================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended March 31, 1999
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission File Number: 0-23513
WEBSTER PREFERRED CAPITAL CORPORATION
--------------------------------------------------
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-1478208
----------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation 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) 578-2286
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. Yes [X] No[ ].
The number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date is: 100 shares
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Statements of Condition at March 31, 1999 and December 31, 1998........................... 3
Statements of Income for the Three Months Ended March 31, 1999 and March 31, 1998 ........ 4
Statements of Cash Flows for the Three Months Ended March 31, 1999 and March 31, 1998..... 5
Condensed Notes to Financial Statements................................................... 6
Management's Discussion and Analysis of Financial Statements.............................. 9
Quantitative and Qualitative Disclosures About Market Risk................................ 13
Forward Looking Statements................................................................ 13
PART II - OTHER INFORMATION................................................................14
SIGNATURES.................................................................................15
INDEX TO EXHIBITS..........................................................................16
</TABLE>
2
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF CONDITION (UNAUDITED)
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 22,362 $ 26,964
Mortgage-Backed Securities Available for Sale, at Fair Value (Note 2) 112,498 118,262
Residential Mortgage Loans, Net (Note 3) 844,508 819,634
Accrued Interest Receivable 5,393 5,422
Prepaid Expenses and Other Assets 594 679
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 985,355 $ 970,961
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued Dividends Payable $ 794 $ 1,019
Accrued Expenses and Other Liabilities 742 224
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,536 1,243
- ----------------------------------------------------------------------------------------------------------------------
MANDATORILY REDEEMABLE PREFERRED STOCK (NOTE 4)
Series A 7.375% Cumulative Redeemable Preferred Stock, Liquidation
preference $1,000 per share; par value $1.00 per
share; 40,000 shares authorized, issued and outstanding 40,000 40,000
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 928,799 928,799
Distributions in Excess of Accumulated Earnings - (1,198)
Retained Earnings 13,096 -
Accumulated Other Comprehensive Income 923 1,116
- ----------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 943,819 929,718
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 985,355 $ 970,961
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying condensed notes to financial statements
3
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
(Dollars In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Loans $ 13,617 $ 11,974
Securities 1,889 2,180
- -----------------------------------------------------------------------------------------------------------
Total Interest Income 15,506 14,154
Provision for Loan Losses (Note 3) 120 -
- -----------------------------------------------------------------------------------------------------------
Interest Income After Provision for Loan Losses 15,386 14,154
Noninterest Expenses:
Advisory Fee Expense Paid to Parent 38 38
Dividends on Mandatorily Redeemable Preferred Stock 738 738
Amortization of Start-up Costs - 37
Other Noninterest Expenses 100 112
- -----------------------------------------------------------------------------------------------------------
Total Noninterest Expenses 876 925
Income Before Taxes 14,510 13,229
Income Taxes - -
- -----------------------------------------------------------------------------------------------------------
NET INCOME 14,510 13,229
Preferred Stock Dividends 216 216
- -----------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholder $ 14,294 $ 13,013
- -----------------------------------------------------------------------------------------------------------
Net Income Per Common Share:
Basic $ 142,940 $ 130,130
Diluted $ 142,940 $ 130,130
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying condensed notes to financial statements
4
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars In Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 14,510 $ 13,229
Adjustments to Reconcile Net Cash Provided by Operating Activities:
Provision for Loan Losses 120 -
Accretion of Securities Discount (17) (502)
Amortization of Deferred Loan Fees and Premiums 415 299
Increase (Decrease) in Accrued Interest Receivable 29 (318)
Increase in Accrued Liabilities 1,255 1,000
Increase (Decrease) in Prepaid Expenses and Other Assets 85 (42)
- -----------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 16,397 13,666
- -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of Mortgage-Backed Securities - (51,682)
Principal Collected on Mortgage-Backed Securities 5,587 555
Purchase of Loans (80,767) (60,356)
Principal Repayments of Loans, Net 55,359 44,662
- -----------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (19,821) (66,821)
- -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Dividends Paid on Common and Preferred Stock (1,178) (650)
Contributions from Parent - 51,842
- -----------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Financing Activities (1,178) 51,192
- -----------------------------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (4,602) (1,963)
Cash and Cash Equivalents at Beginning of Period 26,964 26,167
- -----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 22,362 $ 24,204
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES:
Income Taxes Paid $ - $ --
Interest Paid $ - $ --
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITY:
Transfer of Residential Mortgage Loans to Other Real Estate
Owned $ - $ 110
</TABLE>
See accompanying condensed notes to financial statements
5
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements include all adjustments which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods presented. All adjustments were of a normal recurring nature.
