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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended June 30, 2005
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from           to
 Commission File Number: 0-23513
 WEBSTER PREFERRED CAPITAL CORPORATION
  Connecticut
    
    06-1478208(State or other jurisdiction of
    
    (I. R. S. Employerincorporation or organization)
    
    Identification Number)
 145 Bank Street, Waterbury, Connecticut
    
    06702(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o þ
    1




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WEBSTER PREFERRED CAPITAL CORPORATION
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1.Interim Financial Statements (unaudited):Statements of Condition at June 30, 2005 and December 31, 2004
    
    
    3Statements of Income for the three and six months ended June 30, 2005 and 2004
    
    
    4Statements of Comprehensive Income for the three and six months ended
June 30, 2005 and 2004
    
    
    4Statements of Cash Flows for the six months ended June 30, 2005 and 2004
    
    
    5Notes to the Interim Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    13Item 4.Controls and Procedures
    
    
    14PART II  OTHER INFORMATION
    
    
    14SIGNATURE
    
    
    16EXHIBITSEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
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WEBSTER PREFERRED CAPITAL CORPORATION
 
 Item 1. Interim Financial Statements
 
 STATEMENTS OF CONDITION
(unaudited)
 (Dollars in thousands, except share and per share data)
    
    June 30, 2005
    
    
    December 31, 2004AssetsCash
    
    $
    1,129
    
    
    
    10,325Short-term investments
    
    
    95,000
    
    
    
    29,000Mortgage-backed securities available for sale, at fair value (Note 2)
    
    
    18,825
    
    
    
    20,709Residential mortgage loans (Note 3)
    
    
    433,253
    
    
    
    475,879Accrued interest receivable
    
    
    203
    
    
    
    280Prepaid expenses and other assets
    
    
    993
    
    
    
    1,153Total assets
    
    $
    549,403
    
    
    
    537,346Liabilities and Shareholders EquityAccrued dividends payable
    
    $
    180
    
    
    
    180Accrued expenses and other liabilities
    
    
    12
    
    
    
    6Total liabilities
    
    
    192
    
    
    
    186Shareholders EquitySeries B 8.625% cumulative redeemable preferred stock,
liquidation preference $10 per share; par value $1.00 per share:1,000,000 shares authorized, issued and outstanding
    
    
    1,000
    
    
    
    1,000Common stock, par value $.01 per share:Authorized  1,000 sharesIssued and outstanding  100 shares
    
    
    1
    
    
    
    1Paid-in capital
    
    
    538,799
    
    
    
    538,799Retained earnings (distributions in excess of retained earnings)
    
    
    9,475
    
    
    
    (2,661
    )Accumulated other comprehensive (loss) income
    
    
    (64
    )
    
    
    21Total shareholders equity
    
    
    549,211
    
    
    
    537,160Total liabilities and shareholders equity
    
    $
    549,403
    
    
    
    537,346
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##### Table of Contents



WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF INCOME
(unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(Dollars in thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Interest income:Loans (Note 4)
    
    $
    5,934
    
    
    
    6,122
    
    
    $
    12,081
    
    
    
    11,778Securities and short-term investments
    
    
    798
    
    
    
    565
    
    
    
    1,321
    
    
    
    1,311Total interest income
    
    
    6,732
    
    
    
    6,687
    
    
    
    13,402
    
    
    
    13,089Non interest income:Gain on sale of securities
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    352Noninterest expense:Advisory fee to parent
    
    
    60
    
    
    
    49
    
    
    
    109
    
    
    
    98Other
    
    
    19
    
    
    
    95
    
    
    
    27
    
    
    
    166Total noninterest expense
    
    
    79
    
    
    
    144
    
    
    
    136
    
    
    
    264Net income
    
    
    6,653
    
    
    
    6,895
    
    
    
    13,266
    
    
    
    13,177Preferred stock dividends
    
    
    215
    
    
    
    215
    
    
    
    431
    
    
    
    431Net income available to common shareholder
    
    $
    6,438
    
    
    
    6,680
    
    
    $
    12,835
    
    
    
    12,746Net income per common share:Basic and diluted
    
    $
    64,380
    
    
    
