectively, were
based on a servicing fee rate of 0.375% per annum of the outstanding principal
balances of Residential Mortgage Loans, pursuant to a servicing agreement
between the Company and the Bank. Advisory fees paid to parent for the three
months ended June 30, 2002 and 2001 totaled $50,000 for each quarter. Directors'
fees paid for the three months ended June 30, 2002 and 2001 were $12,000 and
$8,000, respectively, and represent compensation to the two independent members
of the Board of Directors. General and administrative expenses totaled $20,999
and $13,653 for the three months ended June 30, 2002 and 2001, respectively.
On June 25, 2002 the Company's Board of Directors declared, out of the retained
earnings of the Company, a cash dividend of $1.296875 per share on the
outstanding Series A Preferred Shares. Dividends of $3,890,625 were subsequently
paid on July 15, 2002.
There were no common dividends declared during the 2002 quarter.
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
During the six months ended June 30, 2002 and 2001, the Company reported net
income of $8,450,437 and $10,378,181, respectively.
Interest income on Residential Mortgage Loans totaled $9,032,294 for the six
months ended June 30, 2002 (the "2002 period"), compared to $10,950,881 for the
six months ended June 30, 2001 (the "2001 period"). The decrease in interest
income resulted from a decrease in the average yield on such loans to 6.22% in
the 2002 period from 7.49% in the 2001 period. Also contributing to the decrease
in interest income was a decrease in the average loan balance of the Residential
Mortgage Loan portfolio to $290,557,239 in the 2002 period from $292,587,171 in
the 2001 period. The Company would have recorded an additional $6,175 and
$12,413 in interest income for the 2002 period and 2001 period, respectively,
had its non-accrual loans been current in accordance with their original terms.
-11-
Other interest income of $45,731 and $84,617 was recognized on the Company's
interest bearing deposits during the 2002 period and 2001 period, respectively.
No provision for loan losses was recorded for the periods ended June 30, 2002
and 2001. The Company did not sell any REO properties during the 2002 period.
The Company recognized a gain of $21,924 on the sale of one REO property during
the 2001 period.
Operating expenses totaling $627,588 and $676,941 for the 2002 period and 2001
period, respectively, were comprised of loan servicing fees paid to parent,
advisory fees paid to parent, directors fees and general and administrative
expenses. Loan servicing fees paid to parent of $469,317 and $540,601, for the
2002 period and 2001 period, respectively, were based on a servicing fee rate of
0.375% per annum of the outstanding principal balances of Residential Mortgage
Loans, pursuant to a servicing agreement between the Company and the Bank.
Advisory fees paid to parent for the 2002 and 2001 periods totaled $100,000 for
each period. Directors' fees paid for the 2002 and 2001 periods totaled $20,000
and $16,000, respectively, and represent compensation to the two independent
members of the Board of Directors. General and administrative expenses totaled
$38,271 and $20,340 for the 2002 and 2001 periods, respectively.
During the six months ended June 30, 2002, the Company's Board of Directors
declared $7,781,250 of preferred stock dividends out of the retained earnings of
the Company.
There were no common dividends declared during the 2002 period.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Information required by this item is included in Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Interest Rate Risk," which is hereby incorporated herein by reference.
-12-
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not the subject of any material litigation. None of the Company,
the Bank or any affiliate of the Bank is currently involved in nor, to the
Company's knowledge, is currently threatened with any material litigation with
respect to the Residential Mortgage Loans included in the portfolio, other than
routine litigation arising in the ordinary course of business, most of which is
covered by liability insurance.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K are set forth below.
Exhibit
No. Exhibit
- ------- -------------------------------------------------------
11 Computation of Earnings Per Common Share included in Part I, Item 1
of this report
(b) A current report on Form 8-K, dated August 13, 2002, was filed by the
Company with the SEC reporting the Company had dismissed Arthur Andersen LLP as
independent public accountants of the Company and engaged Ernst and Young LLP to
serve as independent public accountants to audit the financial statements of the
Company for the year ending December 31, 2002.
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHEVY CHASE PREFERRED CAPITAL CORPORATION
(Registrant)
August 14, 2002 By: /s/ ALEXANDER R. M. BOYLE
Alexander R. M. Boyle
Vice Chairman of the Board
August 14, 2002 By: /s/ STEPHEN R. HALPIN, JR.
Stephen R. Halpin, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
August 14, 2002 By: /s/ JOEL A. FRIEDMAN
Joel A. Friedman
Senior Vice President and Controller
(Principal Accounting Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, B. Francis Saul, II, the Chairman and Chief Executive
Officer of Chevy Chase Preferred Capital Corporation (the "Company"), has
executed this certification in connection with the filing with the Securities
and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the
period ending June 30, 2002 (the "Report"). The undersigned hereby certifies
that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
August 13, 2002 By: /s/ B. FRANCIS SAUL, II
B. Francis Saul, II
Chairman and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Stephen R. Halpin, Jr., the Executive Vice President and
Chief Financial Officer of Chevy Chase Preferred Capital Corporation (the
"Company"), has executed this certification in connection with the filing with
the Securities and Exchange Commission of the Company's Quarterly Report on Form
10-Q for the period ending June 30, 2002 (the "Report"). The undersigned hereby
certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
August 13, 2002 By: /s/ STEPHEN R. HALPIN, JR.
Stephen R. Halpin, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Exhibit Index
Exhibit
No. Exhibit
- ------- ------------------------------------------------------------
11 Computation of Earnings Per Common Share included in Part I, Item 1 of
this report.