The results of operations for the three month period ended March 31, 1999 are
not necessarily indicative of the results which may be expected for the year as
a whole. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Webster Preferred Capital
Corporation 1998 Annual Report to shareholders.
NOTE 2: MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE, AT FAIR VALUE
The following table sets forth certain information regarding the mortgage-backed
securities:
<TABLE>
<CAPTION>
(In Thousands) Mortgage-Backed Securities
- ---------------------------------------------------------------------------------------------------------
Recorded Value Unrealized Gains Unrealized Estimated
March 31, 1999 Losses Fair Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale Portfolio $ 111,575 $ 923 $ - $ 112,498
===========================================================================================================
Recorded Value Unrealized Gains Unrealized Estimated
Deccember 31, 1998 Losses Fair Value
- ---------------------------------------------------------------------------------------------------------
Available for Sale Portfolio $ 117,146 $ 1,116 $ - $ 118,262
===========================================================================================================
</TABLE>
All mortgage-backed securities have a contractual maturity of over 10 years. The
weighted average yield at March 31, 1999 is 6.76%. Although the stated final
maturity of these obligations are long-term, the weighted average life is much
shorter due to scheduled repayments and prepayments. Gains and losses on the
sales of securities are recorded using the specific identification method.
6
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
NOTE 3: RESIDENTIAL MORTGAGE LOANS, NET
A summary of the Company's residential mortgage loans, net, follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
- ---------------------------------------------------------------------------------
Carrying Carrying
(In Thousands) Amount Amount
- ---------------------------------------------------------------------------------
<S> <C> <C>
Fixed-Rate Loans:
15 yr. Loans $ 114,492 $ 114,924
20 yr. Loans 4,777 3,213
25 yr. Loans 2,715 1,849
30 yr. Loans 207,217 192,490
- ----------------------------------------------------------------------------------
Total Fixed-Rate Loans 329,201 312,476
- ----------------------------------------------------------------------------------
Variable-Rate Loans:
15 yr. Loans 5,636 5,222
20 yr. Loans 7,427 6,504
25 yr. Loans 8,067 8,578
30 yr. Loans 492,009 484,824
- ----------------------------------------------------------------------------------
Total Variable-Rate Loans 513,139 505,128
- ----------------------------------------------------------------------------------
Total Residential Mortgage Loans $ 842,340 $817,604
Premiums and Deferred Fees on Loans, Net 3,843 3,585
Less: Allowance for Loan Losses (1,675) (1,555)
- ----------------------------------------------------------------------------------
Residential Mortgage Loans, Net $ 844,508 $ 819,634
- ----------------------------------------------------------------------------------
</TABLE>
During 1998, Webster Bank contributed $182.8 million of cash to the Company, of
which $131.0 million was used to purchase additional residential loans. As of
March 31, 1999, approximately 39.1% of the Company's residential mortgage loans
are fixed-rate loans and approximately 60.9% are adjustable-rate loans.
A detail of the change in the allowance for loan losses, for the periods
indicated follows:
Three Months Ended
(In Thousands) March 31, 1999 March 31, 1998
- ----------------------------------------------------------------------------
Balance at Beginning of Period $ 1,555 $ 1,538
Provision Charged to Operations 120 --
Charge-offs -- --
Recoveries -- 1
- ------------------------------------------------- --------------------------
Balance at End of Period $ 1,675 $ 1,539
- -----------------------------------------------------------------------------
7
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
NOTE 4: MANDATORILY REDEEMABLE PREFERRED STOCK
The Company is required to redeem all outstanding Series A Preferred Shares on
January 15, 2001 at a redemption price of $1,000 per share, plus accrued and
unpaid dividends.
