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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 quarterly period ended September 30, 2006******OR**   o **Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934****Commission File Number: 0-23513****WEBSTER PREFERRED CAPITAL CORPORATION**(Exact name of registrant as specified in its charter)   **Connecticut** **06-1478208** (State or other jurisdiction of (I. R. S. Employerincorporation or organization) Identification Number)   **145 Bank Street, Waterbury, Connecticut** **06702** (Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (203) 465-4366Indicate by check mark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  þ  Yes     o  NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer ora non-accelerated filer.Large accelerated filer  o     Accelerated filer  o     Non-accelerated filer  þIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  o  Yes     þ  NoThe number of shares outstanding of each of the registrant’s classes of common stock, as of October31, 2006 was: 100 shares.  
 

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**WEBSTER PREFERRED CAPITAL CORPORATION****INDEX**       **Page****PART I — FINANCIAL INFORMATION**         **Item 1**. Interim Financial Statements (unaudited):         Statements of Condition at September 30, 2006 and December 31, 2005  3      Statements of Income for the Three and Nine Months ended September 30, 2006 and 2005  4      Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2006 and 2005  4      Statements of Cash Flows for the Nine Months ended September 30, 2006 and 2005  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  13      **Item 4.**Controls and Procedures  14      **PART II – OTHER INFORMATION**  14      **Item 1**. Legal Proceedings  14      **Item 1A.**Risk Factors  14      **Item 2.**UnregisteredSales of Equity Securities and Use of Proceeds  14      **Item 3.**DefaultsUpon Senior Securities  14      **Item 4.**Submission of Matters to a Vote on Security Holders  14      **Item 5.**Other Information  14      **Item 6.**Exhibits  15      **SIGNATURE**  16      **EXHIBITS**  17  EX-31.1: CERTIFICATION EX-31.2: CERTIFICATION EX-32.1: CERTIFICATION EX-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)* September 30, 2006 December 31, 2005 **Assets**                 Cash $5,322   3,402 Interest-bearing deposits  79,000   77,000 Mortgage-backed securities available for sale, at fair value (Note 2)  36,886   41,335 Residential mortgage loans, net (Note 3)  386,745   388,136 Accrued interest receivable  2,248   1,784 Prepaid expenses and other assets  672   104  **Total assets** $510,873   511,761           **Liabilities and Shareholders’ Equity**                 Accrued dividends payable $180   180 Accrued expenses and other liabilities  191   10  **Total liabilities**  371   190           **Shareholders’ Equity**                 Series B 8.625% cumulative redeemable preferred stock, liquidationpreference $10 per share; par value $1.00 pershare:         1,000,000 shares authorized, issued and outstanding  1,000   1,000 Commonstock, par value $.01 per share:        Authorized— 1,000 shares        Issued and outstanding — 100 shares  1   1 Paid-in capital  513,799   513,799 Distributions in excess of accumulated earnings  (4,298)  (2,729)Accumulated other comprehensive income (loss)  —   (500) **Total shareholders’ equity**  510,502   511,571  **Total liabilities and shareholders’ equity** $510,873   511,761  See accompanying notes to interim financial statements.
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**WEBSTER PREFERRED CAPITAL CORPORATION****STATEMENTS OF INCOME****(unaudited)**                   Three Months Ended Nine Months Ended  September 30, September 30,*(Dollars in thousands, except per share data)* 2006 2005 2006 2005 Interest income:                Loans (Note 4) $5,352   5,609  $15,674   17,690 Securities and short-term investments  1,631   1,084   4,838   2,405  Total interest income  6,983   6,693   20,512   20,095                   Loss on write-down of securities available for sale to fair value  (526)  —   (526)  —                  Noninterest expense:                Advisory fee to parent  51   37   151   146 Other  32   43   126   70  Total noninterest expense  83   80   277   216  **Net income**  **6,374**   **6,613**   **19,709**   **19,879** Preferred stock dividends  216   216   647   647                   Net income available to common shareholder $6,158   6,397  $19,062   19,232                   Net income per common share:                Basic and diluted $61,580   63,970  $190,620   192,320 **STATEMENTS OF COMPREHENSIVE INCOME****(unaudited)**                   Three Months Ended Nine Months Ended  September 30, September 30,*(In thousands)* 2006 2005 2006 2005 Net income $6,374   6,613  $19,709   19,879                  Other comprehensive income (loss):                Reclassification adjustment for loss on write-down of securitiesavailable for sale included in net income  526   —   526   — Unrealized net holding gain (loss) on securitiesavailable for sale arising during the period  209   (210)  (26)  (295) Comprehensive income $7,109   6,403  $20,209   19,584  See accompanying notes to interim financial statements.
