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CHEVY CHASE
PREFERRED CAPITAL CORPORATION
FORM 10-Q
March 31, 2003
______________________________________________________________________________
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, 2003
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 April 30, 2003.
______________________________________________________________________________
CHEVY CHASE PREFERRED CAPITAL CORPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements:..................................................1
(a)Statements of Financial Condition at March 31, 2003 and
December 31, 2002.......................................................2
(b)Statements of Operations for the Three Months Ended
March 31, 2003 and 2002 ................................................3
(c)Statement of Stockholders' Equity for the Three Months
Ended March 31, 2003....................................................4
(d)Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002 ................................................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. Changes in Securities.................................................12
Item 3. Defaults Upon Senior Securities.......................................12
Item 4. Submission of Matters to a Vote of Security Holders...................12
Item 5. Other Information.....................................................12
Item 6. Exhibits and Reports on Form 8-K......................................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
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, 2002 included in the Company's Annual Report on
Form 10-K (File No. 333-10495) filed with the Securities and Exchange Commission
on March 27, 2003 (the "2002 10-K").
-1-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
2003 2002
------------- -------------
(Unaudited)
ASSETS
Cash and interest-bearing deposits $ 2,205,327 $ 2,986,496
Residential mortgage loans (net of allowance
for losses of $40,333 for both periods) 286,631,729 285,395,464
Accounts receivable from parent 14,030,066 15,297,140
Accrued interest receivable 1,097,936 1,138,246
Prepaid expenses 34,250 8,000
------------- -------------
Total assets $303,999,308 $304,825,346
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable to parent $ 50,000 $ -
Accrued expenses and accounts payable to others 11,766 -
Dividends payable to parent - 1,100,000
Dividends payable to others 3,890,625 3,890,625
------------- -------------
Total liabilities 3,952,391 4,990,625
------------- -------------
Preferred Stock, 10,000,000 shares authorized:
10 3/8% Noncumulative Exchangeable Preferred
Stock, $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 284,999,900 284,834,621
Retained earnings 46,917 -
------------- -------------
Total stockholders' equity 300,046,917 299,834,721
------------- -------------
Total liabilities and stockholders' equity $303,999,308 $304,825,346
============= =============
See the accompanying Notes to Financial Statements.
-2-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
--------------------------------------
2003 2002
------------------ ------------------
Interest Income
Residential mortgage loans $ 4,241,772 $ 4,513,523
Other 9,988 29,955
------------------ ------------------
Total interest income 4,251,760 4,543,478
Operating Expenses
Loan servicing fees paid to parent 226,608 240,684
Advisory fees paid to parent 50,000 50,000
Directors fees 8,000 8,000
General and administrative 29,610 17,272
------------------ ------------------
Total operating expenses 314,218 315,956
------------------ ------------------
NET INCOME $ 3,937,542 $ 4,227,522
================== ==================
PREFERRED STOCK DIVIDENDS 3,890,625 3,890,625
------------------ ------------------
EARNINGS AVAILABLE TO
COMMON STOCKHOLDER $ 46,917 $ 336,897
================== ==================
EARNINGS PER COMMON SHARE $ 469.17 $ 3,368.97
================== ==================
See the accompanying Notes to Financial 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, 2002 $15,000,000 $100 $284,834,621 $ - $299,834,721
Net income - - - 3,937,542 3,937,542
Capital contribution from
common stockholder - - 165,279 - 165,279
Dividends on 10 3/8%
Noncumulative Exchangeable
Preferred Stock, Series A - - - (3,890,625) (3,890,625)
----------- ---- ------------ ------------ -------------
Balance, March 31, 2003 $15,000,000 $100 $284,999,900 $ 46,917 $300,046,917
=========== ==== ============ ============ =============
See the accompanying Notes to Financial Statements.
-4-
CHEVY CHASE PREFERRED CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
----------------------------
2003 2002
------------- -------------
Cash flows from operating activities:
Net income $ 3,937,542 $ 4,227,522
Adjustments to reconcile net income to
net cash provided by operating activities:
Decrease in accounts receivable from parent 1,267,074 2,483,042
(Increase) decrease in accrued interest receivable 40,310 (111,726)
Increase in prepaid expenses (26,250) (3,097)
Increase (decrease) in accrued expenses and )
accounts payable 61,766 (39,950)
Increase in accounts payable to parent - 22,825
------------- -------------
Net cash provided by operating activities 5,280,442 6,578,616
------------- -------------
Cash flows from investing activities:
Purchases of residential mortgage loans (55,709,307) (42,897,263)
Repayments of residential mortgage loans 54,473,042 39,290,624
------------- -------------
Net cash used in investing activities (1,236,265) (3,606,639)
------------- -------------
Cash flows from financing activities:
Capital contribution from common stockholder 165,279 341,082
Dividends paid on preferred stock (3,890,625) (3,890,625)
Dividends paid on common stock (1,100,000) (2,700,000)
------------- -------------
Net cash used in financing activities (4,825,346) (6,249,543)
------------- -------------
Net decrease in cash and cash equivalents (781,169) (3,277,566)
Cash and cash equivalents at beginning of period 2,986,496 5,764,867
------------- -------------
Cash and cash equivalents at end of period $ 2,205,327 $ 2,487,301
============= =============
See the accompanying Notes to Financial 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.
