##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2007

OR



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

Commission File Number: 0-23513



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WEBSTER PREFERRED CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                          
|-------------------------------------------------------------- |  | -----------------------------------------
|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)

Registrants telephone number, including area code: (203) 465-4366



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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.    x  Yes ̈No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a
non-accelerated filer.

Large accelerated filer ̈Accelerated filer ̈Non-accelerated
filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). ̈Yes    x  No

The number of shares outstanding of each of the registrants classes of common stock, as of April 30, 2007 was: 100 shares.



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##### Table of Contents

WEBSTER PREFERRED CAPITAL CORPORATION

INDEX



|                               |  |                                                                                       |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                       |  | Page
|                               | 
|PART I - FINANCIAL INFORMATION |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Interim Financial Statements (unaudited):                                             |  |     
|                               |  |                                                                                      
|                               |  | Statements of Condition at March 31, 2007 and December 31, 2006                       |  | 3   
|                               |  |                                                                                      
|                               |  | Statements of Income for the Three Months ended March 31, 2007 and 2006               |  | 4   
|                               |  |                                                                                      
|                               |  | Statements of Comprehensive Income for the Three Months ended March 31, 2007 and 2006 |  | 4   
|                               |  |                                                                                      
|                               |  | Statements of Cash Flows for the Three Months ended March 31, 2007 and 2006           |  | 5   
|                               |  |                                                                                      
|                               |  | Notes to the Interim Financial Statements                                             |  | 6   
|                               |  |                                                                                      
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 9   
|                               |  |                                                                                      
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 12  
|                               |  |                                                                                      
|Item 4.                        |  | Controls and Procedures                                                               |  | 13  
|                               | 
|PART II  OTHER INFORMATION    |  | 13                                                                                   
|                               |  |                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                     |  | 13  
|                               |  |                                                                                      
|Item 1A.                       |  | Risk Factors                                                                          |  | 13  
|                               |  |                                                                                      
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 13  
|                               |  |                                                                                      
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |  | 13  
|                               |  |                                                                                      
|Item 4.                        |  | Submission of Matters to a Vote on Security Holders                                   |  | 13  
|                               |  |                                                                                      
|Item 5.                        |  | Other Information                                                                     |  | 13  
|                               |  |                                                                                      
|Item 6.                        |  | Exhibits                                                                              |  | 14  
|                               | 
|SIGNATURE                      |  | 15                                                                                   
|                               | 
|EXHIBITS                       |  | 16                                                                                   



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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 31,2007 |         | December 31,2006 |  
|Assets                                                                                                                  |  |               |         |                  |   |         |  
|                                                                                                                        |  |              
|Cash                                                                                                                    |  | $             | 3,060   |                  | $ | 56,356  |  
|Interest-bearing deposits                                                                                               |  |               | 40,000  |                  |   | 80,000  |  
|Residential mortgage loans, net                                                                                         |  |               | 311,723 |                  |   | 372,201 |  
|Accrued interest receivable                                                                                             |  |               | 1,350   |                  |   | 1,859   |  
|Prepaid expenses and other assets                                                                                       |  |               | 25      |                  |   | 1,574   |  
|                                                                                                                        |  |               |         |                  |   |         |  
|Total assets                                                                                                            |  | $             | 356,158 |                  | $ | 511,990 |  
|                                                                                                                        |  |               |         |                  |   |         |  
|                                                                                                                        |  |              
|Liabilities and Shareholders Equity                                                                                    |  |               |         |                  |   |         |  
|                                                                                                                        |  |              
|Accrued dividends payable                                                                                               |  | $             | 180     |                  | $ | 180     |  
|Accrued expenses and other liabilities                                                                                  |  |               | 86      |                  |   | 36      |  
|                                                                                                                        |  |               |         |                  |   |         |  
|Total liabilities                                                                                                       |  |               | 266     |                  |   | 216     |  
|                                                                                                                        |  |               |         |                  |   |         |  
|                                                                                                                        |  |              
|Shareholders Equity                                                                                                    |  |               |         |                  |   |         |  
|Series 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   |                  |   | 1,000   |  
|Common stock, par value $.01 per share:                                                                                 |  |               |         |                  |   |         |  
|Authorized  1,000 shares                                                                                               |  |               |         |                  |   |         |  
|Issued and outstanding - 100 shares                                                                                     |  |               | 1       |                  |   | 1       |  
|Paid-in capital                                                                                                         |  |               | 353,799 |                  |   | 513,799 |  
|Retained earnings (distributions in excess of accumulated earnings)                                                     |  |               | 1,092   |                  |   | (3,026  | )
|                                                                                                                        |  |               |         |                  |   |         |  
|Total shareholders equity                                                                                              |  |               | 355,892 |                  |   | 511,774 |  
|                                                                                                                        |  |               |         |                  |   |         |  
|Total liabilities and shareholders equity                                                                              |  | $             | 356,158 |                  | $ | 511,990 |  
|                                                                                                                        |  |               |         |                  |   |         |  