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**WEBSTER PREFERRED CAPITAL CORPORATION****STATEMENTS OF CASH FLOWS****(unaudited)**           Nine Months Ended September 30,*(In thousands)* 2006 2005 **Cash flow from operating activities:**        Net income $19,709   19,879 Adjustments to reconcile net income to net cash provided byoperating activities:        Net amortization and accretion  402   620 Loss on write down of securities available for sale to fair value  526   — (Increase) decrease in accrued interest receivable  (464)  230 Increase in accrued expenses and other liabilities  181   6 Increase in prepaid expenses and other assets  (568)  (64) Net cash provided by operating activities  19,786   20,671           **Cash flow from investing activities:**        Principal repayments on mortgage-backed securities  4,393   2,710 Principal repayments of loans  42,003   65,201 Loans purchased  (40,984)  — Increase in short-term investments  (2,000)  (79,000) Net cash provided by (used in) investing activities  3,412   (11,089)         **Cash flow from financing activities:**        Dividends paid on common and preferred stock  (21,278)  (18,465) Increase (decrease) in cash and cash equivalents  1,920   (8,883)Cash and cash equivalents at beginning of period  3,402   10,325  Cash and cash equivalents at end of period $5,322   1,442  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 CapitalCorporation (the “Company” or “WPCC”), a wholly-owned subsidiary of Webster Bank, and have beenprepared in conformity with U.S. generally accepted accounting principles for interim financialinformation 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 acceptedaccounting principles for complete financial statements. In the opinion of management, alladjustments (consisting of normal recurring accruals) considered necessary for a fair presentationhave been included. Amounts in prior period financial statements are reclassified whenevernecessary to conform to current period presentations. The results of operations for the nine monthsended September 30, 2006 are not necessarily indicative of the results which may be expected forthe year as a whole.The preparation of the Consolidated Interim Financial Statements in conformity with U.S. generallyaccepted accounting principles requires management to make estimates and assumptions that affectthe 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 andexpenses for the periods presented. Actual results could differ from those estimates. These InterimFinancial Statements should be read in conjunction with the audited Consolidated FinancialStatements and Notes thereto included in WPCC’s Annual Report on Form 10-K for the year endedDecember 31, 2005.**NOTE 2: MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE**The following table sets forth certain information regarding the mortgage-backed securities:                       Gross Gross    Amortized Unrealized Unrealized Estimated*(In thousands)* Cost Gains Losses Fair Value **September 30, 2006**                Available for Sale Portfolio $36,886   —   —   36,886                   **December 31, 2005**                Available for Sale Portfolio $41,835   —   (500)  41,335  At September 30, 2006 and December 31, 2005, all mortgage-backed securities available for sale wereissued by government agencies or government-sponsored enterprises. There were no sales ofmortgage-backed securities during the nine months ended September 30, 2006 and 2005.At September 30, 2006, there were no temporarily-impaired investments.Asdisclosed in Webster Financial Corporation’s (“Webster”) press release issued on October 17, 2006and filed on Form 8-K, Webster evaluated the available for sale securities portfolio in light ofchanging market conditions and other factors, and determined that Webster will sell of allits mortgage-backed securities classified as available for sale. The Company made a similarevaluation with respect to its available for sale portfolio, resulting in a decision to sell itsentire portfolio of mortgage-backed securities available for sale. At September 30, 2006 theCompany held $36.9 million of such securities that it wrote-down to fair value.The unrealized loss on the available for sale mortgage-backed securities portfolio of $526thousand, was recognized in the consolidated statement of income for the three months endedSeptember 30, 2006. The sale of the $36.9 million in mortgage backed securities available for salewas completed during October of 2006.
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**WEBSTER PREFERRED CAPITAL CORPORATION****NOTES TO INTERIM FINANCIAL STATEMENTS**(continued)**NOTE 3: RESIDENTIAL MORTGAGE LOANS, NET**A summary of the Company’s residential mortgage loans by type and original maturity follows:         *(In thousands)* September 30, 2006 December 31, 2005 Fixed-rate loans:        15 yr. loans $45,607   50,842 20 yr. loans  7,996   7,218 25 yr. loans  3,205   3,718 30 yr. loans  254,235   232,742  Total fixed-rate loans  311,043   294,520  Variable-rate loans:        15 yr. loans  464   666 20 yr. loans  659   1,241 25 yr. loans  1,114   1,183 30 yr. loans  73,209   89,951  Total variable-rate loans  75,446   93,041           Total residential mortgage loans  386,489   387,561          Premiums and deferred costs on loans, net  2,278   2,597 Less: allowance for loan losses  (2,022)  (2,022)          Residential mortgage loans, net $386,745   388,136  As of September 30, 2006, 80.5% of the Company’s residential mortgage loans are fixed-rate loansand 19.5% are adjustable-rate loans.There has been no activity in the allowance for loan losses for the nine months ended September 30,2006 and 2005.
