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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 September 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
incorporation or organization)
    
    (I. R. S. Employer
Identification Number)145 Bank Street, Waterbury, Connecticut
    
    06702(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o þ
 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 September 30, 2005 and December 31, 2004
    
    
    3Statements of Income for the three and nine months ended September 30, 2005 and 2004
    
    
    4Statements of Comprehensive Income for the three and nine months ended
September 30, 2005 and 2004
    
    
    4Statements of Cash Flows for the nine months ended September 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
    
    
    .
    
    
    
    16EXHIBITS
    
    
    .
    
    
    
    17EX-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)
    
    September 30, 2005
    
    December 31, 2004AssetsCash
    
    $
    1,442
    
    
    
    10,325Short-term investments
    
    
    108,000
    
    
    
    29,000Mortgage-backed securities available for sale, at fair value (Note 2)
    
    
    17,649
    
    
    
    20,709Residential mortgage loans (Note 3)
    
    
    410,113
    
    
    
    475,879Accrued interest receivable
    
    
    50
    
    
    
    280Prepaid expenses and other assets
    
    
    1,217
    
    
    
    1,153Total assets
    
    $
    538,471
    
    
    
    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 shares

Issued and outstanding - 100 shares
    
    
    1
    
    
    
    1Paid-in capital
    
    
    538,799
    
    
    
    538,799Distributions in excess of accumulated earnings
    
    
    (1,247
    )
    
    
    (2,661
    )Accumulated other comprehensive (loss) income
    
    
    (274
    )
    
    
    21Total shareholders equity
    
    
    538,279
    
    
    
    537,160Total liabilities and shareholders equity
    
    $
    538,471
    
    
    
    537,346
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##### Table of Contents



WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF INCOME
(unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(Dollars in thousands, except per share data)
    
    2005
    
    2004
    
    2005
    
    2004Interest income:Loans (Note 4)
    
    $
    5,609
    
    
    
    6,167
    
    
    $
    17,690
    
    
    
    17,945Securities and short-term investments
    
    
    1,084
    
    
    
    499
    
    
    
    2,405
    
    
    
    1,810Total interest income
    
    
    6,693
    
    
    
    6,666
    
    
    
    20,095
    
    
    
    19,755Non interest income:Gain on sale of securities
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    536Noninterest expense:Advisory fee to parent
    
    
    37
    
    
    
    48
    
    
    
    146
    
    
    
    146Other
    
    
    43
    
    
    
    10
    
    
    
    70
    
    
    
    176Total noninterest expense
    
    
    80
    
    
    
    58
    
    
    
    216
    
    
    
    322Net income
    
    
    6,613
    
    
    
    6,792
    
    
    
    19,879
    
    
    
    19,969Preferred stock dividends
    
    
    216
    
    
    
    216
    
    
    
    647
    
    
    
    647Net income available to common shareholder
    
    $
    6,397
    
    
    
    6,576
    
    
    $
    19,232
    
    
    
    19,322Net income per common share:Basic and diluted
    
    $
    63,970
    
    
    
    65,760
    
    
    $
    192,320
    
    
    
    193,220
 
 STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(In thousands)
    
    2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    6,613
    
    
    
    6,792
    
    
    $
    19,879
    
    
    
    19,969Other comprehensive (loss) income:Unrealized net holding (loss) gain on securities
available for sale arising during the period
    
    
    (210
    )
    
    
    284
    
    
    
    (295
    )
    
    
    (402
    )Reclassification adjustment for
gains included in net income
    
    
    
    
    
    
    (184
    )
    
    
    
    
    
    
    (536
    )Other comprehensive (loss) income
    
    
    (210
    )
    
    
    100
    
    
    
    (295
    )
    
    
    (938
    )Comprehensive income
    
    $
    6,403
    
    
    
    6,892
    
    
    $
    19,584
    
    
    
    19,031
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WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF CASH FLOWS
(unaudited)
 Nine Months Ended September 30,(In thousands)
    
    2005
    
    2004Cash flow from operating activities:Net income
    
    $
    19,879
    
    
    
    19,969Adjustments to reconcile net income to net cash provided by
operating activities:Gain on sale of securities
    
    
    
    
    
    
    (536
    )Net amortization and accretion
    
    
    620
    
    
    
    405Decrease in accrued interest receivable
    
    
    230
    
    
    
    123Increase in accrued liabilities
    
    
    6
    
    
    
    6(Increase) decrease in prepaid expenses and other assets
    
    
    (64
    )
    
    
    94Net cash provided by operating activities
    
    
    20,671
    
    
    
    20,061Cash flow from investing activities:Principal repayments on mortgage-backed securities
    
    
    2,710
    
    
    
    8,532Purchase of loans
    
    
    
    
    
    
    (95,121
    )Principal repayments of loans
    
    
    65,201
    
    
    
    75,767Increase in short-term investments
    
    
    (79,000
    )
    
    
    (13,000
    )Proceeds from sale of mortgage-backed securities
    
    
    
    
    
    
    15,600Proceeds of other real estate sold
    
    
    
    
    
    
    95Net cash used by investing activities
    
    
    (11,089
    )
    
    
    (8,127
    )Cash flow from financing activities:Dividends paid on common and preferred stock
    
    
    (18,465
    )
    
    
    (18,480
    )Decrease in cash and cash equivalents
    
    
    (8,883
    )
    
    
    (6,546
    )Cash and cash equivalents at beginning of period
    
    
    10,325
    
    
    
    11,976Cash and cash equivalents at end of period
    
    $
    1,442
    
    
    