    66,800
    
    
    $
    128,350
    
    
    
    127,460
 
 STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    6,653
    
    
    
    6,895
    
    
    $
    13,266
    
    
    
    13,177Other comprehensive income (loss):Unrealized net holding gain (loss) on securities
available for sale arising during the period
    
    
    232
    
    
    
    (849
    )
    
    
    (85
    )
    
    
    (686
    )Reclassification adjustment for
gains included in net income
    
    
    
    
    
    
    (352
    )
    
    
    
    
    
    
    (352
    )Other comprehensive income (loss)
    
    
    232
    
    
    
    (1,201
    )
    
    
    (85
    )
    
    
    (1,038
    )Comprehensive income
    
    $
    6,885
    
    
    
    5,694
    
    
    $
    13,181
    
    
    
    12,139
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WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF CASH FLOWS
(unaudited)
 Six Months Ended June 30,(In thousands)
    
    2005
    
    
    2004Cash flow from operating activities:Net income
    
    $
    13,266
    
    
    
    13,177Adjustments to reconcile net income to net cash provided by
operating activities:Gain on sale of securities
    
    
    
    
    
    
    (352
    )Net amortization and accretion
    
    
    381
    
    
    
    278Decrease (increase) in accrued interest receivable
    
    
    77
    
    
    
    (18
    )Increase in accrued liabilities
    
    
    6
    
    
    
    41Decrease (increase) in prepaid expenses and other assets
    
    
    160
    
    
    
    (420
    )Net cash provided by operating activities
    
    
    13,890
    
    
    
    12,706Cash flow from investing activities:Principal repayments on mortgage-backed securities
    
    
    1,763
    
    
    
    7,582Purchase of loans
    
    
    
    
    
    
    (95,121
    )Principal repayments of loans
    
    
    42,281
    
    
    
    48,813(Increase) decrease in short-term investments
    
    
    (66,000
    )
    
    
    5,000Proceeds from sale of mortgage-backed securities
    
    
    
    
    
    
    11,379Proceeds of other real estate sold
    
    
    
    
    
    
    95Net cash used by investing activities
    
    
    (21,956
    )
    
    
    (22,252
    )Cash flow from financing activities:Dividends paid on common and preferred stock
    
    
    (1,130
    )
    
    
    (1,237
    )Decrease in cash and cash equivalents
    
    
    (9,196
    )
    
    
    (10,783
    )Cash and cash equivalents at beginning of period
    
    
    10,325
    
    
    
    11,976Cash and cash equivalents at end of period
    
    $
    1,129
    
    
    
    1,193Supplemental schedule of non cash transactionsTransfer of residential mortgage loans to other real estate owned
    
    $
    
    
    
    
    60
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WEBSTER PREFERRED CAPITAL CORPORATION
 
 NOTES TO INTERIM FINANCIAL STATEMENTS
 NOTE 1: BASIS OF PRESENTATION
  NOTE 2: MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueJune 30, 2005Available for Sale Portfolio
    
    $
    18,889
    
    
    
    
    
    
    
    (64
    )
    
    
    18,825December 31, 2004Available for Sale Portfolio
    
    $
    20,688
    
    
    
    21
    
    
    
    
    
    
    
    20,709
 
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WEBSTER PREFERRED CAPITAL CORPORATION
 NOTES TO INTERIM FINANCIAL STATEMENTS
 NOTE 3: RESIDENTIAL MORTGAGE LOANS
  (In thousands)
    
    June 30, 2005
    
    
    December 31, 2004Fixed-rate loans:15 yr. loans
    
    $
    56,183
    
    
    
    63,74720 yr. loans
    
    
    7,529
    
    
    
    8,08325 yr. loans
    
    
    3,860
    
    
    
    4,03730 yr. loans
    
    
    255,685
    
    
    
    273,028Total fixed-rate loans
    
    
    323,257
    
    
    
    348,895Variable-rate loans:15 yr. loans
    
    
    869
    
    
    
    1,00920 yr. loans
    
    
    3,247
    
    
    
    5,24625 yr. loans
    
    
    1,332
    
    
    