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**WEBSTER PREFERRED CAPITAL CORPORATION****NOTES TO INTERIM FINANCIAL STATEMENTS**(continued)**NOTE 4: SERVICING**The mortgage loans owned by the Company are serviced by Webster Bank National Association (“WebsterBank”) pursuant to the terms of a servicing agreement. Webster Bank in its role as servicer underthe terms of the servicing agreement is herein referred to as the “Servicer.” The Servicer receivesfees at an annual rate of (i) 8 basis points for fixed-rate loan servicing and collection, (ii) 8basis points for variable-rate loan servicing and collection and (iii) 5 basis points for all otherservices to be provided, as needed, in each case based on the daily outstanding balances of all theCompany’s loans for which the Servicer is responsible. The services provided to the Company byWebster Bank are at the level of a sub-servicing agreement. As such, the Company estimates that thefees paid to Webster Bank for servicing approximates fees that would be paid if the Companyoperated as an unaffiliated entity. Servicing fees paid for the three and nine months endedSeptember 30, 2006 were $76,000 and $226,000 respectively, and for the three and nine months endedSeptember 30, 2005 were $84,000 and $265,000, respectively. Servicing fees are netted againstinterest income in the Statements of Income, as they are considered a reduction in yield to theCompany.The Servicer is entitled to retain any late payment charges, prepayment fees, penalties andassumption fees collected in connection with mortgage loans serviced by it. The Servicer receivesthe benefit, if any, derived from interest earned on collected principal and interest paymentsbetween the date of collection and the date of remittance to the Company and from interest earnedon tax and insurance escrow funds with respect to mortgage loans serviced by it. At the end of eachcalendar month, the Servicer is required to invoice the Company for all fees and charges due to theServicer.
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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 estateinvestment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). TheCompany will generally not be subject to federal income tax for as long as it maintains itsqualification as a REIT, requiring among other things, that it currently distribute to stockholdersat least 90% of its “REIT taxable income” (not including capital gains and certain items of noncashincome). The following discussion of the Company’s financial condition and results of operationsshould be read in conjunction with the Company’s financial statements and other financial dataincluded elsewhere herein and in conjunction with the Company’s 2005 Annual Report on Form 10-K.**Forward Looking Statements**This report contains forward looking statements within the meaning of the Securities Exchange Actof 1934, as amended. Actual results, performance or developments may differ materially from thoseexpressed or implied by such forward looking statements as a result of market uncertainties andother factors. Some important factors that would cause actual results to differ from those in anyforward looking statements include changes in interest rates and the general economy in theConnecticut market area where a substantial portion of the real estate securing the Company’s loansare located, legislative and regulatory changes, changes in tax laws and policies, and changes inaccounting policies, principles or guidelines. Such developments could have an adverse impact onthe Company’s financial position and results of operations. An example of such a forward lookingstatement is the “Quantitative and Qualitative Disclosures About Market Risk” section inManagement’s Discussion and Analysis. Except as required by law, the Company does not undertake toupdate any such forward looking statements.**Summary**WPCC’s total interest income of $7.0 million for the three months ended September 30, 2006 and$20.5 million for the nine months ended September 30, 2006 approximated the amounts for the sameperiods a year earlier. However, the mix of interest income changed due to the following factors:**•** For the three months ended September 30, 2006, averageloans decreased $43.0 million, short term investmentsincreased $18.4 million and average securities decreased$14.3 million compared to the three months ended September 30,2005. **•** For the nine months ended September 30, 2006, averageloans decreased $68.8 million, short term investmentsincreased $16.2 million and average securities increased$19.1 million compared to the nine months ended September 30,2005. **•** The yield on earning assets for the nine months endedSeptember 30, 2006 was 5.37% compared to 4.93% for the ninemonths ended September 30, 2005.**Changes in Financial Condition**Total assets, consisting primarily of residential mortgage loans, were $510.9 million at September30, 2006, a decrease of $0.9 million from $511.8 million at December 31, 2005. Residential mortgageloans decreased $1.4 million primarily as a result of repayments of $42.0 million substantiallyoffset by purchases of $41.0 million. These cash flows were generally replaced with the purchase ofinterest-bearing deposits. Shareholders’ equity decreased to $510.5 million at September 30, 2006from $511.6 million at December 31, 2005, due to the payment of $21.3 million in dividends whilerecording net income of $19.7 million for the first nine months of 2006.
