UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the fiscal year ended December 31, 2002

                                       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

   SECURITIES REGISTERED PURSUANT TO SECTION 12(a) OF THE ACT: Not Applicable

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

               Title of Class                 Exchange where listed
               --------------                 ---------------------
             Preferred Stock, $1 par value           NASDAQ

         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 [ ].

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12B-2). Yes [ ]     No [X] .

         State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently completed
second fiscal quarter. N/A

         The number of shares outstanding of each of the registrant's classes of
common stock, as of February 28, 2003 is: 100 shares


<PAGE>

                      WEBSTER PREFERRED CAPITAL CORPORATION
                          2002 FORM 10-K ANNUAL REPORT
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                             PAGE
                                                                             ----
<S>          <C>                                                              <C>

                                    PART I

ITEM  1.     Business.......................................................   3

                  General...................................................   3
                  Residential Mortgage Loans................................   4
                  Investment Activities.....................................   4
                  Liquidity and Capital Resources...........................   5
                  Regulation................................................   5
                  Taxation..................................................   5

ITEM  2.     Properties.....................................................   6
ITEM  3.     Legal Proceedings..............................................   6
ITEM  4.     Submission of Matters to a Vote of Security Holders............   6

                                     PART II

ITEM  5.     Market for the Registrant's Common Equity and
               Related Stockholder Matters..................................   7
ITEM  6.     Selected Financial Data........................................   8
ITEM  7.     Management's Discussion and Analysis of Financial Condition
               and Results of Operations ...................................   9
ITEM  7A.    Quantitative and Qualitative Disclosures About Market Risk ....  15
ITEM  8.     Financial Statements and Supplementary Data....................  16
ITEM  9.     Changes in and Disagreements with Accountants
               on Accounting and Financial Disclosure.......................  26

                                    PART III

ITEM 10.     Directors and Executive Officers of the Registrant.............  27
ITEM 11.     Executive Compensation.........................................  28
ITEM 12.     Security Ownership of Certain Beneficial Owners
               and Management...............................................  29
ITEM 13.     Certain Relationships and Related Transactions.................  29
ITEM 14.     Controls and Procedures........................................  29


                                     PART IV

ITEM 15.     Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K ...........................................  30

SIGNATURES .................................................................  32

CERTIFICATIONS .............................................................  33

EXHIBITS ...................................................................  35

</TABLE>


                                       2

<PAGE>


FORWARD LOOKING STATEMENTS
--------------------------

This Annual 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 could cause actual results to 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, legislative and
regulatory changes, changes in tax laws and policies, and changes in accounting
policies, principals or guidelines. Such developments could have an adverse
impact on the Company's financial position and results of operations. An example
of a forward-looking statement in this Annual Report is the "Quantitative and
Qualitative Disclosures about Market Risk" section contained in Management's
Discussion and Analysis.

                                     PART I

ITEM 1.  BUSINESS
         --------

GENERAL

Webster Preferred Capital Corporation (the "Company") is a Connecticut
corporation incorporated in March 1997. The Company acquires, holds and manages
real estate mortgage assets ("mortgage assets"), including, but not limited to,
residential mortgage loans, mortgage-backed securities and commercial mortgage
loans. At December 31, 2002 and 2001, the mortgage assets owned by the Company
were comprised of residential mortgage loans and mortgage-backed securities.
Although the Company may acquire and hold a variety of mortgage assets, its
present intention is to acquire only residential mortgage loans and
mortgage-backed securities. The Company intends to hold such assets to generate
net income for distribution to its shareholders based on the spread between the
interest income earned on the mortgage assets and the cost of its capital and
operations. The Company may invest up to 5% of the total value of its portfolio
in assets other than residential mortgage loans and mortgage-backed securities
eligible to be held by real estate investment trusts ("REITs"). As of December
31, 2002, approximately 52.5% of the Company's residential mortgage loans are
fixed-rate loans and 47.5% are adjustable-rate loans.

All of the Company's common stock is owned by Webster Bank. Webster Bank has
indicated to the Company that, for as long as any of the Company's preferred
shares are outstanding, Webster Bank intends to maintain direct ownership of
100% of the outstanding common stock of the Company. Pursuant to the Company's
Certificate of Incorporation, the Company cannot redeem, or make any other
payments or distributions with respect to shares of its common stock to the
extent such redemptions, payments or distributions would cause the Company's
total shareholders' equity (as determined in accordance with accounting
principles generally accepted in the United States of America) to be less than
250% of the aggregate liquidation value of the issued and outstanding preferred
shares. The preferred shares are not exchangeable into capital stock or other
securities of Webster Bank or Webster Financial Corporation ("Webster"), the
parent company of Webster Bank, and do not constitute regulatory capital of
either Webster Bank or Webster. The Company has no subsidiaries.

The Company operates a single segment - acquiring, holding and managing real
estate mortgage assets.

The Company has elected to be treated as a REIT under the Internal Revenue Code,
as amended (the "Code"). The Company generally will not be subject to federal
and Connecticut state income tax to the extent that it distributes its earnings
to its shareholders and maintains its qualification as a REIT.

Total assets of the Company were $631.2 million at December 31, 2002, a decrease
of $297.5 million from $928.7 million at December 31, 2001, primarily due to
return of capital dividends to the common stockholder of $300.0 million. As a
consequence, shareholder's equity was $631.0 million at December 31, 2002 and
$928.4 million at December 31, 2001.

                                       3

<PAGE>


RESIDENTIAL MORTGAGE LOANS

The Company may, from time to time, acquire both conforming and nonconforming
residential mortgage loans. Conventional, conforming residential mortgage loans
comply with the requirements for inclusion in a loan guarantee program sponsored
by either Freddie Mac or Fannie Mae. Nonconforming residential mortgage loans do
not qualify for these programs in one or more aspects. The nonconforming
residential mortgage loans that the Company purchases generally have original
principal balances which exceed the limits for these programs. The Company's
nonconforming residential mortgage loans are expected to meet the requirements
for sale to national private mortgage conduit programs or other investors in the
secondary mortgage market.

Residential mortgage loans are evidenced by a promissory note secured by a
mortgage or deed of trust or other similar security instrument creating a first
lien on a single family (one-to-four unit) residential property, including stock
allocated to a dwelling unit in a residential cooperative housing corporation.
Residential real estate properties underlying residential mortgage loans consist
of individual dwelling units, individual cooperative apartment units, individual
condominium units, two- to four-family dwelling units, planned unit developments
and townhouses.

A summary of the Company's residential mortgage loans by original maturity for
the last five years follows:

<TABLE>
<CAPTION>


                                                                        At December 31,
-------------------------------------------------------------------------------------------------------------
(Dollars in thousands)                             2002        2001          2000        1999          1998
-------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>          <C>          <C>          <C>
Fixed-rate loans:
       15 yr. loans                             $  55,956    $  81,566    $ 102,348    $ 113,950    $ 114,924
       20 yr. loans                                 3,132        4,693        5,107        5,322        3,213
       25 yr. loans                                 2,542        2,598        2,899        2,758        1,849
       30 yr. loans                               138,008      191,049      223,438      227,977      192,490
-------------------------------------------------------------------------------------------------------------

              Total fixed-rate loans              199,638      279,906      333,792      350,007      312,476
-------------------------------------------------------------------------------------------------------------
Variable-rate loans:
       15 yr. loans                                 1,605        3,015        4,700        6,108        5,222
       20 yr. loans                                 3,127        5,368        7,505        7,839        6,504
       25 yr. loans                                 2,680        4,581        6,214        6,759        8,578
       30 yr. loans                               173,482      295,835      418,461      476,647      484,824
-------------------------------------------------------------------------------------------------------------

              Total variable-rate loans           180,894      308,799      436,880      497,353      505,128
-------------------------------------------------------------------------------------------------------------

Total residential mortgage loans                  380,532      588,705      770,672      847,360      817,604
Premiums and deferred costs on loans, net           1,164        2,181        3,235        3,762        3,585
Less: allowance for loan losses                    (2,106)      (2,139)      (2,059)      (1,912)      (1,555)
-------------------------------------------------------------------------------------------------------------

              Residential mortgage loans, net   $ 379,590    $ 588,747    $ 771,848    $ 849,210    $ 819,634
=============================================================================================================

</TABLE>


INVESTMENT ACTIVITIES

MORTGAGE-BACKED SECURITIES. The Company may, from time to time, acquire
fixed-rate or adjustable-rate mortgage-backed securities representing interests
in pools of residential mortgage loans. A portion of any of the mortgage-backed
securities that the Company purchases may have been originated by Webster Bank
by exchanging pools of mortgage loans for the mortgage-backed securities. The
mortgage loans underlying the mortgage-backed securities are secured by single
family residential properties located throughout the United States.

