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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 March 31, 2006
 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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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WEBSTER PREFERRED CAPITAL CORPORATION
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1.Interim Financial Statements (unaudited):Statements of Condition at March 31, 2006 and December 31, 2005
    
    
    3Statements of Income for the Three Months ended March 31, 2006 and 2005
    
    
    4Statements of Comprehensive Income for the Three Months ended March 31, 2006 and 2005
    
    
    4Statements of Cash Flows for the Three Months ended March 31, 2006 and 2005
    
    
    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
    
    
    12Item 4.Controls and Procedures
    
    
    13PART II  OTHER INFORMATION
    
    
    13SIGNATURE
    
    
    15EXHIBITS
    
    
    16EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
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Item 1. Interim Financial Statements
 WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF CONDITION
(unaudited)
 (Dollars in thousands, except share and per share data)
    
    March 31, 2006
    
    December 31, 2005AssetsCash
    
    $
    5,668
    
    
    
    3,402Interest-bearing deposits
    
    
    93,000
    
    
    
    77,000Mortgage-backed securities available for sale, at fair value (Note 2)
    
    
    39,968
    
    
    
    41,335Residential mortgage loans, net (Note 3)
    
    
    376,582
    
    
    
    388,136Accrued interest receivable
    
    
    1,954
    
    
    
    1,784Prepaid expenses and other assets
    
    
    199
    
    
    
    104Total assets
    
    $
    517,371
    
    
    
    511,761Liabilities and Shareholders EquityAccrued dividends payable
    
    $
    180
    
    
    
    180Accrued expenses and other liabilities
    
    
    130
    
    
    
    10Total liabilities
    
    
    310
    
    
    
    190Shareholders 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
    
    
    513,799
    
    
    
    513,799Retained earnings (distributions in excess of accumulated earnings)
    
    
    2,992
    
    
    
    (2,729
    )Accumulated other comprehensive loss
    
    
    (731
    )
    
    
    (500
    )Total shareholders equity
    
    
    517,061
    
    
    
    511,571Total liabilities and shareholders equity
    
    $
    517,371
    
    
    
    511,761
  3




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##### Table of Contents



WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF INCOME
(unaudited)
 Three Months EndedMarch 31,(Dollars in thousands, except per share data)
    
    2006
    
    
    2005Interest income:Loans (Note 4)
    
    $
    5,195
    
    
    
    6,147Securities and short-term investments
    
    
    1,452
    
    
    
    523Total interest income
    
    
    6,647
    
    
    
    6,670Noninterest expense:Advisory fee to parent
    
    
    49
    
    
    
    49Other
    
    
    30
    
    
    
    8Total noninterest expense
    
    
    79
    
    
    
    57Net income
    
    
    6,568
    
    
    
    6,613Preferred stock dividends
    
    
    216
    
    
    
    216Net income available to common shareholder
    
    $
    6,352
    
    
    
    6,397Net income per common share:Basic and diluted
    
    $
    63,520
    
    
    
    63,970
 
 STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 Three Months EndedMarch 31,(In thousands)
    
    2006
    
    
    2005Net income
    
    $
    6,568
    
    
    
    6,613Other comprehensive loss:Unrealized net holding loss on securities
available for sale arising during the period
    
    
    (231
    )
    
    
    (317
    )Comprehensive income
    
    $
    6,337
    
    
    
    6,296
  4




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WEBSTER PREFERRED CAPITAL CORPORATION
 
 STATEMENTS OF CASH FLOWS
(unaudited)
 Three Months Ended March 31,(In thousands)
    
    2006
    
    2005Cash flow from operating activities:Net income
    
    $
    6,568
    
    
    
    6,613Adjustments to reconcile net income to net cash provided by
operating activities:Net amortization and accretion
    
    
    237
    
    
    
    232(Increase) decrease in accrued interest receivable
    
    
    (170
    )
    
    
    35Increase in accrued expenses and other liabilities
    
    
    120
    
    
    
    45Increase in prepaid expenses and other assets
    
    
    (95
    )
    
    
    (494
    )Net cash provided by operating activities
    
    
    6,660
    
    
    
    6,431Cash flow from investing activities:Principal repayments on mortgage-backed securities
    
    
    1,136
    
    
    
    767Principal repayments of loans
    
    
    11,317
    
    
    
    23,270Increase in short-term investments
    
    
    (16,000
    )
    
    
    (38,500
    )Net cash used by investing activities
    
    
    (3,547
    )
    
    
    (14,463
    )Cash flow from financing activities:Dividends paid on common and preferred stock
    
    
    (847
    )
    
    
    (915
    )Increase (decrease) in cash and cash equivalents
    
    
    2,266
    
    
    
    (8,947
    )Cash and cash equivalents at beginning of period
    
    
    3,402
    
    
    
    10,325Cash and cash equivalents at end of period
    
    $
    5,668
    
    
    
    1,378
  5




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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 ValueMarch 31, 2006Available for Sale Portfolio
    
    $
    40,699
    
    
    
    
    
    
    
    (731
    )
    
    
    39,968December 31, 2005Available for Sale Portfolio
    
    $
    41,835
    
    
    
    
    
    
    
    (500
    )
    
    
    41,335
   Less Than Twelve Months
    
    Twelve Months or Longer
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    Unrealized(In thousands)
    
    Value
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    LossesAvailable for Sale:Mortgage-backed securities
    
    $
    24,004
    
    
    
    (118
    )
    
    
    15,964
    
    
    