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**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 beenconservatively underwritten and by aggressively managing nonperforming assets. At September 30,2006 and December 31, 2005, residential real estate loans comprised the entire loan portfolio. Allsuch residential loans were purchased from Webster Bank. The Company also invests in short-termjumbo certificates of deposit, and prior to the October 2006 sale, in government agency orgovernment-sponsored enterprise issued mortgage-backed securities.The following table details the Company’s nonperforming assets:           September 30, December 31,*(In thousands)* 2006 2005 Loans accounted for on a nonaccrual basis:        Residential variable-rate loans $78  $97  Total nonperforming loans and assets $78  $97  At September 30, 2006 and December 31, 2005, the allowance for loan losses was approximately $2.0million. Management believes that the allowance for loan losses is adequate to cover probablelosses inherent in the current portfolio.**Liquidity and Capital Resources**The primary sources of liquidity for the Company are principal and interest payments from theresidential mortgage loans and mortgage-backed securities portfolios. The primary uses of liquidityare purchases of residential mortgage loans and mortgage-backed securities and the payment ofdividends on the common and preferred stock.While scheduled loan amortization, maturing securities, short-term investments and securitiesrepayments are predictable sources of funds, loan and mortgage-backed security prepayments can varygreatly and are influenced by factors such as general interest rates, economic conditions andcompetition. One of the inherent risks of investing in loans and mortgage-backed securities is thepossibility prepayments of principal prior to maturity at prepayment rates different than thoseestimated at the time of purchase. This generally occurs because of changes in market interestrates.In the unlikely event that principal and interest payments on its mortgage assets are insufficientto meet its operating needs, WPCC has the ability to raise additional funds. For example, WPCC’sresidential mortgage loans are underwritten to meet secondary market requirements and could easilybe sold or securitized as mortgage-backed securities and used as borrowing collateral, although theCompany had no plans to do so at September 30, 2006 and December 31, 2005.**Asset/Liability Management**The goal of the Company’s asset/liability management policy is to manage interest-rate risk so asto maximize net interest income over time in changing interest rate environments while maintainingacceptable levels of risk. The Company prepares estimates of the level of prepayments and theeffect of such prepayments on the level of future earnings due to reinvestment of funds at ratesdifferent than those that currently exist. The Company is unable to predict future fluctuations ininterest rates. The market values of the Company’s financial assets are sensitive to fluctuationsin market interest rates. The market values of fixed-rate loans and mortgage-backed securities tendto decline in value as interest rates rise. If interest rates decrease, the market value of loansand mortgage-backed securities generally will tend to increase with the level of prepayments alsonormally increasing. The interest income earned on the Company’s variable-rate, interest-sensitiveinstruments, which represent primarily variable-rate mortgage loans, may change due to changes inquoted interest-rate indices. The variable-rate mortgage loans generally re-price based on a statedmargin over U.S. Treasury Securities indices of varying maturities, the terms of which areestablished at the time that the loan is closed. At September 30, 2006, 19.5% of the Company’sresidential 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 and nine months ended September 30, 2006, the Company reported net income of $6.4million and $19.7 million, respectively, which approximated the net income for the three and ninemonths ended September 30, 2005.In its third quarter earnings release issued on October 17, 2006, Webster Financial Corporationannounced the repositioning of its available for sale securities portfolio and management’sdecision to sell all mortgage-backed securities classified as available for sale. The Company tooksimilar action with respect to its available for sale portfolio. As a result, the Companyrecognized a loss on the write-down of available for salemortgage-backed securities to fair value of $526,000 asof September 30, 2006. The Company completed the sale of its available for sale mortgage-backedsecurities portfolio during October of 2006. Sale proceeds, initially re-invested in interestbearing deposits, are expected to be used to purchase additional residential mortgage loans fromWebster Bank.Interest income of $7.0 million for the three months ended September 30, 2006 and $20.5 million forthe nine months ended September 30, 2006 was flat compared to $6.7 million and $20.1 million forthe same periods last year. Interest rates increased by 44 basis points and average earning assetsdecreased by $33.5 million for the nine months ended September 30, 2006 compared to the same periodin 2005.The following table shows the major categories of average interest-earning assets, together withtheir respective interest income and the rates earned by the Company:                           Three Months Ended Three Months Ended  September 30, 2006 September 30, 2005  Average Interest Average Average Interest Average*(In thousands)* Balance Income Yield Balance Income Yield Mortgage loans $382,629   5,352   5.59% $425,616   5,609   5.27%Mortgage-backed securities (a)  36,299   464   5.11   17,924   205   4.57 Short-term investments  87,620   1,167   5.33   101,946   879   3.45  Total $506,548   6,983   5.51% $545,486   6,693   4.91%                            Nine Months Ended Nine Months Ended  September 30, 2006 September 30, 2005  Average Interest Average Average Interest Average*(In thousands)* Balance Income Yield Balance Income Yield Mortgage loans $379,244   15,674   5.51% $447,995   17,690   5.27%Mortgage-backed securities (a)  38,085   1,436   5.03   18,985   654   4.59 Short-term investments  92,337   3,402   4.91   76,158   1,751   3.07  Total $509,666   20,512   5.37% $543,138   20,095   4.93% (a) Unrealized net gains and losses are excluded from the average balance.