The Series A Preferred Shares may be redeemed at the option of the Company at
any time on and after January 15, 1999 through January 14, 2001.
NOTE 5: OTHER COMPREHENSIVE INCOME
The following table summarizes reclassification adjustments for other
comprehensive income and the related tax effects for the three months ended
March 31, 1999 and 1998:
<TABLE>
<CAPTION>
BEFORE INCOME TAX
TAX (EXPENSE) NET-OF-TAX
(In Thousands) AMOUNT OR BENEFIT AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized gain on available for sale securities:
Unrealized holding gains arisen during the period $ (193) -- $ (193)
Less: Reclassification adjustment for gains
realized during the period -- -- --
-------------------------------------------------------------------------------------------------------
Other comprehensive income at March 31, 1999 $ (193) -- $ (193)
-------------------------------------------------------------------------------------------------------
Unrealized gain on available for sale securities:
Unrealized holding gains arisen during the period $ 1,019 -- $ 1,019
Less: Reclassification adjustment for gains
realized during the period -- -- --
-------------------------------------------------------------------------------------------------------
Other comprehensive income at March 31, 1998 $ 1,019 -- $ 1,019
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
GENERAL
The Company is a subsidiary of Webster Bank and was incorporated in March 1997
to provide a cost-effective means of raising funds, including capital, on a
consolidated basis for Webster Bank. Total assets at March 31, 1999 and December
31,1998 were $985.4 million and $971.0 million, respectively, consisting
primarily of residential mortgage loans and mortgage-backed securities.
The Company has elected to be treated as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986 (the "Code"), and 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 95% of its "REIT taxable income" (not including capital gains and
certain items of noncash income). The Company and Webster Bank will also benefit
significantly from federal and state tax treatment of dividends paid by the
Company as a result of its qualification as a REIT. 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.
CHANGES IN FINANCIAL CONDITION
Total assets were $985.4 million at March 31, 1999, an increase of $14.4 million
from $971.0 million at December 31, 1998. The increase in total assets is
primarily attributable to the purchase of additional residential mortgage loans
of $80.7 million, offset by loan repayments of $55.3 million and principal
collected on mortgage-backed securities of $5.5 million. Shareholders' equity
was $943.8 million at March 31, 1999 and $929.7 million at December 31, 1998.
ASSET QUALITY
The Company maintains high asset quality by acquiring residential real estate
loans that have been conservatively underwritten, aggressively managing
nonaccrual assets and maintaining adequate reserve coverage. At March 31, 1999,
residential real estate loans comprised the entire loan portfolio. The Company
also invests in highly rated mortgage-backed securities.
The aggregate amount of nonaccrual loans was $766,000 at March 31, 1999. The
following table details the Company's nonaccrual loans at March 31, 1999 and
December 31, 1998:
March 31, December 31,
(In Thousands) 1999 1998
- -----------------------------------------------------------------------------
Loans Accounted for on a Nonaccrual Basis:
Residential Fixed-Rate Loans $ 59 $ 71
Residential Variable-Rate Loans 707 1,206
- ----------------------------------------------------------------------------
Total Nonaccrual Loans $ 766 $ 1,277
- ----------------------------------------------------------------------------
At March 31, 1999 the allowance for loan losses was approximately $1.7 million,
or 218% of nonaccrual assets. Management believes that the allowance for loan
losses is adequate to cover expected losses in the portfolio.
9
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for the Company are net cash flows from
operating activities, investing activities and financing activities. Net cash
flows from operating activities primarily include net income, net changes in
prepaid expenses and other assets, accrued interest receivable and adjustments
for noncash items such as amortization on deferred fees and premiums, and
mortgage-backed securities net amortization and accretion. Net cash flows from
investing activities primarily include the purchase and repayments of
residential real estate loans and mortgage backed securities that are classified
as available for sale. Net cash flows from financing activities primarily
include net changes in capital generally related to stock issuances, capital
contributions from Webster Bank and dividend payments.