The Company intends to acquire only investment-grade mortgage-backed securities
issued or guaranteed by Fannie Mae, Freddie Mac and Government National Mortgage
Association ("GNMA"). The Company does not intend to acquire any interest-only,
principal-only or high-risk mortgage-backed securities. Further, the Company
does not intend to acquire any residual interests in real estate mortgage
conduits or any interests, other than as a creditor, in any taxable mortgage
pools.

                                       4


<PAGE>

OTHER REAL ESTATE ASSETS. Although the Company presently intends to invest only
in residential mortgage loans and mortgage-backed securities, the Company may
invest up to 5% of the total value of its portfolio in assets other than
residential mortgage loans and mortgage-backed securities eligible to be held by
REITs. In addition to commercial mortgage loans, such assets could include cash
and cash equivalents. The Company does not intend to invest in securities or
interests of persons primarily engaged in real estate activities. At December
31, 2002 and 2001, the Company did not hold any commercial mortgage loans.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal liquidity need will be to fund dividends on outstanding
capital stock. In January 2001, the Company redeemed its outstanding shares of
Series A Preferred Stock for $40 million, plus accrued dividends. The Company
had sufficient cash on hand to redeem the shares. The Company does not
anticipate that it will have any other material capital expenditures. The
Company believes that cash generated from the payment of interest and principal
on its mortgage assets will provide sufficient funds to meet its operating
requirements and to pay dividends in accordance with the requirements to be
taxed as a REIT for the foreseeable future. To the extent that the Company
accumulates cash in order to meet its dividend requirements, it may invest such
cash in short-term securities or money-market instruments.

REGULATION

The Company is a wholly owned subsidiary of Webster Bank. Webster Bank is
subject to extensive regulation, supervision and examination by the Office of
Thrift Supervision (the "OTS") as its primary federal regulator. Webster Bank
also is subject to regulation, supervision and examination by the Federal
Deposit Insurance Corporation (the "FDIC") and, as to certain matters, by the
Board of Governors of the Federal Reserve System. These federal banking
regulatory authorities have the right to examine the Company and its activities
as a subsidiary of Webster Bank.

If Webster Bank were to become "undercapitalized" under "prompt corrective
action" initiatives of the OTS, the OTS has the authority to require, among
other things, that Webster Bank or the Company alter, reduce or terminate any
activity that the OTS determines poses an excessive risk to Webster Bank. The
Company does not believe that its activities currently pose, or in the future
will pose, such a risk to Webster Bank; however, there can be no assurance in
that regard. The regulators also could restrict transactions between Webster
Bank and the Company, including the transfer of assets, or require Webster Bank
to divest or liquidate the Company. Webster Bank could further be directed to
take prompt corrective action if federal regulators determined that Webster Bank
was in an unsafe or unsound condition or engaging in an unsafe or unsound
practice. In light of Webster Bank's control of the Company, as well as the
Company's dependence and reliance upon the skills and diligence of Webster
Bank's offices and employees, some or all of the foregoing actions and
restrictions could have an adverse effect on the operations of the Company,
including causing the Company to fail to qualify as a REIT.

Pursuant to OTS regulations and the Company's Certificate of Incorporation, the
Company maintains a separate corporate existence from Webster Bank. In the event
Webster Bank should be placed into receivership or conservatorship by federal
bank regulators, such federal bank regulators would control Webster Bank. There
can be no assurance that these regulators would not cause Webster Bank, as sole
holder of the common stock, to take action adverse to the interest of holders of
the preferred shares of the Company.

TAXATION

The Company elected to be treated as a REIT under Sections 856 through 860 of
the Code, commencing with its taxable year ended December 31, 1997. As a REIT,
the Company generally will not be subject to federal and Connecticut income
taxes on its net income and capital gains that it distributes to the holders of
its common stock and preferred stock. Prior to January 16, 2001, Webster Bank
was not subject to Connecticut state income tax on dividends to it by the
Company. This exemption expired with the redemption of the Series A Preferred
Stock.

To maintain REIT status, an entity must meet a number of organizational and
operational requirements, including a requirement that it currently distribute
to stockholders at least 90% of its "REIT taxable income" (not including


                                       5
<PAGE>


capital gains and certain items of non-cash income). If the Company fails to
qualify as a REIT in any taxable year, it will be subject to federal and
Connecticut state income tax at regular corporate rates. Notwithstanding
qualification for taxation as a REIT, the Company may be subject to federal,
state and/or local tax, on undistributed REIT taxable income and net income from
prohibited transactions.

ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. The Company intends to
operate so as to qualify as a REIT under the Code. Although the Company believes
that it is owned, organized and operates in such a manner as to qualify as a
REIT, no assurance can be given as to the Company's ability to remain qualified
as a REIT. Qualification as a REIT involves the application of highly technical
and complex Code provisions for which there are only limited judicial or
administrative interpretations. The determination of various factual matters and
circumstances, not entirely within the Company's control, may affect the
Company's ability to qualify as a REIT. Although the Company is not aware of any
proposal in Congress to amend the tax laws in a manner that would materially and
adversely affect the Company's ability to operate as a REIT, no assurance can be
given that new legislation, regulations, administrative interpretations or court
decisions will not significantly change the tax laws in the future with respect
to qualification as a REIT or the federal income tax consequences of such
qualification.

If in any taxable year the Company fails to qualify as a REIT, the Company would
not be allowed a deduction for distributions to stockholders in computing its
federal taxable income and would be subject to federal and Connecticut state
income tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. As a result, the amount available for
distribution to the Company's stockholders would be reduced for the year or
years involved. In addition, unless entitled to relief under certain statutory
provisions, the Company would also be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification was lost. A
failure of the Company to qualify as a REIT would not by itself give the Company
the right to redeem the preferred shares, nor would it give the holders of the
preferred shares the right to have their shares redeemed.

Notwithstanding that the Company currently intends to operate in a manner
designed to qualify as a REIT, future economic, market, legal, tax or other
considerations may cause the Company to determine that it is in the best
interest of the Company and the holders of its common stock and preferred stock
to revoke the REIT election. The tax law prohibits the Company from electing
treatment as a REIT for the four taxable years following the year of such
revocation.

In the event that the Company has insufficient available cash on hand or is
otherwise precluded from making dividend distributions in amounts sufficient to
maintain its status as a REIT or to avoid imposition of an excise tax, the
Company may avail itself of consent dividend procedures. A consent dividend is a
hypothetical dividend, as opposed to an actual dividend, declared by the Company
and treated for U.S. federal tax purposes as though it had actually been paid to
stockholders who were the owners of shares on the last day of the year and who
executed the required consent form, and then recontributed by those stockholders
to the Company. The Company would use the consent dividend procedures only with
respect to its common stock.

ITEM 2.  PROPERTIES
         ----------

Not Applicable.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

No matter was submitted during the fourth quarter of the fiscal year 2002 to
security holders for a vote.

                                       6


<PAGE>



                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
         ---------------------------------------------------------------------

All of the Company's common stock is owned by Webster Bank, and consequently
there is no market for such securities. The Company's Series B 8.625% Cumulative
Redeemable Preferred Stock (the "Series B Preferred Stock") is traded
over-the-counter and quoted on the NASDAQ Stock Market's National Market Tier
under the symbol "WBSTP."

The Series A 7.375% Cumulative Redeemable Preferred Stock was required to be
redeemed on January 15, 2001, at $1,000 per share, plus accrued and unpaid
dividends. The total redemption was made on January 16, 2001, due to a legal
holiday on January 15, 2001, for $40.7 million out of existing cash.

The Series B Preferred Stock was not redeemable (barring certain circumstances)
prior to January 15, 2003. On and after January 15, 2003, the Series B Preferred
shares may be redeemed at the option of the Company, in whole or in part, at a
redemption price of $10 per share, plus any accrued and unpaid dividends. At
this time, management has no plans to redeem the Series B Preferred Stock.

Dividends declared and paid on the common stock in 2002, 2001 and 2000 totaled
$41.5 million, $56.5 million and $61.5 million, respectively. Dividends declared
on the Series A Preferred Stock in 2001 totaled $123,000 and totaled $3.0
million for 2000. Dividends declared on the Series B Preferred Stock in 2002,
2001 and 2000 totaled $862,500 for each year.

The market price for the Series B Preferred Stock averaged $10.45, $10.40 and
$9.36 for the years ending December 31, 2002, 2001 and 2000, respectively. The
Series B Preferred Stock reached a low of $9.96 and a high of $11.25, during the
year ended December 31, 2002. The Series B Preferred Stock reached a low of
$9.63 and a high of $11.25, during the year ended December 31, 2001. The Series
B Preferred Stock reached a low of $8.38 and a high of $10.25, during the year
ended December 31, 2000.