See accompanying notes to interim financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

STATEMENTS OF INCOME

(unaudited)



|                                              |  |                             |        |      |   |       
|--------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                                              |  | Three Months EndedMarch 31,
|(Dollars in thousands, except per share data) |  | 2007                        |        | 2006
|Interest income:                              |  |                             |        |      |   |       
|Loans                                         |  | $                           | 4,622  |      | $ | 5,195 
|Securities and short-term investments         |  |                             | 700    |      |   | 1,452 
|                                              |  |                             |        |      |   |       
|Total interest income                         |  |                             | 5,322  |      |   | 6,647 
|                                              |  |                             |        |      |   |       
|Noninterest expense:                          |  |                             |        |      |   |       
|Advisory fee to parent                        |  |                             | 51     |      |   | 49    
|Other                                         |  |                             | 27     |      |   | 30    
|                                              |  |                             |        |      |   |       
|Total noninterest expense                     |  |                             | 78     |      |   | 79    
|                                              |  |                             |        |      |   |       
|Net income                                    |  |                             | 5,244  |      |   | 6,568 
|Preferred stock dividends                     |  |                             | 216    |      |   | 216   
|                                              |  |                             |        |      |   |       
|Net income available to common shareholder    |  | $                           | 5,028  |      | $ | 6,352 
|                                              |  |                             |        |      |   |       
|Net income per common share:                  |  |                             |        |      |   |       
|Basic                                         |  | $                           | 50,280 |      | $ | 63,520

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)



|                                                                                       |  |                             |       |      |   |       |  
|-------------------------------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | ----- | -
|                                                                                       |  | Three Months EndedMarch 31, |      
|(In thousands)                                                                         |  | 2007                        |       | 2006 |  
|Net income                                                                             |  | $                           | 5,244 |      | $ | 6,568 |  
|                                                                                       |  |                            
|Other comprehensive loss:                                                              |  |                             |       |      |   |       |  
|Unrealized net holding loss on securities available for sale arising during the period |  |                             |      |      |   | (231  | )
|                                                                                       |  |                             |       |      |   |       |  
|Comprehensive income                                                                   |  | $                           | 5,244 |      | $ | 6,337 |  
|                                                                                       |  |                             |       |      |   |       |  

See accompanying notes to interim financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                  |  |                             |          |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months EndedMarch 31, |         
|(In thousands)                                                                    |  | 2007                        |          |   | 2006 |  
|Cash flow from operating activities:                                              |  |                             |          |   |      |   |         |  
|Net income                                                                        |  | $                           | 5,244    |   |      | $ | 6,568   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |          |   |      |   |         |  
|Net amortization and accretion                                                    |  |                             | 50       |   |      |   | 237     |  
|Decrease (increase) in accrued interest receivable                                |  |                             | 509      |   |      |   | (170    | )
|Increase in accrued expenses and other liabilities                                |  |                             | 50       |   |      |   | 120     |  
|Decrease (increase) in prepaid expenses and other assets                          |  |                             | 1,549    |   |      |   | (95     | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 7,402    |   |      |   | 6,660   |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Cash flow from investing activities:                                              |  |                             |          |   |      |   |         |  
|Principal repayments on mortgage-backed securities                                |  |                             |         |   |      |   | 1,136   |  
|Net decrease in residential mortgage loans                                        |  |                             | 60,428   |   |      |   | 11,317  |  
|Net decrease (increase) in short-term investments                                 |  |                             | 40,000   |   |      |   | (16,000 | )
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash provided by (used in) investing activities                               |  |                             | 100,428  |   |      |   | (3,547  | )
|Cash flow from financing activities:                                              |  |                             |          |   |      |   |         |  
|Dividends paid on common and preferred stock                                      |  |                             | (1,126   | ) |      |   | (847    | )
|Return of capital dividends                                                       |  |                             | (160,000 | ) |      |   |        |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Net cash used in financing activities                                             |  |                             | (161,126 | ) |      |   | (847    | )
|                                                                                  |  |                             |          |   |      |   |         |  
|(Decrease) increase in cash and cash equivalents                                  |  |                             | (53,296  | ) |      |   | 2,266   |  
|Cash and cash equivalents at beginning of period                                  |  |                             | 56,356   |   |      |   | 3,402   |  
|                                                                                  |  |                             |          |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                           | 3,060    |   |      | $ | 5,668   |  
|                                                                                  |  |                             |          |   |      |   |         |  