    5,430Supplemental 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 ValueSeptember 30, 2005Available for Sale Portfolio
    
    $
    17,923
    
    
    
    
    
    
    
    (274
    )
    
    
    17,649December 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)
    
    September 30, 2005
    
    December 31, 2004Fixed-rate loans:15 yr. loans
    
    $
    53,452
    
    
    
    63,74720 yr. loans
    
    
    7,291
    
    
    
    8,08325 yr. loans
    
    
    3,744
    
    
    
    4,03730 yr. loans
    
    
    243,429
    
    
    
    273,028Total fixed-rate loans
    
    
    307,916
    
    
    
    348,895Variable-rate loans:15 yr. loans
    
    
    734
    
    
    
    1,00920 yr. loans
    
    
    2,857
    
    
    
    5,24625 yr. loans
    
    
    1,306
    
    
    
    1,38230 yr. loans
    
    
    96,805
    
    
    
    118,287Total variable-rate loans
    
    
    101,702
    
    
    
    125,924Total residential mortgage loans
    
    
    409,618
    
    
    
    474,819Premiums and deferred costs on loans, net
    
    
    2,517
    
    
    
    3,082Less: allowance for loan losses
    
    
    (2,022
    )
    
    
    (2,022
    )Residential mortgage loans
    
    $
    410,113
    
    
    
    475,879
   Nine Months EndedSeptember 30,(In thousands)
    
    2005
    
    2004Balance at beginning of period
    
    $
    2,022
    
    
    
    2,106Charge-offs
    
    
    
    
    
    
    84Balance 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
  
    
    The primary cause of the decline in net income is that
included in the three and nine months of 2004 results were
$184,000 and $536,000 of gains on sales of securities. There
was no corresponding gains in the 2005 results.
    
    Total interest income increased slightly in both the
three and nine month periods of 2005 due to the increase in
the yield on short-term investments. The overall yield on
earning assets increased for the nine month period to 4.95%
from 4.79%. 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.
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WEBSTER PREFERRED CAPITAL CORPORATION
 Results of Operations
   Three Months Ended
    
    
    Three Months EndedSeptember 30, 2005
    
    
    September 30, 2004Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Average(In thousands)
    
    Balance
    
    
    Income
    
    
    Yield
    
    
    Balance
    
    
    Income
    
    
    YieldMortgage loans
    
    $
    425,616
    
    
    
    5,609
    
    
    
    5.27
    %
    
    $
    465,071
    
    
    
    6,167
    
    
    
    5.30
    %Mortgage-backed securities (a)
    
    
    17,924
    
    
    
    205
    
    
    
    4.57
    
    
    
    23,605
    
    
    
    281
    
    
    
    4.76Short-term investments
    
    
    101,946
    
    
    
    879
    
    
    
    3.45
    
    
    
    62,043
    
    
    
    218
    
    
    
    1.41Total
    
    $
    545,486
    
    
    
    6,693
    
    
    
    4.91
    %
    
    $
    550,719
    
    
    
    6,666
    
    
    
    4.84
    %
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2004Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Average(In thousands)
    
    Balance
    
    
    Income
    
    
    Yield
    
    
    Balance
    
    
    Income
    
    
    YieldMortgage loans
    
    $
    447,995
    
    
    
    17,690
    
    
    
    5.27
    %
    
    $
    450,768
    
    
    
    17,945
    
    
    
    5.31
    %Mortgage-backed securities (a)
    
    
    18,985
    
    
    
    654
    
    
    
    4.59
    
    
    
    33,081
    
    
    
    1,249
    
    
    
    5.03Short-term investments
    
    
    76,158
    
    
    
    1,751
    
    
    
    3.07
    
    
    
    65,819
    
    
    
    561
    
    
    
    1.14Total
    
    $
    543,138
    
    
    
    20,095
    
    
    
    4.93
    %
    
    $
    549,668
    
    
    
    19,755
    
    
    
    4.79
    %
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WEBSTER PREFERRED CAPITAL CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS (continued)
  Three Months Ended September 30,
    
    
    Nine Months Ended September 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
    
    $
    (14
    )
    
    
    (544
    )
    
    
    (558
    )
    
    $
    (68
    )
    
    
    (187
    )
    
    
    (255
    )Mortgage-backed securities
    
    
    (11
    )
    
    
    (65
    )
    
    
    (76
    )
    
    
    (102
    )
    
    
    (493
    )
    
    
    (595
    )Short-term investments
    
    
    458
    
    
    
    203
    
    
    
    661
    
    
    
    1,037
    
    
    
    153
    
    
    
    1,190Net change in net interest income
    
    $
    433
    
    
    
    (406
    )
    
    
    27
    
    
    $
    867
    
    
    
    (527
    )
    
    
    340
  Changes in Financial Condition
  Asset Quality
   (In thousands)
    
    September 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 September 30, 2005Interest sensitive assets:Mortgage-backed securities
    
    $
    17,923
    
    
    
    17,649
    
    
    
    486
    
    
    
    (566
    )Variable-rate residential loans
    
    
    101,702
    
    
    
    101,857
    
    
    
    1,277
    
    
    
    (1,491
    )Fixed-rate residential loans
    
    
    307,916
    
    
    
    308,764
    
    
    
    8,354
    
    
    
    (12,243
    )Total
    
    
    
    
    
    
    
    
    
    $
    10,117
    
    
    
    (14,300
    )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
  Item 5. Other Information
  14




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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: November 7, 2005BY:
    
    /s/ Gregory S. MadarGregory S. Madar,Senior Vice President,Treasurer & Assistant SecretaryPrincipal Financial and Accounting Officer
 16