Dividends will be declared at the discretion of the Board of Directors after
considering the Company's distributable funds, financial requirements, tax
considerations and other factors. The Company's distributable funds will consist
primarily of interest and principal payments on the Mortgage Assets held by it,
and the Company anticipates that a significant portion of such assets will bear
interest at adjustable rates. Accordingly, if there is a decline in interest
rates, the Company may experience a decrease in income available to be
distributed to its shareholders. However, the Company currently expects that
both its cash available for distribution and its "REIT taxable income" will
exceed the amount needed to pay dividends on the Preferred Shares, even in the
event of a significant decline in interest rate levels, because (i) the
Company's Mortgage Assets are interest-bearing, (ii) the Series B Preferred
Stock is not expected to exceed 15% of the Company's capitalization, and (iii)
the Company does not anticipate incurring any indebtedness.





                                       7

<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA
         -----------------------

The selected financial data set forth below is based upon and should be read in
conjunction with the Company's audited financial statements and notes thereto
appearing elsewhere in this document.

<TABLE>
<CAPTION>


BALANCE SHEET DATA                                                           At December 31,
                                                    --------------------------------------------------------------------
(In thousands)                                        2002           2001           2000           1999          1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>            <C>            <C>

Available for sale securities, at fair value        $110,061       $158,543       $ 76,927       $ 95,647       $118,262
Residential mortgage loans, net                      379,590        588,747        771,848        849,210        819,634
Interest-bearing deposits                            110,500        167,500         97,500             --             --
Total assets                                         631,237        928,672        968,198        967,209        970,961
Total liabilities                                        245            246            864            982          1,243
Mandatorily redeemable preferred stock                    --             --         40,000         40,000         40,000
Total shareholders' equity                           630,992        928,426        927,334        926,227        929,718
------------------------------------------------------------------------------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>


INCOME STATEMENT DATA                                                 For the Year Ended December 31,
                                                    --------------------------------------------------------------------
(In thousands)                                        2002           2001           2000           1999          1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>            <C>            <C>

Total interest income                               $ 42,255       $ 58,071       $ 65,312       $ 64,219       $ 62,134
Provision for loan losses                                 --             90            190            480            300
Gain on sale of securities                                --             --             94             --            261
Noninterest expenses                                     310            384          3,534          3,522          3,836
------------------------------------------------------------------------------------------------------------------------
Net income                                            41,945         57,597         61,682         60,217         58,259
Preferred stock dividends                                863            863            863            862            862
------------------------------------------------------------------------------------------------------------------------
Net income available to
common shareholder                                  $ 41,082       $ 56,734       $ 60,819       $ 59,355       $ 57,397
------------------------------------------------------------------------------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>

                                                                     For the Year Ended December 31,
                                                    --------------------------------------------------------------------
SIGNIFICANT STATISTICAL DATA                          2002           2001           2000           1999          1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>            <C>            <C>

Net income per common share
       Basic                                        $410,816       $567,336       $608,189       $593,550       $573,970
       Diluted                                      $410,816       $567,336       $608,189       $593,550       $573,970
Dividends declared per
common share                                        $412,272       $570,141       $615,050       $602,910       $582,250
------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       8

<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         -----------------------------------------------------------------------
         OF OPERATIONS
         -------------

The Company has elected to be treated as a REIT under the Code and will
generally not be subject to federal and Connecticut 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.

CRITICAL ACCOUNTING POLICIES
----------------------------

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and could potentially result in
materially different results under different assumptions and conditions. We
believe that our most critical accounting policies upon which our financial
condition depends, and which involve the most complex or subjective decisions or
assessments are as follows:

ALLOWANCE FOR LOAN LOSSES

Arriving at an appropriate level of allowance for loan losses involves a high
degree of judgment. The Company's allowance for loan losses provides for
probable losses based upon evaluations of known and inherent risks in the loan
portfolio. Management uses historical information to assess the adequacy of the
allowance for loan losses as well as the prevailing business environment; as it
is affected by changing economic conditions and various external factors, which
may impact the portfolio in ways currently unforeseen. The allowance is
increased by provisions for loan losses and by recoveries of loans previously
charged-off and reduced by loans charged-off.

FINANCIAL CONDITION
-------------------

Total assets, consisting primarily of residential mortgage loans and
mortgage-backed securities, were $631.2 million at December 31, 2002, a decrease
of $297.5 million from $928.7 million at December 31, 2001. The primary factors
causing the decline in total assets were decreases in net loans of $209.2
million, mortgage-backed securities of $48.5 million and interest-bearing
deposits of $57.0 million. These funds were primarily used for a $300.0 million
return of capital dividend to the Company's common shareholder and the $41.5
million payment of a common stock dividend. As a result of the return of capital
dividend, shareholders' equity declined to $631.0 million at December 31, 2002
from $928.4 million at December 31, 2001.

Reductions in loans and mortgage-backed securities were primarily due to
accelerated prepayments throughout 2002 due to the low interest rate
environment. The decline in accrued interest receivable of $2.4 million is due
to the decline in earning assets, as well as lower interest rates, primarily on
interest-bearing deposits. The decrease in other assets from $6.4 million to
$1.5 million was due to a reduction in the balance of mortgage payments
collected by Webster Bank, the Company's loan servicer, but remitted subsequent
to the prior year end.

ASSET QUALITY

The Company maintains asset quality by acquiring residential real estate loans
that have been conservatively underwritten and by aggressively managing
nonperforming assets. During 2002, all loan purchases by the Company were from
Webster Bank. As such, the Company's asset quality is dependent upon Webster
Bank's ability to maintain conservative underwriting standards. At December 31,
2002, residential real estate loans comprised the entire loan portfolio. The
Company also invests in government agency or government-sponsored agency issued
mortgage-backed securities.


                                       9

<PAGE>

NONPERFORMING ASSETS AND DELINQUENCIES

The following table details the Company's nonperforming assets for the last five
years:

<TABLE>
<CAPTION>
                                                                              At December 31,
                                                      -------------------------------------------------------------------
(Dollars in thousands)                                  2002           2001          2000           1999           1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>            <C>
Loans accounted for on a nonaccrual basis:
       Residential fixed-rate loans                   $   247        $   120        $   231        $   319        $    71
       Residential variable-rate loans                    209            425            186            830          1,206
-------------------------------------------------------------------------------------------------------------------------
             Total nonperforming loans                    456            545            417          1,149          1,277
Other real estate owned                                    79             88            288             60             --
-------------------------------------------------------------------------------------------------------------------------
             Total nonperforming assets               $   535        $   633        $   705        $ 1,209        $ 1,277
=========================================================================================================================
Allowance for loan losses                             $ 2,106        $ 2,139        $ 2,059        $ 1,912        $ 1,555
       Allowance / nonperforming loans                    462%           392%           494%           166%           122%
       Allowance / total mortgage loans                  0.55%          0.36%          0.27%          0.22%          0.19%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table sets forth information as to the Company's loans past due
30-89 days and still accruing:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                      -------------------------------------------------------------------
(Dollars in thousands)                                  2002           2001          2000           1999           1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>            <C>
Past due 30-89 days:
       Residential fixed-rate loans                   $   643        $   583        $ 5,809        $ 4,453        $ 4,605
       Residential variable-rate loans                  1,176          1,749         12,513          8,430         14,082
-------------------------------------------------------------------------------------------------------------------------
             Total                                    $ 1,819        $ 2,332        $18,322        $12,883        $18,687
=========================================================================================================================

</TABLE>

ALLOWANCE FOR LOAN LOSSES


         An allowance for loan losses is established based upon a review of the
loan portfolio, loss experience, specific problem loans, current and anticipated
economic conditions and other pertinent factors which, in management's judgment,
deserve current recognition in estimating probable loan losses.

         Management believes that the allowance for loan losses is adequate.
While management believes it uses the best available information to recognize
losses on loans, future additions to the allowance may be necessary based on
actual results or changes in information used. In addition, various regulatory
agencies, as an integral part of their examination process of Webster Bank,
periodically may review the Company's allowance for loan losses. Such agencies
may require the Company to recognize additions to the allowance for loan losses
based on judgments different from those of management.

A detail of the change in the allowance for loan losses for the periods
indicated follows:

<TABLE>
<CAPTION>
                                                                        For the Year Ended December 31,
                                                      -------------------------------------------------------------------
(Dollars in thousands)                                  2002           2001          2000           1999           1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>            <C>            <C>

Balance at beginning of period                        $ 2,139        $ 2,059        $ 1,912        $ 1,555        $ 1,538
Provision charged to operations                            --             90            190            480            300
Charge-offs                                               (33)           (10)           (43)          (123)          (284)
Recoveries                                                 --             --             --             --              1
-------------------------------------------------------------------------------------------------------------------------

       Balance at end of period                       $ 2,106        $ 2,139        $ 2,059        $ 1,912        $ 1,555

=========================================================================================================================
</TABLE>
                                       10

<PAGE>

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 purchases 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 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.