See accompanying notes to interim financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

NOTES TO INTERIM FINANCIAL STATEMENTS

(unaudited)

---

NOTE 1: Basis Of Presentation

The accompanying interim financial statements represent the accounts of Webster Preferred Capital Corporation
(the Company or WPCC), a wholly-owned subsidiary of Webster Bank, and have been prepared in conformity with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Amounts in prior period financial statements are reclassified whenever necessary to conform to current period presentations. The
results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results which may be expected for the year as a whole.

The preparation of the Interim Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, as of the date of the Interim Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates. These Interim
Financial Statements should be read in conjunction with the audited Financial Statements and Notes thereto included in WPCCs Annual Report on Form 10-K for the year ended December 31, 2006.

NOTE 2: Residential Mortgage Loans, Net

Loans represent assets that
the Company acquires from Webster Bank at carrying value. While these transfers represent legal sales by Webster Bank, Webster Bank may not record the transfers as sales for GAAP accounting purposes because of its 100% direct ownership interest in
the Company. Accordingly, the Companys assets represent non-recourse receivables from Webster Bank which are fully collateralized by the underlying loans. The underlying loans are whole loans secured by first mortgages or deeds of trust on
single family (one-to-four unit) residential real estate properties located primarily in Connecticut. The assets continue to be classified as residential loans in the Companys financial statements because the returns on and the recoverability
of these non-recourse receivables are entirely dependent on the performance of the underlying residential loans.

Loans are stated at the principal amounts
outstanding, adjusted by deferred loan costs, and the allowance for loan losses. Interest on loans is credited to income as earned based on the rate applied to principal amounts outstanding. Interest which is more than 90 days past due is not
accrued. Such interest ultimately collected, if any, is credited to income in the period received. Deferred loan fees/costs on loans acquired are recognized in interest income over the lives of the loans using a method approximating the interest
method. Servicing fees paid to the Servicer are charged against interest income.



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A summary of the Companys residential mortgage loans by type and original maturity follows:



|                                          |  |                |         |   |                   |   |         |  
|----------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|(In thousands)                            |  | March 31, 2007 |         |   | December 31, 2006 |  
|Fixed-rate loans:                         |  |                |         |   |                   |   |         |  
|15 yr. loans                              |  | $              | 30,093  |   |                   | $ | 29,401  |  
|20 yr. loans                              |  |                | 7,575   |   |                   |   | 6,652   |  
|25 yr. loans                              |  |                | 3,544   |   |                   |   | 2,857   |  
|30 yr. loans                              |  |                | 144,290 |   |                   |   | 198,172 |  
|                                          |  |                |         |   |                   |   |         |  
|Total fixed-rate loans                    |  |                | 185,502 |   |                   |   | 237,082 |  
|                                          |  |                |         |   |                   |   |         |  
|Variable-rate loans:                      |  |                |         |   |                   |   |         |  
|15 yr. loans                              |  |                | 801     |   |                   |   | 877     |  
|20 yr. loans                              |  |                | 550     |   |                   |   | 559     |  
|25 yr. loans                              |  |                | 990     |   |                   |   | 1,012   |  
|30 yr. loans                              |  |                | 124,793 |   |                   |   | 133,265 |  
|                                          |  |                |         |   |                   |   |         |  
|Total variable-rate loans                 |  |                | 127,134 |   |                   |   | 135,713 |  
|                                          |  |                |         |   |                   |   |         |  
|Total residential mortgage loans          |  |                | 312,636 |   |                   |   | 372,795 |  
|                                          |  |               
|Premiums and deferred costs on loans, net |  |                | 1,109   |   |                   |   | 1,428   |  
|Less: allowance for loan losses           |  |                | (2,022  | ) |                   |   | (2,022  | )
|                                          |  |                |         |   |                   |   |         |  
|Residential mortgage loans, net           |  | $              | 311,723 |   |                   | $ | 372,201 |  
|                                          |  |                |         |   |                   |   |         |  