    1,38230 yr. loans
    
    
    103,834
    
    
    
    118,287Total variable-rate loans
    
    
    109,282
    
    
    
    125,924Total residential mortgage loans
    
    
    432,539
    
    
    
    474,819Premiums and deferred costs on loans, net
    
    
    2,736
    
    
    
    3,082Less: allowance for loan losses
    
    
    (2,022
    )
    
    
    (2,022
    )Residential mortgage loans
    
    $
    433,253
    
    
    
    475,879
   Six Months Ended June 30,(In thousands)
    
    2005
    
    
    2004Balance at beginning of period
    
    $
    2,022
    
    
    
    2,106Charge-offs
    
    
    
    
    
    
    (84
    )Balance at end of period
    
    $
    2,022
    
    
    
    2,022
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WEBSTER PREFERRED CAPITAL CORPORATION
 NOTES TO INTERIM FINANCIAL STATEMENTS
 NOTE 4: SERVICING
 $
  8




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WEBSTER PREFERRED CAPITAL CORPORATION
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 General
  Forward Looking Statements
  Summary
  
    
    For the first six months of 2005, average mortgage loans
increased $15.8 million from the previous year, due to the
purchase of loans of $50.8 million during the second half of
2004.
    
    The yield on earning assets increased for the six months
ended June 30, 2005 to 4.94% from 4.77%. The downward
repricing of adjustable rate mortgages combined with the lower
replacement yield on new mortgage assets combined to decrease
the return on mortgage-related assets. However, the overall
yield increased since WPCC held a higher percentage of these
higher yielding mortgage loans than a year ago.
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WEBSTER PREFERRED CAPITAL CORPORATION
 Results of Operations
   Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Three Months EndedJune 30, 2005
    
    
    
    
    
    
    
    
    
    
    June 30, 2004Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Average(In thousands)
    
    Balance
    
    
    Income
    
    
    Yield
    
    
    Balance
    
    
    Income
    
    
    YieldMortgage loans
    
    $
    447,518
    
    
    
    5,934
    
    
    
    5.30
    %
    
    $
    463,468
    
    
    
    6,122
    
    
    
    5.28
    %Mortgage-backed securities (a)
    
    
    19,231
    
    
    
    217
    
    
    
    4.51
    
    
    
    32,881
    
    
    
    399
    
    
    
    4.85Short-term investments
    
    
    78,813
    
    
    
    581
    
    
    
    2.95
    
    
    
    65,451
    
    
    
    166
    
    
    
    1.01Total
    
    $
    545,562
    
    
    
    6,732
    
    
    
    4.94
    %
    
    $
    561,800
    
    
    
    6,687
    
    
    
    4.76
    %
 Six Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30, 2005
    
    
    
    
    
    
    
    
    
    
    June 30, 2004Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Average(In thousands)
    
    Balance
    
    
    Income
    
    
    Yield
    
    
    Balance
    
    
    Income
    
    
    YieldMortgage loans
    
    $
    459,371
    
    
    
    12,081
    
    
    
    5.26
    %
    
    $
    443,558
    
    
    
    11,778
    
    
    
    5.31
    %Mortgage-backed securities (a)
    
    
    19,722
    
    
    
    449
    
    
    
    4.55
    
    
    
    37,871
    
    
    
    968
    
    
    
    5.11Short-term investments
    
    
    63,051
    
    
    
    872
    
    
    
    2.77
    
    
    
    67,728
    
    
    
    343
    
    
    
    1.01Total
    
    $
    542,144
    
    
    
    13,402
    
    
    
    4.94
    %
    
    $
    549,157
    
    
    
    13,089
    
    
    
    4.77
    %
 
 (a)
    
    Unrealized net gains (losses) are excluded from average balance   10




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WEBSTER PREFERRED CAPITAL CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS (continued)
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005 v. 2004
    
    
    
    
    
    
    
    
    
    
    2005 v. 2004Increase (Decrease) due to
    
    
    Increase (Decrease) due to(In thousands)
    
    Rate
    
    
    Volume
    
    
    Total
    
    
    Rate
    
    
    Volume
    
    
    TotalInterest on interest-earning assets:Mortgage loans
    
    $
    23
    
    
    