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, commencing January 15, 1998. The Company
periodically makes dividend payments on its common stock in accordance with
Company by-laws. Common stock dividends are paid to comply with REIT
qualification rules. REIT qualification rules require that 90% of net taxable
income for the year be distributed to shareholders. In April and October 2002,
the Company declared and paid a return of capital dividend to Webster Bank, the
Company's sole common shareholder, a total of $300.0 million. Accelerated
prepayments during the second half of 2001 and throughout 2002 resulted in
increased cash levels for the company. This dividend returns the cash to the
Company's common shareholder.

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. 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 reprice 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 December 31, 2002, 47.5% of the Company's residential
mortgage loans were variable-rate loans.

RESULTS OF OPERATIONS
---------------------

For the years ended December 31, 2002, 2001 and 2000, the Company reported net
income of $41.9 million, $57.6 million and $61.7 million, respectively or
$410,816, $567,336 and $608,189, respectively, per common share on a diluted
basis.

Total interest income for 2002 amounted to $42.3 million, net of servicing fees,
a decrease of $15.8 million from $58.1 million, net of servicing fees, in 2001.
Total interest income for 2001 decreased $7.2 million from $65.3 million, net of
servicing fees, in 2000. The table below shows the major categories of average
assets together with their respective interest income and the rates earned by
the Company.

The decline in interest income of $15.8 million, or 27.2%, from 2001 to 2002 was
due to both a decline in yield on earning assets and a decline in outstanding
earning assets. Due to the declining interest rate environment during 2002,
mortgage prepayments accelerated. These assets were replaced with ones earning a
lower yield. The decline in balances was due to accelerated prepayments and the
$300.0 million return of capital dividend to the common shareholder.

                                       11


<PAGE>


The decline in interest income of $7.2 million, or 11.1%, from 2000 to 2001 was
due to both a decline in yield on earning assets and a decline in outstanding
earning assets. Due to the declining interest rate environment during 2001,
mortgage prepayments accelerated. These assets were replaced with ones earning a
lower yield. The decline in balances was due to the repayment of the $40.0
million Series A Preferred Stock.

<TABLE>
<CAPTION>

                                                     For the years ended December 31,
                              --------------------------------------------------------------------------------------------------
                                           2002                              2001                            2000
                              --------------------------------------------------------------------------------------------------
                               Average   Interest     Average    Average   Interest     Average  Average    Interest     Average
(Dollars in thousands)         Balance    Income       Yield     Balance    Income       Yield   Balance     Income       Yield
                              --------------------------------------------------------------------------------------------------
<S>                           <C>        <C>           <C>      <C>        <C>           <C>     <C>        <C>           <C>
Mortgage loans, net           $495,598   $ 31,161      6.29%    $704,930   $ 47,807      6.78%   $824,283   $ 56,383      6.84%
Mortgage-backed securities     136,517      8,863      6.49      102,794      6,742      6.56      72,301      4,875      6.74
Interest-bearing deposits      128,662      2,231      1.73       94,625      3,522      3.72      65,678      4,054      6.17
                              --------------------------------------------------------------------------------------------------
        Total                 $760,777    $42,255      5.55%    $902,349   $ 58,071      6.44%   $962,262   $ 65,312      6.79%
                              ==================================================================================================

</TABLE>

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 and
interest-bearing liabilities have impacted interest income and interest expense
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.

<TABLE>
<CAPTION>

                                                    Years ended December 31,             Years ended December 31,
                                                          2002 V. 2001                         2001 V. 2000
---------------------------------------------------------------------------------------------------------------------------
                                              Increase (Decrease) due to               Increase (Decrease) due to
(In thousands)                                Rate         Volume         Total          Rate        Volume         Total
---------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>           <C>           <C>           <C>

Interest on interest-earning assets:
  Loans, net and loans held for sale        $ (3,258)     $(13,388)     $(16,646)     $   (490)     $ (8,086)     $ (8,576)
  Mortgage-backed securities                     (73)        2,194         2,121          (134)        2,001         1,867
  Interest-bearing deposits                   (2,286)          995        (1,291)       (1,945)        1,413          (532)
---------------------------------------------------------------------------------------------------------------------------
Net change in fully taxable-equivalent
  net interest income                       $ (5,617)     $(10,199)     $(15,816)     $ (2,569)     $ (4,672)     $ (7,241)
===========================================================================================================================

</TABLE>

There was no provision for loan losses for the year ended December 31, 2002. The
provision for loan losses for the years ended December 31, 2001 and 2000
amounted to $90,000 and $190,000, respectively. The decline in the provision for
loan losses is reflective of the decrease in the total residential mortgage loan
portfolio, due to accelerated prepayments in mortgage loans, as well as the
continued low level of nonperforming loans and charge-offs.

There were no gains from sale of mortgage-backed securities for years ended
December 31, 2002 and 2001. Gains from the sale of mortgage-backed securities
for the year ended December 31, 2000 was $94,000.

Noninterest expenses for the years ended December 31, 2002, 2001 and 2000,
amounted to $310,000, $384,000 and $3.5 million, respectively, which included
advisory fees, dividends on Series A Preferred Stock and amortized start-up
costs. The reduction in noninterest expenses for 2002 from 2001 was due to the
inclusion in 2001 of $123,000 in Series A Preferred Stock dividends. This was
partially offset for year ended December 31, 2002 by increases in advisory fees
of $29,000 and increases in nonperforming asset expense of $36,000. The
reduction in noninterest expense in 2001 from 2000 was due to the repayment of
$40.0 million of Series A Preferred Stock and the resulting decline of $2.8
million in dividend expense. No income tax expense was recorded for any of the
periods.



                                       12

<PAGE>


IMPACT OF INFLATION AND CHANGING PRICES
---------------------------------------

The financial statements and related data presented herein have been prepared in
accordance with accounting principles generally accepted in the United States of
America, which require the measurement of financial position and operating
results in terms of historical dollars without considering changes in the
relative purchasing power of money over time due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of
a real estate investment trust are monetary in nature. As a result, interest
rates have a more significant impact on a real estate corporation's performance
than the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude as the price of
goods and services. In the current interest rate environment, the maturity
structure of the Company's assets is critical to the maintenance of acceptable
performance levels.

RECENT FINANCIAL ACCOUNTING STANDARDS
-------------------------------------

On December 2, 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS" or "Statement") No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
amendment of FASB Statement No. 123." This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
the annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on the
reported results. Management does not expect any material impact on its
financial statements when the statement is adopted.

On October 1, 2002, FASB issued SFAS No. 147, "Acquisitions of Certain Financial
Instruments - an amendment of FASB Statement No. 72 and 144 and FASB
Interpretation No. 9". The Statement removes acquisitions of financial
institutions from the scope of both SFAS No 72 and FIN 9 and requires that those
transactions be accounted for in accordance with SFAS Nos. 141 and 142. In
addition, the Statement amends SFAS No. 144 to include in its scope long-term
customer-relationship intangible assets of financial institutions such as core
deposit intangibles. The Company adopted SFAS No. 147 effective January 1, 2002,
without material impact on its financial statements.

On July 30, 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement requires companies to
recognize costs associated with exit or disposal activities when they occur
rather than at the date of commitment to an exit or disposal plan. SFAS No. 146
is to be applied prospectively to exit or disposal activities initiated after
December 31, 2002. Management does not expect any material impact on its
financial statements when the statement is adopted.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
This statement amends FASB Statement No. 13, "Accounting for Leases," to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. This
statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. SFAS No. 145 is effective for fiscal years beginning
after May 15, 2002, with early application encouraged. Management does not
expect any material impact on its financial statements when this statement is
adopted.

On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This Statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. This
Statement supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." This Statement also
supersedes the accounting and reporting provisions of APB Opinion No. 30
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." The changes in this Statement improve financial
reporting by requiring that one accounting model be used for long-lived assets
to be disposed of by broadening the presentation of discontinued operations to
include more disposal transactions. This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The provisions of this Statement are to be
applied prospectively. The Company adopted the provisions of this Statement
effective January 1, 2002 without effect on the financial condition of the
Company.

                                       13


<PAGE>


On August 16, 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". Statement No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. Statement No. 143 applies to
all entities. This Statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. Under this Statement, the liability is discounted and the
accretion expense is recognized using the credit-adjusted risk-free interest
rate in effect when the liability was initially recognized. The FASB issued this
Statement to provide consistency for the accounting and reporting of liabilities
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. This Statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002. Earlier application is
permitted. The Company does not expect any material impact on its financial
statements when this Statement is adopted.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." Statement No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement No. 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill. Statement No. 142
will require that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of Statement No. 142. Statement No. 142 will also
require that intangible assets with definite useful lives be amortized over
their respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The Company adopted the provisions of Statement No. 141 effective July 1, 2001
and the provisions of Statement No. 142 effective January 1, 2002, both without
effect on the financial condition of the Company.