As of March 31, 2007, 59.3% of the Companys residential mortgage loans are fixed-rate loans and 40.7%
are adjustable-rate loans.

There has been no activity in the allowance for loan losses for the three months ended March 31, 2007 and 2006.



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WEBSTER PREFERRED CAPITAL CORPORATION

NOTES TO INTERIM FINANCIAL STATEMENTS(continued)

---

NOTE 3: Servicing

The mortgage loans owned by the Company are serviced by Webster Bank National Association
(Webster Bank) pursuant to the terms of a servicing agreement. Webster Bank in its role as servicer under the terms of the servicing agreement is herein referred to as the Servicer. The Servicer receives fees at an annual
rate of (i) 8 basis points for fixed-rate loan servicing and collection, (ii) 8 basis points for variable-rate loan servicing and collection and (iii) 5 basis points for all other services to be provided, as needed, in each case based
on the daily outstanding balances of all the Companys loans for which the Servicer is responsible. The services provided to the Company by Webster Bank are at the level of a sub-servicing agreement. As such, the Company estimates that the fees
paid to Webster Bank for servicing approximates fees that would be paid if the Company operated as an unaffiliated entity. Servicing fees paid for the three months ended March 31, 2007 were $66,000, compared to the three months ended
March 31, 2006 of $76,000. Servicing fees are netted against interest income in the Statements of Income, as they are considered a reduction in yield to the Company.

The Servicer is entitled to retain any late payment charges, prepayment fees, penalties and assumption fees collected in connection with mortgage loans serviced by it. The Servicer receives the benefit, if any,
derived from interest earned on collected principal and interest payments between the date of collection and the date of remittance to the Company and from interest earned on tax and insurance escrow funds with respect to mortgage loans serviced by
it. At the end of each calendar month, the Servicer is required to invoice the Company for all fees and charges due to the Servicer.

NOTE 4: Accounting
for Uncertainty in Income Taxes:

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (FIN 48). This statement clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position
to be recognized in a companys financial statements. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax
positions to be recognized in the financial statements. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006.

On January 1, 2007 the Company adopted the provisions of FIN 48 and there was no impact on the financial
statements. Upon the adoption of this standard, the Company performed an analysis of its tax positions to determine whether there may be uncertainties that require further analysis under FIN 48 based on their specific facts and circumstances. The
Company did not identify any tax positions that contained significant uncertainties at January 1, 2007 or March 31, 2007.

The Company has no
interest or penalties recognized in its statements of income for the three months ended March 31, 2007 and 2006, or in its balance sheets at March 31, 2007. Such interest and penalties would be classified as income taxes in its statement
of income.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31,
2003 through 2006, The Companys state income tax returns are also open to audit under the statute of limitations for three years ending December 31, 2003 through 2006.



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WEBSTER PREFERRED CAPITAL CORPORATION



|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

General

The Company is a subsidiary of Webster Bank and has elected to be treated as a real estate investment trust
(REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company will generally not be subject to federal income tax for as long as it maintains its qualification as a REIT, requiring among other things,
that it currently distribute to stockholders at least 90% of its REIT taxable income (not including capital gains and certain items of noncash income). The following discussion of the Companys financial condition and results of
operations should be read in conjunction with the Companys financial statements and other financial data included elsewhere herein and in conjunction with the Companys 2006 Annual Report on Form 10-K.