    (211
    )
    
    
    (188
    )
    
    $
    (114
    )
    
    
    417
    
    
    
    303Mortgage-backed securities
    
    
    (26
    )
    
    
    (156
    )
    
    
    (182
    )
    
    
    (96
    )
    
    
    (423
    )
    
    
    (519
    )Short-term investments
    
    
    375
    
    
    
    40
    
    
    
    415
    
    
    
    554
    
    
    
    (25
    )
    
    
    529Net change in net interest income
    
    $
    372
    
    
    
    (327
    )
    
    
    45
    
    
    $
    344
    
    
    
    (31
    )
    
    
    313
  Changes in Financial Condition
  Asset Quality
   (In thousands)
    
    June 30, 2005
    
    
    December 31, 2004Loans accounted for on a nonaccrual basis:Residential variable-rate loans
    
    $
    
    
    
    
    179Total nonperforming loans and assets
    
    $
    
    
    
    
    179
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WEBSTER PREFERRED CAPITAL CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS (continued)
 Liquidity and Capital Resources
    Asset/Liability Management
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WEBSTER PREFERRED CAPITAL CORPORATION
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Estimated Market Value Impact(In thousands)
    
    Amortized Cost
    
    
    Market Value
    
    
    -100 BP
    
    
    +100 BPAt June 30, 2005Interest sensitive assets:Mortgage-backed securities
    
    $
    18,889
    
    
    
    18,832
    
    
    
    373
    
    
    
    (622
    )Variable-rate residential loans
    
    
    323,257
    
    
    
    328,106
    
    
    
    10,393
    
    
    
    (4,440
    )Fixed-rate residential loans
    
    
    109,281
    
    
    
    110,374
    
    
    
    1,690
    
    
    
    (484
    )Total
    
    
    
    
    
    
    
    
    
    $
    12,456
    
    
    
    (5,546
    )At December 31, 2004Interest sensitive assets:Mortgage-backed securities
    
    $
    20,688
    
    
    
    20,709
    
    
    
    524
    
    
    
    (664
    )Variable-rate residential loans
    
    
    125,924
    
    
    
    125,100
    
    
    
    1,635
    
    
    
    (1,878
    )Fixed-rate residential loans
    
    
    348,895
    
    
    
    354,998
    
    
    
    6,929
    
    
    
    (12,522
    )Total
    
    
    
    
    
    
    
    
    
    $
    9,088
    
    
    
    (15,064
    )
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WEBSTER PREFERRED CAPITAL CORPORATION
 
 Item 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  
    
    William T, Bromage was elected to serve as Chairman.
    
    William T. Bromage and William J. Healy were elected to serve on the Audit committee.
  Item 5. Other Information
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Item 6. Exhibits
 Exhibit Number
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of
Webster Preferred Capital Corporation (the Company)
(incorporated herein by reference from Exhibit 3.1 to the
Companys Annual Report on Form 10-K for the fiscal year
ended December 31, 1997).3.2
    
    Certificate of Amendment for the Series B 8.625% Cumulative
Redeemable Preferred Stock of the Company (incorporated
herein by reference from Exhibit 3.3 to the Companys
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997).3.3
    
    Amended and Restated By-Laws of the Company (incorporated herein by
reference from Exhibit 3.4 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 1997).4.1
    
    Specimen of certificate representing the Series B 8.625% Cumulative
Redeemable Preferred Stock of the Company (incorporated herein by
reference from Exhibit 4.2 to the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 1997).31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, signed by the Companys Principal Executive Officer.31.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, signed by the Companys Principal Financial Officer.32.1
    
    Written Statement pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by the Companys Principal Executive Officer.32.2
    
    Written Statement pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, signed by the Companys Principal Financial Officer.
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SIGNATURE
  WEBSTER PREFERRED CAPITAL CORPORATIONRegistrantDate: August 8, 2005BY:
    
    /s/ Gregory S. MadarGregory S. Madar,Senior Vice President,Treasurer & Assistant SecretaryPrincipal Financial and Accounting Officer
 16