In January 2003, FASB issued FASB Interpretation No. ("FIN") 46, "Consolidation
of Variable Interest Entities". This interpretation addresses consolidation by
business enterprises of variable interest entities which have one or both of the
following characteristics: 1) the entity investment is not sufficient to support
its activities without additional financial support, 2) equity investors lack
one or more of the essential characteristics of a controlling interest. This
interpretation is intended to achieve more consistent application of
consolidation policies to variable interest entities, and improve comparability
between enterprises engaged in similar activities even if some activities are
conducted through variable interest entities. The Company does not expect any
material impact on its financial statements as a result of this interpretation.

In November 2002, FASB issued FIN 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others". This interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements. It also clarifies that
a guarantor is required to recognize, at inception of guarantee, a liability for
the fair value of the obligation undertaken in issuing a guarantee. The
recognition of a liability for obligations under taken upon issuing a guarantee
results in a more representationally faithful depiction of the guarantor's
assets and liabilities. There was no material impact on the Company's financial
statements as a result of this interpretation.




                                       14

<PAGE>


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------

The following table summarizes the estimated market value of the Company's
interest-sensitive assets at December 31, 2002 and 2001, and the projected
change to market values if interest rates instantaneously increase or decrease
by 100 basis points. The Company had no interest-sensitive liabilities at
December 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                                                                        Estimated Market Value Impact
                                                                                      ---------------------------------
(In thousands)                                Amortized Cost       Market Value           -100 BP            +100 BP
-----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                 <C>                  <C>               <C>
AT DECEMBER 31, 2002
Interest sensitive assets:
      Mortgage-backed securities                 $ 105,832           $ 110,061            $ 1,942           $ (2,912)
      Variable-rate residential loans              180,894             186,182              1,629             (1,610)
      Fixed-rate residential loans                 199,638             211,622              1,110             (5,741)

-----------------------------------------------------------------------------------------------------------------------

AT DECEMBER 31, 2001
Interest sensitive assets:
      Mortgage-backed securities                 $ 157,331           $ 158,543            $ 6,175           $ (7,605)
      Variable-rate residential loans              308,799             308,533              4,186             (4,829)
      Fixed-rate residential loans                 279,906             287,009             10,579            (13,841)
-----------------------------------------------------------------------------------------------------------------------

</TABLE>


Interest-sensitive assets, when impacted by a minus 100 basis point rate change,
result in a favorable $4.7 million change in net market values for 2002 compared
to a favorable $20.9 million net market value change in 2001. These changes
represent 0.92% of interest-sensitive assets in 2002 and 2.78% in 2001. A plus
100 basis point rate change results in an unfavorable $10.3 million or 2.02%
change in 2002 compared to an unfavorable $26.3 million or 3.48% change in 2001.

Based on the Company's asset/liability mix at December 31, 2002, management
estimates that an instantaneous 100 basis point increase in interest rates would
increase net income over the next twelve months by 8.6%. An instantaneous 100
basis point decline in interest rates would decrease net income by 10.0%. These
estimates assume that management takes no action to mitigate any negative
effects from changing interest rates.

In particular, 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 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 Webster's interest-rate risk position at
December 31, 2002, represents a reasonable level of risk.


                                       15

<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
        -------------------------------------------

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
Webster Preferred Capital Corporation


We have audited the accompanying statements of condition of Webster Preferred
Capital Corporation (a subsidiary of Webster Bank) as of December 31, 2002 and
2001 and the related statements of income, comprehensive income, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Webster Preferred Capital
Corporation as of December 31, 2002 and 2001, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 2002 in conformity with accounting principles generally accepted in the
United States of America.




---------------
KPMG LLP
Hartford, Connecticut
January 22, 2003








                                       16

<PAGE>




WEBSTER PREFERRED CAPITAL CORPORATION

                             STATEMENTS OF CONDITION

<TABLE>
<CAPTION>

                                                                                                    December 31,
                                                                                        -------------------------------------
(Dollars in thousands, except per share data)                                              2002                    2001
-----------------------------------------------------------------------------------------------------------------------------
ASSETS

<S>                                                                                     <C>                      <C>
   Cash                                                                                 $  28,292                $  3,850
   Interest-bearing deposits                                                              110,500                 167,500
   Mortgage-backed securities available for sale, at fair value (Note 2)                  110,061                 158,543
   Residential mortgage loans, net (Note 3)                                               379,590                 588,747
   Accrued interest receivable                                                              1,192                   3,562
   Other real estate owned                                                                     79                      88
   Prepaid expenses and other assets                                                        1,523                   6,382
-----------------------------------------------------------------------------------------------------------------------------
     TOTAL ASSETS                                                                       $ 631,237                $928,672
=============================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

   Accrued dividends payable                                                            $     180                $    181
   Accrued expenses and other liabilities                                                      65                      65
-----------------------------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                                        245                     246
-----------------------------------------------------------------------------------------------------------------------------

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 (Note 4)                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                                                                      628,799                 928,799
     Distribution in excess of accumulated earnings                                        (3,037)                 (2,586)
     Accumulated other comprehensive income                                                 4,229                   1,212
-----------------------------------------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' EQUITY                                                           630,992                 928,426
-----------------------------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                         $ 631,237                $928,672
=============================================================================================================================

</TABLE>

See accompanying notes to financial statements





                                       17


<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                For the Years Ended December 31,
                                                                           ------------------------------------------
(In thousands, except per share data)                                        2002             2001              2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>              <C>              <C>
Interest income:
Loans (Note 5)                                                             $ 31,161         $ 47,807         $ 56,383
Securities and interest-bearing deposits                                     11,094           10,264            8,929
---------------------------------------------------------------------------------------------------------------------
        Total interest income                                                42,255           58,071           65,312
Provision for loan losses (Note 3)                                               --               90              190
---------------------------------------------------------------------------------------------------------------------
Interest income after provision for loan losses                              42,255           57,981           65,122

Noninterest income:
Gain on sale of securities                                                       --               --               94

Noninterest expenses:
Advisory fee expense paid to parent (Note 6)                                    186              158              158
Dividends on Mandatorily redeemable preferred stock (Note 4)                     --              123            2,950
Other noninterest expense                                                       124              103              426
---------------------------------------------------------------------------------------------------------------------
        Total noninterest expense                                               310              384            3,534

Income before income taxes                                                   41,945           57,597           61,682
Income taxes (Note 7)                                                            --               --               --
---------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                   41,945           57,597           61,682
Preferred stock dividends                                                       863              863              863
---------------------------------------------------------------------------------------------------------------------
Net income available to common shareholder                                 $ 41,082         $ 56,734         $ 60,819
=====================================================================================================================
Net income per common share:
        Basic                                                              $410,816         $567,336         $608,189
        Diluted                                                            $410,816         $567,336         $608,189
---------------------------------------------------------------------------------------------------------------------

</TABLE>


                       STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>

                                                                               For the Years Ended December 31,
---------------------------------------------------------------------------------------------------------------------
(In thousands)                                                              2002             2001             2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>              <C>
Net income                                                                $ 41,945         $ 57,597         $ 61,682

Other comprehensive income:
    Unrealized net holding gain on securities available for sale
    arising during the period                                                3,017              858            1,887

    Reclassification adjustment for gains realized
    during the period                                                           --               --              (94)

---------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                                   3,017              858            1,793
---------------------------------------------------------------------------------------------------------------------

Comprehensive income                                                      $ 44,962         $ 58,455         $ 63,475
=====================================================================================================================

</TABLE>


See accompanying notes to financial statements


                                       18

<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION

                       STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                         Distributions  Accumulated
                                                                                          in Excess of    Other
                                                  Preferred      Common      Paid-In      Accumulated  Comprehensive
(In thousands, except per share data)               Stock         Stock      Capital        Earnings      Income        Total
--------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>           <C>           <C>           <C>

Balance, December 31, 1999                        $   1,000    $       1    $ 928,799     $  (2,134)    $  (1,439)    $ 926,227
Comprehensive income:
Net income for 2000                                      --           --           --        61,682            --        61,682
Net unrealized losses on available
      for sale securities, net of
      reclassification adjustments                       --           --           --            --         1,793         1,793
                                                                                                                      ---------
Total comprehensive income                                                                                               63,475
                                                                                                                      ---------

Dividends declared and paid:
      Common stock ($615,050 per share)                  --           --           --       (61,505)           --       (61,505)
      Preferred stock series B
      ($0.8625 per share)                                --           --           --          (863)           --          (863)
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000                        $   1,000    $       1    $ 928,799     $  (2,820)    $     354     $ 927,334
===============================================================================================================================