Forward Looking Statements

This report contains forward
looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Actual results, performance or developments may differ materially from those expressed or implied by such forward looking statements as a result of market
uncertainties and other factors. Some important factors that would cause actual results to differ from those in any forward looking statements include changes in interest rates and the general economy in the Connecticut market area where a
substantial portion of the real estate securing the Companys loans are located, legislative and regulatory changes, changes in tax laws and policies, and changes in accounting policies, principles or guidelines. Such developments could have an
adverse impact on the Companys financial position and results of operations. An example of such a forward looking statement is the Quantitative and Qualitative Disclosures About Market Risk section in Managements Discussion
and Analysis. Except as required by law, the Company does not undertake to update any such forward looking statements.

Summary

WPCCs total interest income of $5.3 million for the three months ended March 31, 2007 decreased $1.3 million or 20.0% compared to $6.6 million for the three
months ended March 31, 2006. The decrease in interest income is due to the following factors:



| |  |  | For the three months ended March 31, 2007, average loans decreased $52.1 million, short term investments decreased $33.0 million and average securities
decreased $40.6 million compared to the three months ended March 31, 2006.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The yield on earning assets for the three months ended March 31, 2007 was 5.52% compared to 5.20% for the three months ended March 31, 2006.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

Changes in Financial Condition

Total assets, consisting primarily of residential mortgage loans, were $356.2 million at March 31, 2007, a decrease of $155.8 million from $512.0 million at December 31, 2006. Residential mortgage loans decreased $60.5 million
primarily as a result of transfers to Webster Bank of $90.5 million, repayments of $20.4 million offset by acquisitions of $50.4 million. Interest bearing deposits decreased by $40.0 million and cash decreased by $53.3 million compared to
December 31, 2006. The resulting net cash was used to pay a $160 million return of capital dividend to Webster Bank in the first quarter of 2007. Shareholders equity decreased by $155.9 million to $355.9 million at March 31, 2007
from $511.8 million at December 31, 2006, due to the payment of $160 million in return of capital dividend and $1.1 million in common and preferred dividends partially offset by net income of $5.2 million for the first three months of 2007.

Loans represent assets that the Company acquires from Webster Bank at carrying value. While these transfers represent legal sales by Webster Bank, Webster
Bank may not record the transfers as sales for GAAP accounting purposes because of its 100% direct ownership interest in the Company. Accordingly, the Companys assets represent non-recourse receivables from Webster Bank which are fully
collateralized by the underlying loans. The underlying loans are whole loans secured by first mortgages or deeds of trust on single family (one-to-four unit) residential real estate properties located primarily in Connecticut. The assets continue to
be classified as residential loans in the Companys financial statements because the returns on and the recoverability of these non-recourse receivables are entirely dependent on the performance of the underlying residential loans.



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##### Table of Contents

WEBSTER PREFERRED CAPITAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS (continued)

---

Asset Quality

The Company maintains asset quality by investing in residential real estate loans that have been conservatively
underwritten and by aggressively managing nonperforming assets. At March 31, 2007 and December 31, 2006, residential real estate loans comprised the entire loan portfolio. All such residential loans were acquired from Webster Bank. The
Company also invests in short-term jumbo certificates of deposit.

The following table details the Companys nonperforming assets:



|                                     |  |               |     |                  |   |    
|------------------------------------ |  | ------------- | --- | ---------------- | - | ---
|(In thousands)                       |  | March 31,2007 |     | December 31,2006
|Nonaccrual loans                     |  | $             | 211 |                  | $ | 211
|                                     |  |               |     |                  |   |    
|Total nonperforming loans and assets |  | $             | 211 |                  | $ | 211
|                                     |  |               |     |                  |   |    

At March 31, 2007 and December 31, 2006, the allowance for loan losses was approximately $2.0 million.
Management believes that the allowance for loan losses is adequate to cover probable losses inherent in the current portfolio.

Liquidity and Capital
Resources

The primary sources of liquidity for the Company are principal and interest payments from the residential mortgage loans and
mortgage-backed securities portfolios. The primary uses of liquidity are acquisitions of residential mortgage loans and mortgage-backed securities and the payment of dividends on the common and preferred stock.