While scheduled loan amortization, maturing securities, short-term investments
and securities repayments are predictable sources of funds, loan and
mortgage-backed security prepayments are greatly influenced by general interest
rates, economic conditions and competition. One of the inherent risks of
investing in loans and mortgage-backed securities is the ability of such
instruments to incur 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. The market values of
fixed-rate loans and mortgage-backed securities are sensitive to fluctuations in
market interest rates, declining in value as interest rates rise. If interest
rates decrease, the market value of loans generally will tend to increase with
the level of prepayments also normally increasing.
Dividends on the Series A Preferred Stock are payable at the rate of 7.375% per
annum (an amount equal to $73.75 per annum per share), and the dividends on the
Series B Preferred Stock are payable at the rate of 8.625% per annum (an amount
equal to $.8625 per annum per share), in all cases if, when and as declared by
the Board of Directors of the Company. Dividends on the preferred shares are
cumulative and, if declared, payable on January 15, April 15, July 15 and
October 15 in each year.
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 must provide for sufficient liquidity for daily operations. 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 and as such the market values of
certain of the Company's financial assets are sensitive to fluctuations in
market interest rates. Changes in interest rates can affect the value of its
loans and other interest-earning assets. At March 31, 1999, 60.9% of the
Company's residential mortgage loans were variable-rate loans. The Company's
management believes these residential mortgage loans are less likely to incur
prepayments of principal.
10
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
For the three months ended March 31, 1999 and 1998, the Company reported net
income of $14.5 million and $13.2 million, respectively, or $142,940 and
$130,130, respectively, per common share on a diluted basis.
Total interest income for the three months ended March 31, 1999 and 1998
amounted to $15.5 million and $14.2 million, respectively, net of servicing
fees. The following table shows the major categories of average interest-earning
assets, their respective interest income and the rates earned by the Company:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999 THREE MONTHS ENDED MARCH 31, 1998
- -----------------------------------------------------------------------------------------------------------------
Average Interest Average Average Interest Average
(In Thousands) Balance Income Yield Balance Income Yield
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans $808,654 $13,617 6.74% $660,600 $ 11,974 7.25%
Mortgage-Backed Securities 113,641 1,791 6.30% 127,884 2,140 6.69%
Interest Bearing Deposits 9,749 98 4.02% 3,396 40 6.10%
- -----------------------------------------------------------------------------------------------------------------
Total $932,044 $15,506 6.66% $790,470 $ 14,154 7.16%
==================================================================================================================
</TABLE>
The provision for loan losses for the three months ended March 31, 1999,
amounted to $120,000. There was no provision for loan losses for the three
months ended March 31, 1998. The provision for loan losses reflects the increase
in the total residential mortgage loan portfolio.
Noninterest expenses for the three months ended March 31, 1999 and 1998 amounted
to $876,000 and $925,000, respectively, and included advisory fees and dividends
on Series A Preferred Stock. The reduction in noninterest expenses of $49,000 is
primarily due to the write-off of remaining start-up costs in the fourth quarter
of 1998. No income tax expense was recorded for either period.
RECENT FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments imbedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
This SFAS is not expected to impact the Company since the Company does not
engage in hedging activities or utilize derivative instruments.
11
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
YEAR 2000 READINESS DISCLOSURE STATEMENT
The "Year 2000" issue refers to the potential impact of the failure of computer
programs and equipment to give proper recognition of dates beyond December 31,
1999 and other issues related to the Year 2000 century date change.
I. The Company's State Of Readiness
The Company has assessed the issues regarding Year 2000 and since the Company
depends on Webster Bank as Advisor and Servicer, as agreed upon in the Advisory
Service Agreement and the Master Service Agreement, the Company will be reliant
on Webster Bank and its parent company, Webster Financial Corporation
("Webster"), to ensure proper date recognition.