Comprehensive income:
Net income for 2001                                      --           --           --        57,597            --        57,597
Net unrealized gains on available
      for sale securities, net of
      reclassification adjustments                       --           --           --            --           858           858
                                                                                                                      ---------
Total comprehensive income                                                                                               58,455
                                                                                                                      ---------
Dividends declared and paid:
      Common stock ($565,000 per share)                  --           --           --       (56,500)           --       (56,500)
      Preferred stock series B
      ($0.8625 per share)                                --           --           --          (863)           --          (863)
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001                        $   1,000    $       1    $ 928,799     $  (2,586)    $   1,212     $ 928,426
===============================================================================================================================

Comprehensive income:
Net income for 2002                                      --           --           --        41,945            --        41,945
Net unrealized gains on available
      for sale securities, net of
      reclassification adjustments                       --           --           --            --         3,017         3,017
                                                                                                                      ---------
Total comprehensive income                                                                                               44,962
                                                                                                                      ---------

Return of capital dividend on common stock               --           --     (300,000)           --            --      (300,000)
Dividends declared and paid:
      Common stock ($415,330 per share)                  --           --           --       (41,533)           --       (41,533)
      Preferred stock series B
      ($0.8625 per share)                                --           --           --          (863)           --          (863)
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002                        $   1,000    $       1    $ 628,799     $  (3,037)    $   4,229     $ 630,992
================================================================================================================================
</TABLE>

See accompanying notes to financial statements



                                       19

<PAGE>



WEBSTER PREFERRED CAPITAL CORPORATION

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                            For the Years Ended December 31,
                                                                     ----------------------------------------------
(Dollars in thousands)                                                  2002              2001             2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>               <C>
OPERATING ACTIVITIES:
Net income                                                           $  41,945         $  57,597         $  61,682
Adjustments to reconcile net income to net cash provided by
operating activities:
      Provision for loan losses                                             --                90               190
      Amortization of mortgage premiums                                    179               200               200
      Accretion of securities discount                                    (115)             (360)              (32)
      Amortization of net deferred loan costs                              838               853               655
      Gain on sale of securities                                            --                --               (94)
      Decrease in accrued interest receivable                            2,370             1,075               648
      Decrease in total liabilities                                         (1)             (618)             (118)
      Decrease (increase) in prepaid expenses and other assets           4,859            (6,380)              338
-------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                               50,075            52,457            63,469
-------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of  mortgage-backed securities                                     --           (99,747)          (34,193)
Principal collected on mortgage-backed securities                       51,614            19,349             7,444
Decrease (increase) in interest-bearing deposits                        57,000           (70,000)          (97,500)
Proceeds from REO sales                                                    192               384                92
Proceeds from sales of mortgage-backed securities                           --                --            47,388
Purchase of loans                                                           --            (6,401)          (31,415)
Principal repayments of loans, net                                     207,957           188,175           107,412
-------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities                       316,763            31,760              (772)
-------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Dividends paid on common and preferred stock                           (42,396)          (57,363)          (62,368)
Return of capital dividend to common shareholder                      (300,000)               --                --
Redemption of Series A preferred stock                                      --           (40,000)               --
-------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities                                 (342,396)          (97,363)          (62,368)
-------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents                        24,442           (13,146)              329
Cash and cash equivalents at beginning of year                           3,850            16,996            16,667
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                             $  28,292         $   3,850         $  16,996
===================================================================================================================

SUPPLEMENTAL DISCLOSURES:
      Income taxes paid                                              $      --         $      --         $      --
      Interest paid                                                         --                --                --

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITY:
        Loans transferred to REO                                     $     183         $     193         $     362

</TABLE>


See accompanying notes to financial statements




                                       20

<PAGE>


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




A) BUSINESS

Webster Preferred Capital Corporation (the "Company") is a Connecticut
corporation incorporated in March 1997 and a subsidiary of Webster Bank, which
is a wholly-owned subsidiary of Webster Financial Corporation ("Webster"). The
Company acquires, holds and manages real estate mortgage assets ("mortgage
assets"). As of December 31, 2002, the mortgage assets owned by the Company
consisted of whole loans secured by first mortgages or deeds of trusts on single
family (one-to-four unit) residential real estate properties ("residential
mortgage loans"), located primarily in Connecticut and mortgage-backed
securities, secured by these same type of loans, located throughout the country.

The Company has elected to be treated as a Real Estate Investment Trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"), and will
generally not be subject to federal income tax to the extent that it distributes
its earnings to its stockholders and maintains its qualification as a REIT. All
of the shares of the Company's common stock, par value $0.01 per share, are
owned by Webster Bank, which is a federally-chartered and federally-insured
savings bank. Webster Bank has indicated to the Company that, for as long as any
of the Company's preferred shares are outstanding, Webster Bank intends to
maintain direct ownership of 100% of the outstanding common stock of the
Company.

B) BASIS OF FINANCIAL STATEMENT PRESENTATION

The financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America. In preparing the
financial statements, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities, and disclosure of
contingent assets and liabilities, as of the date of the financial statements
and revenues and expenses for the periods presented. The actual results of the
Company could differ from those estimates. An example of a material estimate
that is susceptible to near-term changes is the allowance for loan losses.

C) ALLOWANCE FOR LOAN LOSSES

An allowance for loan losses is established based upon a review of the loan
portfolio, loss experience, specific problem loans, economic conditions and
other pertinent factors which, in management's judgment, deserve current
recognition in estimating probable loan losses.

Management believes that the allowance for loan losses is adequate. While
management believes it uses the best available information to recognize probable
losses on loans, future additions to the allowance may be necessary based upon
actual results or changes in the above mentioned factors. In addition, various
regulatory agencies, as an integral part of their examination process of Webster
Bank, periodically may review the Company's allowance for loan losses. Such
agencies may require the Company to recognize additions to the allowance for
loan losses based on judgments different from those of management.

D) OTHER REAL ESTATE OWNED

Other real estate owned consists of properties acquired through foreclosure
proceedings or acceptance of a deed in lieu of foreclosure. Other real estate
owned is reported at the lower of fair value less estimated selling expenses or
carrying value of the loan at the time of foreclosure. Operating expenses are
charged to current period earnings and gains and losses upon disposition are
reflected in the statement of income when realized.

E) LOANS

Loans are stated at the principal amounts outstanding net of deferred loan fees
and/or cost and an 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. Loan
origination fees, premiums and discounts on loans purchased 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 credited against loan
interest income.

                                       21


<PAGE>


The Company's residential mortgage loans are exempt from the disclosure
provisions of the Statement of Financial Accounting Standard ("SFAS") No.114,
"Accounting by Creditors for Impairment of a Loan," as amended by SFAS No.118,
since the Company's loans are comprised of large groups of smaller balance loans
which are collectively evaluated for impairment.

F) MORTGAGE-BACKED SECURITIES

Mortgage-backed securities are U.S. government agency or government sponsored
agency issued securities and are classified as available for sale. Available for
sale securities are carried at fair value with unrealized gains and losses
recorded as adjustments to shareholders' equity. The adjustment to shareholders'
equity is not tax-effected, as the Company is generally not subject to federal
and state income tax. Management intends to hold these securities for indefinite
periods of time as part of its asset/liability strategy and may sell the
securities in response to changes in interest rates, changes in prepayment risk
or other factors. One of the risks inherent when investing in mortgage-backed
securities is the ability of such instruments to incur prepayments of principal
prior to maturity. Because of prepayments, the weighted-average yield of these
securities may also change, which could affect earnings. Realized gains and
losses on the sales of securities are recorded using the specific identification
method. Unrealized losses on securities are charged to earnings when the decline
in fair value of a mortgage-backed security is judged to be other than
temporary.

G) NET INCOME PER COMMON SHARE

Basic net income per common share is calculated by dividing net income available
to common shareholders by the weighted-average number of shares of common stock
outstanding. Diluted net income per common share is calculated by dividing net
income available to common shareholders by the weighted-average diluted common
shares. The Company has no dilutive items. The weighted-average number of shares
used in the computation of basic and diluted earnings per common share for the
years ended December 31, 2002, 2001, and 2000 was 100.

H) STATEMENT OF CASH FLOWS

For purposes of the Statement of Cash Flows, the Company defines cash on hand
and in banks to be cash and cash equivalents.

I) COMPREHENSIVE INCOME

The purpose for reporting comprehensive income is to report a measure of all
changes in equity of an enterprise that result from recognized transactions and
other economic events of the period other than transactions with owners in their
capacity as owners. Comprehensive income includes net income and certain changes
in equity from non-owner sources that are not recognized in the income statement
(such as net unrealized gains and losses on securities available for sale). The
Company has reported comprehensive income and its components for 2002, 2001, and
2000 in its Statements of Shareholders' Equity.