While scheduled loan amortization, maturing securities, short-term investments and securities repayments are predictable sources of funds, loan and mortgage-backed
security prepayments can vary greatly and are influenced by factors such as general interest rates, economic conditions and competition. One of the inherent risks of investing in loans and mortgage-backed securities is the possibility prepayments of
principal prior to maturity at prepayment rates different than those estimated at the time of purchase. This generally occurs because of changes in market interest rates.

In the unlikely event that principal and interest payments on its mortgage assets are insufficient to meet its operating needs, WPCC has the ability to raise additional funds. For example, WPCCs residential
mortgage loans are underwritten to meet secondary market requirements and could easily be sold or securitized as mortgage-backed securities and used as borrowing collateral, although the Company had no plans to do so at March 31, 2007 and
December 31, 2006.

Asset/Liability Management

The goal of the Companys asset/liability management policy is to manage interest-rate risk so as to maximize net interest income over time in changing interest rate environments while maintaining acceptable levels of risk. The Company
prepares estimates of the level of prepayments and the effect of such prepayments on the level of future earnings due to reinvestment of funds at rates different than those that currently exist. The Company is unable to predict future fluctuations
in interest rates. The market values of the Companys financial assets are sensitive to fluctuations in market interest rates. The market values of fixed-rate loans and mortgage-backed securities tend to decline in value as interest rates rise.
If interest rates decrease, the market value of loans and mortgage-backed securities generally will tend to increase with the level of prepayments also normally increasing. At March 31, 2007 the Company had no mortgage backed securities. The
interest income earned on the Companys variable-rate, interest-sensitive instruments, which represent primarily variable-rate mortgage loans, may change due to changes in quoted interest-rate indices. The variable-rate mortgage loans generally
re-price based on a stated margin over U.S. Treasury Securities indices of varying maturities, the terms of which are established at the time that the loan is closed. At March 31, 2007, 40.7% of the Companys residential mortgage loans
were variable-rate loans.



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WEBSTER PREFERRED CAPITAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS (continued)

---

Results of Operations

For the three months ended March 31, 2007, the Company reported net income of $5.2 million a decrease of
$1.3 million or 20.2% compared to the same period in 2006.

Interest income was $5.3 million for the three months ended March 31, 2007 a decrease of
$1.3 million or 20.0% compared to the same period in 2006. The decrease in interest income was primarily related to a reduction in interest earning assets of $125.8 million for the three months ended March 31, 2007 compared to the three months
ended March 31, 2006, offset by an increase in yields on earning assets of 32 basis points.

The following table shows the major categories of average
interest-earning assets, together with their respective interest income and the rates earned by the Company:



|                           |  |                                   |         |                |                                   |              |  |      |                |  |                |         |              |   |       |  |      |  
|-------------------------- |  | --------------------------------- | ------- | -------------- | --------------------------------- | ------------ |  | ---- | -------------- |  | -------------- | ------- | ------------ | - | ----- |  | ---- | -
|                           |  | Three Months Ended March 31, 2007 |         |                | Three Months Ended March 31, 2006 |             
|(In thousands)             |  | AverageBalance                    |         | InterestIncome |                                   | AverageYield |  |      | AverageBalance |  | InterestIncome |         | AverageYield |  
|Mortgage loans             |  | $                                 | 332,053 |                | $                                 | 4,622        |  | 5.57 | %              |  | $              | 384,188 |              | $ | 5,195 |  | 5.41 | %
|Mortgage-backed securities |  |                                   |        |                |                                   |             |  |     |                |  |                | 40,616  |              |   | 493   |  | 4.86 |  
|Short-term investments     |  |                                   | 53,322  |                |                                   | 700          |  | 5.25 |                |  |                | 86,344  |              |   | 959   |  | 4.44 |  
|                           |  |                                   |         |                |                                   |              |  |      |                |  |                |         |              |   |       |  |      |  
|Total                      |  | $                                 | 385,375 |                | $                                 | 5,322        |  | 5.52 | %              |  | $              | 511,148 |              | $ | 6,647 |  | 5.20 | %
|                           |  |                                   |         |                |                                   |              |  |      |                |  |                |         |              |   |       |  |      |  