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Net interest income also can be understood in terms of the impact of changing rates and changingvolumes. The following table describes the extent to which changes in interest rates and changes involume 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 involume (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 tothe combined impact of volume and rate has been allocated proportionately to the change due tovolume and the change due to rate.                           Three Months Ended September 30, Nine Months Ended September 30,  2006 v. 2005 2006 v. 2005  Increase (Decrease) due to Increase (Decrease) due to*(In thousands)* Rate Volume Total Rate Volume Total Interest on interest-earning assets:                        Mortgage loans $331   (588)  (257) $369   (2,385)  (2,016)Mortgage-backed securities  17   242   259   67   715   782 Short-term investments  425   (137)  288   1,221   430   1,651  Net change in net interest income $773   (483)  290  $1,657   (1,240)  417  There were no provisions for loan losses for the three and nine months ended September 30, 2006 and2005.
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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-sensitiveassets at September 30, 2006 and December 31, 2005 and the projected change to market values ifinterest rates instantaneously increase or decrease by 100 basis points.                           Estimated Market Value Impact*(In thousands)* Amortized Cost Market Value -100 BP +100 BP **At September 30, 2006**                Interest sensitive assets:                Mortgage-backed securities $36,886   36,886  $1   (1)Variable-rate residential loans  75,446   75,373   729   (1,039)Fixed-rate residential loans  311,043   308,304   7,042   (12,698) Total         $7,772   (13,738)                            **At December 31, 2005**                Interest 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)           Interest-sensitive assets, when shocked by a minus 100 basis point rate change, experience afavorable $7.8 million change in market value at September 30, 2006 compared to a favorable $10.6million market value change at December 31, 2005. These changes in market value represent 1.8% ofinterest-sensitive assets at September 30, 2006 and 2.5% at December 31, 2005. A plus 100 basispoint rate change results in an unfavorable $13.7 million, or 3.2%, change in market value atSeptember 30, 2006 compared to an unfavorable $14.2 million, or 3.3%, market value change atDecember 31, 2005. Changes in the projected market value due to the instantaneous rate changes atSeptember 30, 2006 compared to December 31, 2005 are a result of changes in outstanding balances ofthe assets, and do not represent a significant change due to interest rates since year end.Based on the asset/liability mix at September 30, 2006, management estimates that a gradual 200basis point increase in interest rates over a 12 month period would increase net income over thatperiod by approximately 3.8%. A gradual 200 basis point decrease in interest rates is projected todecrease net income by approximately 4.0%. At December 31, 2005, a projected 200 basis pointincrease and a 200 basis point decrease in rates produced a net income increase of 5.4% and a netincome decrease of 5.9%, respectively.The Company’s interest rate sensitive assets are subject to prepayment risk. Prepayment risk isinherently difficult to estimate and is dependent upon a number of economic, financial andbehavioral variables. The Company uses a sophisticated mortgage prepayment modeling system toestimate prepayments and the corresponding impact on market value and net interest income. Themodel uses information that includes the instrument type, coupon spread, loan age and other factorsin its projections.These assumptions are inherently uncertain and, as a result, the simulation analyses cannotprecisely estimate the impact that higher or lower rate environments will have on net interestincome. Actual results will differ from simulated results due to timing, magnitude and frequency ofinterest rate changes, changes in cash flow patterns and market conditions, as well as changes inmanagement’s strategies. Management believes that the Company’s interest rate risk position atSeptember 30, 2006, represents a reasonable level of risk.