J) RECLASSIFICATION

Certain financial statement balances as previously reported have been
reclassified to conform to the 2002 Financial Statement Presentation.



                                       22



<PAGE>


NOTE 2: MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE



The following table sets forth certain information regarding the mortgage-backed
securities:

<TABLE>
<CAPTION>


-----------------------------------------------------------------------------------------------------------------
                                             Amortized         Unrealized         Unrealized           Estimated
(In thousands)                                    Cost              Gains             Losses          Fair Value
-----------------------------------------------------------------------------------------------------------------
<S>                                           <C>                <C>                <C>                 <C>
DECEMBER 31, 2002
    Available for sale portfolio              $105,832           $  4,229           $     --            $110,061
-----------------------------------------------------------------------------------------------------------------
DECEMBER 31, 2001
      Available for sale portfolio            $157,331           $  1,326           $   (114)           $158,543
-----------------------------------------------------------------------------------------------------------------

</TABLE>


There was a sale to an unaffiliated third party of $47.4 million of
mortgage-backed securities during the year ended December 31, 2000, resulting in
a net gain of $94,000. There were no sales of mortgage-backed securities for the
years ending December 31, 2002 and 2001.




NOTE 3: RESIDENTIAL MORTGAGE LOANS, NET




A summary of residential mortgage loans, net, by type and original maturity
follows:

                                                             At December 31,
                                                        -----------------------
(In thousands)                                             2002          2001
-------------------------------------------------------------------------------
Fixed-rate loans:
       15 yr. loans                                     $  55,956     $  81,566
       20 yr. loans                                         3,132         4,693
       25 yr. loans                                         2,542         2,598
       30 yr. loans                                       138,008       191,049
-------------------------------------------------------------------------------

        Total fixed-rate loans                            199,638       279,906
-------------------------------------------------------------------------------
Variable-rate loans:
       15 yr. loans                                         1,605         3,015
       20 yr. loans                                         3,127         5,368
       25 yr. loans                                         2,680         4,581
       30 yr. loans                                       173,482       295,835
-------------------------------------------------------------------------------

        Total variable-rate loans                         180,894       308,799
-------------------------------------------------------------------------------
                                                        $ 380,532     $ 588,705
       Total residential mortgage loans

       Premiums and deferred fees on loans, net             1,164         2,181
       Less: allowance for loan losses                     (2,106)       (2,139)
-------------------------------------------------------------------------------

        Residential mortgage loans, net                 $ 379,590     $ 588,747
===============================================================================

As of December 31, 2002, approximately 52.5% of the Company's residential
mortgage loans are fixed-rate loans and approximately 47.5% are adjustable-rate
loans.

                                       23

<PAGE>


A detail of the change in the allowance for loan losses, for the periods
indicated, follows:

                                               For the Year Ended December 31,
                                            ------------------------------------
(In thousands)                                2002          2001          2000
--------------------------------------------------------------------------------
Balance at beginning of year                $ 2,139       $ 2,059       $ 1,912
Provision charged to operations                  --            90           190
Charge-offs                                     (33)          (10)          (43)
Recoveries                                       --            --            --
--------------------------------------------------------------------------------
  Balance at end of year                    $ 2,106       $ 2,139       $ 2,059
================================================================================


NOTE 4: REDEEMABLE PREFERRED STOCK

In December 1997, the Company raised $50.0 million, less expenses, in a public
offering of 40,000 shares of Series A 7.375% cumulative redeemable preferred
stock, liquidation preference $1,000 per share, and 1.0 million shares of Series
B 8.625% cumulative redeemable preferred stock, liquidation preference $10 per
share.

The Company was 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. This redemption took place on January 16, 2001, due to a legal
holiday on January 15, 2001.

The Series B preferred stock is not redeemable prior to January 15, 2003, except
upon the occurrence of a specified tax event. The redemption is at the option of
the Company, which has no current plans to redeem the Series B preferred stock.

NOTE 5: SERVICING

The mortgage loans owned by the Company are serviced by 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 years 2002, 2001 and 2000 were
$387,000, $556,000 and $652,000, respectively. Servicing fees are included in
interest income on the Statement of Operations, as they are classified as 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 6: ADVISORY SERVICES

Advisory services are being provided pursuant to an agreement with Webster Bank
to provide the Company with the following types of services: administer the
day-to-day operations, monitor the credit quality of the real estate mortgage
assets, advise with respect to the acquisition, management, financing, and
disposition of real estate mortgage assets and provide the necessary executive
administration, human resource, accounting and control, technical support,
record keeping, copying, telephone, mailing and distribution, investment and
funds management services. Webster Bank received an annual fee of $186,000 with
respect to the advisory services provided to the Company in 2002, an increase
from $157,500 in 2001 and 2000. The Company estimates that the fees paid to
Webster Bank for advisory services approximate fees that would be paid for such
services if the Company were an unaffiliated entity.

                                       24

<PAGE>


Operating expenses outside the scope of the advisory agreement are paid directly
by the Company. Such expenses include but are not limited to the following: fees
for third party consultants, attorneys, and external auditors and any other
expenses incurred that are not directly related to the advisory agreement.

NOTE 7: INCOME TAXES

The Company has elected to be treated as a REIT under Sections 856 through 860
of the Code, and believes that its organization and method of operation meet the
requirements for qualification as a REIT. As a REIT, the Company generally will
not be subject to federal income tax on net income and capital gains that it
distributes to the holders of its Common Stock and Preferred Stock. Therefore,
no provision for federal income taxes has been included in the accompanying
financial statements.

To maintain REIT status, an entity must meet a number of organizational and
operational requirements, including a requirement that it currently distributes
to stockholders at least 90% of its "REIT taxable income" (not including capital
gains and certain items of non-cash income). If the Company fails to qualify as
a REIT in any taxable year, it will be subject to federal income tax at regular
corporate rates.

NOTE 8: SUMMARY OF ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS

A summary of estimated fair values of financial instruments consist of the
following:

<TABLE>
<CAPTION>

                                                                            At December 31,
                                                         --------------------------------------------------------------
                                                                2002                               2001
-----------------------------------------------------------------------------------------------------------------------
                                                         Carrying        Estimated           Carrying        Estimated
(In thousands)                                            Amount         Fair Value           Amount         Fair Value
-----------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>                <C>              <C>
ASSETS:
   Cash                                                  $  28,292        $  28,292          $  3,850         $  3,850
   Interest-bearing deposits                               110,500          110,500           167,500          167,500
   Mortgage-backed securities                              110,061          110,061           158,543          158,543
   Residential mortgages                                   381,696          397,804           590,886          595,542
   Less: allowance for loan losses                          (2,106)          (2,106)           (2,139)          (2,139)
-----------------------------------------------------------------------------------------------------------------------

</TABLE>

The Company uses Webster's Asset/Liability simulation model to estimate the fair
value of its residential mortgage loans. Fair value is estimated by discounting
the average expected cash flows over multiple interest rate paths. An
arbitrage-free trinomial lattice term structure model generates the interest
rate paths. The month-end LIBOR/Swap yield curve and swap option volatilities
are used as the input for deriving forward rates for future months. Cash flows
for all instruments are created for each rate path using product specific
behavioral models and account specific system data. Discount rates are matched
with the time period of the expected cash flow. The Asset/Liability simulation
software is enhanced with a mortgage prepayment model and a Collateralized
Mortgage Obligation database provided by two leading financial software
companies. Instruments with explicit options (i.e., caps, floors, puts and
calls) and implicit options (i.e., prepayment and early withdrawal ability)
require such a rate and cash flow modeling approach to more accurately quantify
value. A spread is added to the discount rates to reflect credit and option
risks embedded in each instrument. Spreads and prices are calibrated to
observable market instruments when available or to estimates based on industry
standards.

The carrying amounts for interest-bearing deposits other than time deposits
approximate fair value since they mature in 90 days or less and do not present
unanticipated credit concerns. The fair value of mortgage-backed securities (see
Note 2) is estimated based on prices or quotations received from third parties
or pricing services

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings or any part of a particular
financial instrument. Fair value estimates are based on judgements regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
factors are subjective in nature and involve uncertainties and matters of
significant judgement and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.