NOTE 2 - RESIDENTIAL MORTGAGE LOANS:
Residential mortgage loans consist of adjustable-rate mortgages ("ARMs"), and 30
year 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,
specified in the related mortgage note, subject to periodic and lifetime
interest rate caps. 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:
March 31, December 31,
2003 2002
-------------- --------------
Monthly ARMs $ 62,535,604 $ 67,406,366
One-year ARMs 16,514,606 16,966,406
Three-year ARMs 18,644,623 20,126,451
Five-year ARMs 57,289,431 58,544,908
7/1 ARMs 16,421,009 16,056,192
10/1 ARMs 59,466,825 62,040,642
30 year fixed-rate 55,799,964 44,294,832
-------------- --------------
Total 286,672,062 285,435,797
Less:
Allowance for loan losses 40,333 40,333
-------------- --------------
Total $286,631,729 $285,395,464
============== ==============
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 March 31, 2003, 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 April 15, 2003.
There were no common dividends declared during the three months ended March 31,
2003.
-7-
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FINANCIAL CONDITION
Residential Mortgage Loans
At March 31, 2003 and December 31, 2002, the Company had $286,631,729 and
$285,395,464, respectively, invested in loans secured by first mortgages or
deeds of trust on single-family residential real estate properties ("Residential
Mortgage Loans"). During the three months ended March 31, 2003, Residential
Mortgage Loan purchases were $55,709,307 and principal collections were
$54,473,042. 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 March 31, 2003, the Company had five 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 $913,440 (or 0.32% of loans). At December 31, 2002, the Company had
seven non-accrual loans with an aggregate principal balance of $1,436,859 (or
0.50% of loans).
At March 31, 2003, the Company had two loans which were delinquent 30-89 days
with an aggregate principal balance of $528,083 (or 0.18% of loans). At December
31, 2002, the Company had five loans which were delinquent 30-89 days with an
aggregate principal balance of $1,307,482 (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 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 that are
determined to be necessary. There was no activity in the allowance for loan
losses during the three months ended March 31, 2003 and 2002. The balance of the
allowance for loan losses was $40,333 for each of the quarters ended March 31,
2003 and 2002.
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.
-8-
Based on the outstanding balance of the Company's Residential Mortgage Loans at
March 31, 2003 and the interest rates on such loans, anticipated annual interest
income, net of servicing fees, on the Company's loan portfolio was approximately
102.5% 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 Form 10-K for 2002.
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
54.4%) 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.
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.
-9-
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.
No income tax was paid during either of the three month periods ended March 31,
2003 and 2002.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002
During the three months ended March 31, 2003 and 2002, the Company reported net
income of $3,937,542 and $4,227,522, respectively.
Interest income on Residential Mortgage Loans totaled $4,241,772 for the three
months ended March 31, 2003 (the "2003 quarter"), compared to $4,513,523 for the
three months ended March 31, 2002 (the "2002 quarter"). The decrease in interest
income resulted from a decrease in the average yield on such loans to 5.97% in
the 2003 quarter from 6.25% in the 2002 quarter. The average balance of the
Residential Mortgage Loan portfolio was $284,438,334 in the 2003 quarter
compared to $288,776,317 in the 2002 quarter. The Company would have recorded an
additional $11,327 and $21,643 in interest income for the three months ended
March 31, 2003 and 2002, had its non-accrual loans been current in accordance
with their original terms.
Other interest income of $9,988 and $29,955 was recognized on the Company's
interest bearing deposits during the three months ended March 31, 2003 and 2002,
respectively. The decrease was primarily due to a lower average yield on
interest bearing deposits which decreased by 216 basis points (from 3.48% to
1.32%) from the average yield in the 2002 quarter. Partially offsetting this
decrease was an increase in the average balance on interest bearing deposits of
$765,889 in the 2003 quarter.
-10-
No provision for loan losses was recorded for the three months ended March 31,
2003 and 2002.
The Company did not sell any REO properties during the three months ended March
31, 2003 and 2002.
Operating expenses totaling $314,218 and $315,956 for the three months ended
March 31, 2003 and 2002, 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 $226,608 and
$240,684, for the three months ended March 31, 2003 and 2002, 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 March 31, 2003 and 2002 totaled $50,000 for each quarter.
Directors' fees paid for the three months ended March 31, 2003 and 2002 totaled
$8,000 for each period, and represent compensation to the two independent
members of the Board of Directors. General and administrative expenses totaled
$29,610 and $17,272 for the three months ended March 31, 2003 and 2002,
respectively.
On March 18, 2003, 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.
There were no common dividends declared during the quarter ended March 21, 2003.
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
Within the 90-day period prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company's filings under the Securities Exchange Act of 1934, as amended.
There have been no significant changes in the Company's internal controls, or in
other factors that could significantly affect internal controls, subsequent to
the date the Company carried out its evaluations.
-11-
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
99.1 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
99.2 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
-12-
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 15, 2003 By: /s/ ALEXANDER R. M. BOYLE
------------------------------------
Alexander R. M. Boyle
Vice Chairman of the Board
May 15, 2003 By: /s/ STEPHEN R. HALPIN, JR.
------------------------------------
Stephen R. Halpin, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
May 15, 2003 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 of Chevy Chase Preferred
Capital Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures 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 quarterly report is being
prepared; (b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and (c) presented in
this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003 /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 of Chevy Chase Preferred
Capital Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures 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 quarterly report is being
prepared; (b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and (c) presented in
this quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003 /s/ STEPHEN R. HALPIN, JR.
--------------------------
Stephen R. Halpin, Jr.
Chief Financial Officer and
Executive Vice President
Exhibit 11
Computation of Earnings Per Common Share included in Part I, Item 1 of this
report.
Exhibit 99.1
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
period ended March 31, 2003 (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.
Date: May 15, 2003 /s/ B. FRANCIS SAUL, II
--------------------------
B. Francis Saul, II
Chairman and Chief Executive Officer
Exhibit 99.2
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 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 ended March 31, 2003 (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.
Date: May 15, 2003 /s/ STEPHEN R. HALPIN, JR.
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Stephen R. Halpin, Jr.
Chief Financial Officer and
Executive Vice President