Net interest income also can be understood in terms of the impact of changing rates and changing volumes. The
following table describes the extent to which changes in interest rates and changes in volume of interest-earning assets have impacted interest income during the periods indicated. Information is provided in each category with respect to
(i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rates (changes in rates multiplied by prior volume) and (iii) the net change. The change attributable
to the combined impact of volume and rate has been allocated proportionately to the change due to volume and the change due to rate.



|                                     |  |                                                                     |       |   |        |   |        |       |  |   |        |  
|------------------------------------ |  | ------------------------------------------------------------------- | ----- | - | ------ | - | ------ | ----- |  | - | ------ | -
|                                     |  | Three Months EndedMarch 31, 2007 v.
2006 Increase (Decrease) due to |      
|(In thousands)                       |  | Rate                                                                |       |   | Volume |   |        | Total | 
|Interest on interest-earning assets: |  |                                                                     |       |   |        |   |        |       |  |   |        |  
|Mortgage loans                       |  | $                                                                   | 1,017 |   |        | $ | (1,590 | )     |  | $ | (573   | )
|Mortgage-backed securities           |  |                                                                     | (247  | ) |        |   | (246   | )     |  |   | (493   | )
|Short-term investments               |  |                                                                     | 862   |   |        |   | (1,121 | )     |  |   | (259   | )
|                                     |  |                                                                     |       |   |        |   |        |       |  |   |        |  
|Net change in net interest income    |  | $                                                                   | 1,632 |   |        | $ | (2,957 | )     |  | $ | (1,325 | )
|                                     |  |                                                                     |       |   |        |   |        |       |  |   |        |  

There were no provisions for loan losses for the three months ended March 31, 2007 and 2006.



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WEBSTER PREFERRED CAPITAL CORPORATION



|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|------- | ----------------------------------------------------------

The following table summarizes the estimated market value of the Companys interest-sensitive
assets at March 31, 2007 and December 31, 2006 and the projected change to market values if interest rates instantaneously increase or decrease by 100 basis points.



|                                |  |                |         |              |   |                              |  |         |       |  |   |         |  
|------------------------------- |  | -------------- | ------- | ------------ | - | ---------------------------- |  | ------- | ----- |  | - | ------- | -
|                                |  |                |         |              |   | Estimated MarketValue Impact | 
|(In thousands)                  |  | Amortized Cost |         | Market Value |   | -100 BP                      |  | +100 BP |      
|At March 31, 2007               |  |                |         |              |   |                              |  |         |       |  |   |         |  
|Interest sensitive assets:      |  |                |         |              |   |                              |  |         |       |  |   |         |  
|Variable-rate residential loans |  | $              | 185,502 |              | $ | 185,526                      |  | $       | 4,909 |  | $ | (7,462  | )
|Fixed-rate residential loans    |  |                | 127,134 |              |   | 127,487                      |  |         | 1,556 |  |   | (1,793  | )
|                                |  |                |         |              |   |                              |  |         |       |  |   |         |  
|Total                           |  |                |         |              |   |                              |  | $       | 6,465 |  |   | (9,255  | )
|                                |  |                |         |              |   |                              |  |         |       |  |   |         |  
|At December 31, 2006            |  |                |         |              |   |                              |  |         |       |  |   |         |  
|Interest sensitive assets:      |  |                |         |              |   |                              |  |         |       |  |   |         |  
|Variable-rate residential loans |  | $              | 237,082 |              | $ | 236,076                      |  | $       | 6,399 |  | $ | (10,210 | )
|Fixed-rate residential loans    |  |                | 135,713 |              |   | 135,948                      |  |         | 1,806 |  |   | (2,064  | )
|                                |  |                |         |              |   |                              |  |         |       |  |   |         |  
|Total                           |  |                |         |              |   |                              |  | $       | 8,205 |  |   | (12,274 | )
|                                |  |                |         |              |   |                              |  |         |       |  |   |         |  

Interest-sensitive assets, when shocked by a minus 100 basis point rate change, experience a favorable $6.5
million change in market value at March 31, 2007 compared to a favorable $8.2 million market value change at December 31, 2006. These changes in market value represent 2.07% of interest-sensitive assets at March 31, 2007 and 2.4% at
December 31, 2006. A plus 100 basis point rate change results in an unfavorable $ 9.3 million, or -2.96%, change in market value at March 31, 2007 compared to an unfavorable $12.3 million, or 3.1%, market value change at
December 31, 2006. Changes in the projected market value due to the instantaneous rate changes at March 31, 2007 compared to December 31, 2006 are a result of changes in outstanding balances of the assets, and do not represent a
significant change due to interest rates since year end.