    (613
    )
    
    
    39,968
    
    
    
    (731
    )
   6




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WEBSTER PREFERRED CAPITAL CORPORATION
 NOTES TO INTERIM FINANCIAL STATEMENTS
 NOTE 3: RESIDENTIAL MORTGAGE LOANS, NET
  (In thousands)
    
    March 31, 2006
    
    December 31, 2005Fixed-rate loans:15 yr. loans
    
    $
    48,481
    
    
    
    50,84220 yr. loans
    
    
    7,016
    
    
    
    7,21825 yr. loans
    
    
    3,692
    
    
    
    3,71830 yr. loans
    
    
    229,125
    
    
    
    232,742Total fixed-rate loans
    
    
    288,314
    
    
    
    294,520Variable-rate loans:15 yr. loans
    
    
    570
    
    
    
    66620 yr. loans
    
    
    704
    
    
    
    1,24125 yr. loans
    
    
    1,160
    
    
    
    1,18330 yr. loans
    
    
    85,389
    
    
    
    89,951Total variable-rate loans
    
    
    87,823
    
    
    
    93,041Total residential mortgage loans
    
    
    376,137
    
    
    
    387,561Premiums and deferred costs on loans, net
    
    
    2,467
    
    
    
    2,597Less: allowance for loan losses
    
    
    (2,022
    )
    
    
    (2,022
    )Residential mortgage loans, net
    
    $
    376,582
    
    
    
    388,136
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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 three months of 2006, average loans
decreased $87.2 million, short term investments increased
$39.2 million and average securities increased $20.4 million
compared to the first three months of 2005.
    
    The yield on earning assets for the three months ended
March 31, 2006 was 5.20% compared to 4.95% for the same period
in 2005.
 Changes in Financial Condition
  Asset Quality
  9




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WEBSTER PREFERRED CAPITAL CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS
  March 31,
    
    December 31,(In thousands)
    
    2006
    
    2005Loans accounted for on a nonaccrual basis:Residential variable-rate loans
    
    $
    231
    
    
    $
    97Total nonperforming loans and assets
    
    $
    231
    
    
    $
    97
  Liquidity and Capital Resources
    Asset/Liability Management
  10




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WEBSTER PREFERRED CAPITAL CORPORATION
 MANAGEMENTS DISCUSSION AND ANALYSIS
 Results of Operations
    Three Months Ended
    
    Three Months EndedMarch 31, 2006
    
    March 31, 2005Average
    
    Interest
    
    Average
    
    Average
    
    Interest
    
    Average(In thousands)
    
    Balance
    
    Income
    
    Yield
    
    Balance
    
    Income
    
    YieldMortgage loans
    
    $
    384,188
    
    
    
    5,195
    
    
    
    5.41
    %
    
    $
    471,352
    
    
    
    6,147
    
    
    
    5.22
    %Mortgage-backed securities (a)
    
    
    40,616
    
    
    
    493
    
    
    
    4.86
    
    
    
    20,219
    
    
    
    232
    
    
    
    4.59Short-term investments
    
    
    86,344
    
    
    
    959
    
    
    
    4.44
    
    
    
    47,114
    
    
    
    291
    
    
    
    2.47Total
    
    $
    511,148
    
    
    
    6,647
    
    
    
    5.20
    %
    
    $
    538,685
    
    
    
    6,670
    
    
    
    4.95
    %
 (a)
    
    Unrealized net gains and losses are excluded from the average balance.
  Three Months Ended March 31,2006 v. 2005Increase (Decrease) due to(In thousands)
    
    Rate
    
    Volume
    
    TotalInterest on interest-earning assets:Mortgage loans
    
    $
    1,353
    
    
    
    (2,305
    )
    
    
    (952
    )Mortgage-backed securities
    
    
    14
    
    
    
    247
    
    
    
    261Short-term investments
    
    
    327
    
    
    
    341
    
    
    
    668Net change in net interest income
    
    $
    1,694
    
    
    
    (1,717
    )
    
    
    (23
    )
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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 March 31, 2006Interest sensitive assets:Mortgage-backed securities
    
    $
    40,699
    
    
    
    39,968
    
    
    
    523
    
    
    
    (544
    )Variable-rate residential loans
    
    
    87,823
    
    
    
    88,896
    
    
    
    1,369
    
    
    
    (1,606
    )Fixed-rate residential loans
    
    
    288,314
    
    
    
    282,529
    
    
    
    10,057
    
    
    
    (12,378
    )Total
    
    
    
    
    
    
    
    
    
    $
    11,949
    
    
    
    (14,528
    )At December 31, 2005Interest sensitive assets:Mortgage-backed securities
    
    $
    41,835
    
    
    
    41,335
    
    
    
    521
    
    
    
    (580
    )Variable-rate residential loans
    
    
    93,041
    
    
    
    92,557
    
    
    
    1,168
    
    
    
    (1,262
    )Fixed-rate residential loans
    
    
    294,520
    
    
    
    293,051
    
    
    
    8,892
    
    
    
    (12,363
    )Total
    
    
    
    
    
    
    
    
    
    $
    10,581
    
    
    
    (14,205
    )
     12




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WEBSTER PREFERRED CAPITAL CORPORATION
 
 Item 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 1a. Risk Factors
  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
  13




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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: May 11, 2006BY:
    
    /s/ Gregory S. MadarGregory S. Madar,Senior Vice President,Treasurer & Assistant SecretaryPrincipal Financial and Accounting Officer
 15