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**WEBSTER PREFERRED CAPITAL CORPORATION****Item 4. CONTROLS AND PROCEDURES**As of September 30, 2006 the Company carried out an evaluation, under the supervision and with theparticipation of the Company’s management, including its principal executive officer and itsprincipal financial officer, of the design and operation of the Company’s disclosure controls andprocedures (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 officerconcluded 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 itfiles under the Securities Exchange Act of 1934, within the time periods specified in the SEC’srules and forms. There was no change in the Company’s internal control over financial reportingthat occurred during the period covered by this report that has materially affected, or isreasonably 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 toits business, to which the Company is a party or of which any of its property is the subject.**Item 1A. Risk Factors**During the third quarter of 2006, there were no material changes to the risk factors previouslydisclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.**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**As outlined in Webster’s press release issued on October 17, 2006 and filed on Form 8-K, Websterevaluated the available for sale securities portfolio in light of changing market conditions andother factors, and it was determined that Webster will sell of all its mortgage-backed securitiesclassified as available for sale. The Company made a similar evaluation with respect to itsavailable for sale portfolio, resulting in a decision to sell its entire portfolio ofmortgage-backed securities available for sale. At September 30, 2006 the Company held $36.9million of such securities that it wrote-down to fair value.
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**Item 6. Exhibits**   Exhibit Number Description3.1 Amended and Restated Certificate of Incorporation ofWebster Preferred Capital Corporation (the “Company”)(incorporated herein by reference from Exhibit 3.1 to theCompany’s Annual Report on Form 10-K for the fiscal yearended December 31, 1997).   3.2 Certificate of Amendment for the Series B 8.625% CumulativeRedeemable Preferred Stock of the Company (incorporatedherein by reference from Exhibit 3.3 to the Company’sAnnual Report on Form 10-K for the fiscal year endedDecember 31, 1997).   3.3 Amended and Restated By-Laws of the Company (incorporated herein byreference from Exhibit 3.4 to the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 1997).   4.1 Specimen of certificate representing the Series B 8.625% CumulativeRedeemable Preferred Stock of the Company (incorporated herein byreference from Exhibit 4.2 to the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 1997).   31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of2002, signed by the Company’s Chief Executive Officer.   31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of2002, signed by the Company’s Principal Financial Officer.   32.1 Written Statement pursuant to Section 906 of the Sarbanes-Oxley Actof 2002, signed by the Company’s Principal Executive Officer.   32.2 Written Statement pursuant to Section 906 of the Sarbanes-Oxley Actof 2002, signed by the Company’s Principal Financial Officer.
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**SIGNATURE**Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned thereunto duly authorized.         WEBSTER PREFERRED CAPITAL CORPORATION    Registrant         Date:November 09, 2006        BY:   /s/ Gregory S. Madar               Gregory S. Madar,        Senior Vice President,        Chief Accounting Officer & Assistant Secretary        Principal Financial and Accounting Officer  
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**EXHIBIT INDEX**   Exhibit Number Description3.1 Amended and Restated Certificate of Incorporation ofWebster Preferred Capital Corporation (the “Company”)(incorporated herein by reference from Exhibit 3.1 to theCompany’s Annual Report on Form 10-K for the fiscal yearended December 31, 1997).   3.2 Certificate of Amendment for the Series B 8.625% CumulativeRedeemable Preferred Stock of the Company (incorporatedherein by reference from Exhibit 3.3 to the Company’sAnnual Report on Form 10-K for the fiscal year endedDecember 31, 1997).   3.3 Amended and Restated By-Laws of the Company (incorporated herein byreference from Exhibit 3.4 to the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 1997).   4.1 Specimen of certificate representing the Series B 8.625% CumulativeRedeemable Preferred Stock of the Company (incorporated herein byreference from Exhibit 4.2 to the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 1997).   31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of2002, signed by the Company’s Chief Executive Officer.   31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of2002, signed by the Company’s Principal Financial Officer.   32.1 Written Statement pursuant to Section 906 of the Sarbanes-Oxley Actof 2002, signed by the Company’s Principal Executive Officer.   32.2 Written Statement pursuant to Section 906 of the Sarbanes-Oxley Actof 2002, signed by the Company’s Principal Financial Officer.
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