Based on the asset/liability mix at March 31, 2007, management estimates that a gradual 200
basis point increase in interest rates over a 12 month period would increase net income over that period by approximately 3.5%. A gradual 200 basis point decrease in interest rates is projected to decrease net income by approximately 4.0%. At
December 31, 2006, a projected 200 basis point increase and a 200 basis point decrease in rates produced a net income increase of 4.5% and a net income decrease of 5.0%, respectively.

The Companys interest rate sensitive assets are subject to prepayment risk. Prepayment risk is inherently difficult to estimate and is dependent upon a number of
economic, financial and behavioral variables. The Company uses a sophisticated mortgage prepayment modeling system to estimate prepayments and the corresponding impact on market value and net interest income. The model uses information that includes
the instrument type, coupon spread, loan age and other factors in its projections.

These assumptions are inherently uncertain and, as a result, the
simulation analyses cannot precisely estimate the impact that higher or lower rate environments will have on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes,
changes in cash flow patterns and market conditions, as well as changes in managements strategies. Management believes that the Companys interest rate risk position at March 31, 2007, represents a reasonable level of risk.



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WEBSTER PREFERRED CAPITAL CORPORATION



|Item 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

As of March 31, 2007 the Company carried out an evaluation, under the supervision and with the participation of the Companys management, including its principal executive officer and its principal financial
officer, of the design and operation of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on this evaluation, the Companys principal executive
officer and principal financial officer concluded that the Companys disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the
Securities Exchange Act of 1934, within the time periods specified in the SECs rules and forms. There was no change in the Companys internal control over financial reporting that occurred during the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II  OTHER INFORMATION



|Item 1. | LEGAL PROCEEDINGS
|------- | -----------------

There are no material pending legal proceedings, other than ordinary routine litigation incident to its business, to which the Company is a party or of which any of its property is the subject.



|Item 1A. | RISK FACTORS
|-------- | ------------

During the first quarter of 2007, there were no material changes to the risk factors previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.



|Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|------- | -----------------------------------------------------------

Not Applicable.



|Item 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

Not Applicable.



|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|------- | ---------------------------------------------------

Not Applicable.



|Item 5. | OTHER INFORMATION
|------- | -----------------

None



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##### Table of Contents

|Item 6. | Exhibits
|------- | --------



|              |  |                                                                                                                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                               
|3.1           |  | 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 Chief 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 18 U.S.C. § 1350, as created by section 906 of the Sarbanes-Oxley Act of 2002, signed by the Companys Principal Executive Officer.                                                                                         
|              | 
|32.2          |  | Written Statement pursuant to 18 U.S.C. § 1350, as created by section 906 of the Sarbanes-Oxley Act of 2002, signed by the Companys Principal Financial Officer.                                                                                         



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##### Table of Contents

SIGNATURE

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.



|                   |  |                                       |  |                                             
|------------------ |  | ------------------------------------- |  | --------------------------------------------
|                   |  | WEBSTER PREFERRED CAPITAL CORPORATION
|                   |  | Registrant                           
|Date: May 11, 2007 |  |                                       |  |                                             
|                   |  |                                      
|                   |  | BY:                                   |  | /s/ Gregory S. Madar                        
|                   |  |                                       |  | Gregory S. Madar                            
|                   |  |                                       |  | Senior Vice President                       
|                   |  |                                       |  | (Principal Financial and Accounting Officer)



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##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                               
|3.1           |  | 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 Chief 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 18 U.S.C. § 1350, as created by section 906 of the Sarbanes-Oxley Act of 2002, signed by the Companys Principal Executive Officer.                                                                                         
|              | 
|32.2          |  | Written Statement pursuant to 18 U.S.C. § 1350, as created by section 906 of the Sarbanes-Oxley Act of 2002, signed by the Companys Principal Financial Officer.                                                                                         



16