The Company has reviewed documentation provided by Webster and has determined
that Webster is taking the appropriate steps to become Year 2000 compliant.
II. The Costs To Address The Company's Year 2000 Issues
The Company currently pays a monthly servicing and managerial fee to Webster as
agreed upon in the Advisory Service Agreement and the Master Service Agreement.
The Company is not expected to incur any costs associated with Year 2000 issues
that are not covered under the Advisory Service Agreement and the Master Service
Agreement. The Advisory Service Agreement and the Master Service Agreement
include technical support, and administrative services, in which Webster
monitors and supervises the performance of all parties who have contracts to
perform services for the Company.
III. The Risks Of The Company's Year 2000 Issues
The Company is in the process of identifying and evaluating potential Year 2000
related worst case scenarios that could result from 1) Webster's failure to
identify, test, and validate all critical date dependent applications and
embedded microchips that affect core business processes and 2) the failure of
external forces, such as third party vendors, and utilities, to have properly
remediated their systems.
Potential worst case scenarios being addressed, include: extended electrical
power outage, extended telephone communication outage, and excessive media
speculation and community fear.
The Company is unable to estimate lost revenue related to Year 2000 issues due
to the uncertainties of the impact and effects of external forces and their
potential extended disruptions.
IV. The Company's Contingency Plans
A contingency plan is being drafted by the Company to address each identified
potential worst case scenario. Alternative solutions for business resumption and
approaches to minimize the impact of each scenario are being formulated.
Proposed approaches to address potential scenarios include: designating
alternate offices as emergency locations with alternate power sources and
identifying alternate communication methods.
Availability Of Webster's Disclosure
Webster's Year 2000 Readiness Disclosure Statement is available in detail in its
December 31, 1998, Form 10-K.
12
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table summarizes the estimated market value of the Company's
interest-sensitive assets and interest-sensitive liabilities at March 31, 1999
and the projected change to market values if interest rates instantaneously
increase or decrease by 100 basis points.
<TABLE>
<CAPTION>
Estimated Market Value Impact
---------------------------
(In Thousands) Book Value Market Value -100 BP +100 BP
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT MARCH 31, 1999
Interest Sensitive Assets:
Mortgage-Backed Securities $ 112,498 112,499 2,024 (3,436)
Variable-Rate Residential Loans 513,139 523,075 6,464 (9,829)
Fixed-Rate Residential Loans 329,201 339,358 7,219 (13,330)
Interest-Sensitive Liabilities:
Series A Preferred Stock 40,000 40,000 533 (3,935)
- -----------------------------------------------------------------------------------------------
</TABLE>
FORWARD LOOKING STATEMENTS
Statements in Management's Discussion and Analysis in the section captioned
"Year 2000 Readiness Disclosure Statement" and in "Quantitative and Qualitative
Disclosures about Market Risk" are 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 that differ from
those in any forward-looking statements include changes in interest rates and
general economics in the Connecticut market area where a substantial portion of
the real estate securing the Company's loans is located. Such developments could
have an adverse impact on the Company's financial position and results of
operations.
13
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Numbers Description
--------------- -----------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1999.
14
<PAGE>
SIGNATURES
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
BY: /s/ Peter J. Swiatek
----------------------------------
Peter J. Swiatek,
Vice President & Treasurer
Principal Financial Officer
Principal Accounting Officer
Date: May 12, 1999
15
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
27 Financial Data Schedule
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 22,362
<SECURITIES> 112,498
<RECEIVABLES> 846,183
<ALLOWANCES> (1,675)
<INVENTORY> 0
<CURRENT-ASSETS> 5,987
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 985,355
<CURRENT-LIABILITIES> 1,536
<BONDS> 0
40,000
1,000
<COMMON> 1
<OTHER-SE> 942,818
<TOTAL-LIABILITY-AND-EQUITY> 985,355
<SALES> 15,506
<TOTAL-REVENUES> 15,506
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 876
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,510
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,510
<EPS-PRIMARY> 142,940
<EPS-DILUTED> 142,940
</TABLE>