                                       25

<PAGE>


NOTE 9: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

2002
------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)              First Quarter      Second Quarter      Third Quarter     Fourth Quarter
------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                <C>                <C>                <C>
Net interest income                               $ 12,456           $ 11,076           $ 10,260           $  8,463
Noninterest expenses                                    71                 92                 80                 67
                                         -------------------------------------------------------------------------------
NET INCOME                                          12,385             10,984             10,180              8,396
Preferred dividends                                    216                215                216                216
                                         -------------------------------------------------------------------------------
Net income available to common
       shareholder                                $ 12,169           $ 10,769           $  9,964           $  8,180
                                         ===============================================================================
Net income per common share
       Basic                                      $121,693           $107,686           $ 99,644           $ 81,793
                                         ===============================================================================
       Diluted                                    $121,693           $107,686           $ 99,644           $ 81,793
                                         ===============================================================================
</TABLE>


<TABLE>
<CAPTION>

2001
------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)              First Quarter      Second Quarter      Third Quarter     Fourth Quarter
------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                <C>                <C>                <C>


Net interest income                               $ 15,011           $ 14,568           $ 14,520           $ 13,972
Provision for loan losses                               30                 30                 30                 --
Noninterest expenses                                   181                 81                 59                 63
                                         -------------------------------------------------------------------------------
NET INCOME                                          14,800             14,457             14,431             13,909
Preferred dividends                                    216                215                216                216
                                         -------------------------------------------------------------------------------
Net income available to common
       shareholder                                $ 14,584           $ 14,242           $ 14,215           $ 13,693
                                         ===============================================================================
Net income per common share
       Basic                                      $145,837           $142,420           $142,150           $136,929
                                         ===============================================================================
       Diluted                                    $145,837           $142,420           $142,150           $136,929
                                         ===============================================================================

</TABLE>


A COPY OF WEBSTER PREFERRED CAPITAL CORPORATION'S 2002 ANNUAL REPORT WILL BE
PROVIDED TO SHAREHOLDERS UPON REQUEST.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         ---------------------------------------------------------------
         FINANCIAL DISCLOSURE.
         --------------------


The Company has no changes in or disagreements with its outside accountants on
accounting and financial disclosures.





                                       26

<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          --------------------------------------------------

The Company's Board of Directors currently consists of three members. Directors
are elected for a one-year term. The Company currently has three officers. The
Company has no other employees.

The persons who are current directors and executive officers of the Company are
as follows:

NAME                           AGE         POSITION AND OFFICES HELD
----                           ---         -------------------------

Ross M. Strickland              53         President and Director

Harriet Munrett Wolfe           49         Director

William J. Healy                58         Director

Gregory S. Madar                40         Senior Vice President, Treasurer and
                                           Assistant Secretary


John D. Benjamin                55         Senior Vice President and Secretary

The following is a summary of the experience of the officers and directors of
the Company:

Ross M. Strickland is the President and a director of the Company. He is also
the Executive Vice President - Mortgage Banking of Webster and Webster Bank,
positions he has held since his employment began in 1991. Prior to joining
Webster Bank, he was Executive Vice President of Residential Lending with the
former Northeast Savings, F.A., Hartford, Connecticut, from 1988 to 1991. Prior
to joining Northeast Savings, he was National Sales Manager, Credit Resources
Group, for Shearson Lehman Brothers.

Harriet Munrett Wolfe is a director of the Company. She is also the Executive
Vice President, General Counsel and Secretary of Webster and Webster Bank. Ms.
Wolfe joined Webster and Webster Bank in March 1997 as Senior Vice President and
Counsel, was appointed Secretary in June 1997 and General Counsel in September
1999. In January 2003, she was appointed Executive Vice President. Prior to
joining Webster and Webster Bank, she was in private practice. From November
1990 to January 1996, she was Vice President and Senior Counsel of Shawmut Bank
Connecticut, N.A., Hartford, Connecticut. Prior to joining Shawmut, she was
Associate Legal Counsel and Assistant Secretary of the former Citytrust,
Bridgeport, Connecticut.

William J. Healy is a director of the Company. He is also the Executive Vice
President and Chief Financial Officer of Webster and Webster Bank, positions he
has held since April 2001. Prior to joining Webster, Mr. Healy was Executive
Vice President and Chief Financial Officer of Summit Bancorp, a bank holding
company in Princeton, NJ. From 1994 to 1998, Mr. Healy was Executive Vice
President and Controller for Summit. He joined Summit in 1973, after working for
KPMG Peat Marwick for several years as a supervising senior accountant and
senior accountant.

Gregory S. Madar is the Senior Vice President, Treasurer and Assistant Secretary
of the Company. He served as the Secretary of the Company from March 1997 to
March 1999. He is also Senior Vice President and Controller of Webster Bank. Mr.
Madar, a Certified Public Accountant, joined Webster Bank in 1995 as Vice
President and Tax Manager and was elected Senior Vice President and Assistant
Controller in January 2000. In February 2002, he was promoted to Senior Vice
President and Controller. Prior to joining Webster Bank, he was Controller of
Millane Nurseries, Inc. from 1993 to 1995. Prior to joining Millane Nurseries,
he was a tax manager with KPMG LLP ("KPMG") in Hartford. He was associated with
KPMG from 1987 to 1993.

John D. Benjamin has served as Secretary of the Company since March 1999. He is
also Assistant Secretary and Senior Compliance Officer of Webster and Senior
Vice President, Assistant Secretary and Senior Compliance Officer of Webster
Bank, positions he has held since 1996. Mr. Benjamin joined Webster Bank's
predecessor, First Federal Savings and Loan Association of Waterbury, in 1970.
He has served in various management positions and was elected Vice President in
1984 and Senior Vice President in 1991.

                                       27
<PAGE>


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers and persons who own more than 10% of its Series
B Preferred Stock to file with the SEC initial reports of ownership of the
Company's equity securities and to file subsequent reports when there are
changes in such ownership. Based on a review of reports submitted to the
Company, the Company believes that during the fiscal year ended December 31,
2002, all Section 16(a) filing requirements applicable to the Company's
officers, directors and more than 10% owners were complied with on a timely
basis.

ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------

The Company currently has three officers, none of whom receive separate
compensation as employees of the Company. The Company has retained an advisor to
perform certain functions pursuant to an Advisory Service Agreement described
below under "The Advisor." Each officer of the Company currently is also an
officer of Webster Bank. The Company maintains corporate and accounting records
that are separate from those of Webster Bank and any of Webster Bank's
affiliates.

It is not currently anticipated that the officers, directors or employees of the
Company will have any pecuniary interest in any Mortgage Asset to be acquired or
disposed of by the Company or in any transaction in which the Company has an
interest.

The Company does not pay the directors of the Company fees for their services as
directors. Although no direct compensation is paid by the Company, under the
Advisory Services Agreement, the Company reimburses Webster Bank for its
proportionate share of the salaries of such person for services rendered.

THE ADVISOR
-----------

The Company has entered into an Advisory Service Agreement (the "Advisory
Agreement") with Webster Bank to administer the day-to-day operations of the
Company. Webster Bank in its role as advisor under the terms of the Advisory
Agreement is herein referred to as the "Advisor." The Advisor is responsible for
(i) monitoring the credit quality of the Mortgage Assets held by the Company,
(ii) advising the Company with respect to the acquisition, management, financing
and disposition of the Company's Mortgage Assets, and (iii) maintaining custody
of the documents related to the Company's Mortgage Assets. The Advisor may at
any time subcontract all or a portion of its obligations under the Advisory
Agreement to one or more of its affiliates involved in the business of managing
Mortgage Assets. If no affiliate of the Advisor is engaged in the business of
managing Mortgage Assets, the Advisor may, with the approval of a majority of
the Board of Directors, subcontract all or a portion of its obligations under
the Advisory Agreement to unrelated third parties. The Advisor may assign its
rights or obligations under the Advisory Agreement to any affiliate of the
Company. The Advisor will not, in connection with the subcontracting of any of
its obligations under the Advisory Agreement, be discharged or relieved in any
respect from its obligations under the Advisory Agreement.

The Advisory Agreement had an initial term of two years, and has been renewed
for additional one-year periods. It will continue to be renewed until notice of
nonrenewal is delivered by either party to the other party. The Advisory
Agreement may be terminated by the Company at any time upon 90 days' prior
written notice. The Advisor is entitled to receive an advisory fee equal to
$195,000 per year beginning January 1, 2003 with respect to the advisory
services provided by it to the Company, as per the amended agreement adopted on
December 19, 2002. The fee may be revised to reflect changes in the actual costs
incurred by the Advisor in providing services.

The Advisory Agreement provides that the liability of the Advisor to the Company
for any loss due to the Advisor's performing or failing to perform the services
under the Advisory Agreement shall be limited to those losses sustained by the
Company which are a direct result of the Advisor's negligence or willful
misconduct. It also provides that under no circumstances shall the Advisor be
liable for any consequential or special damages and that in no event shall the
Advisor's total combined liability to the Company for all claims arising under
or in connection with the Advisory Agreement be more than the total amount of

                                       28
<PAGE>

all fees payable by the Company to the Advisor under the Advisory Agreement
during the year immediately proceeding the year in which the first claim giving
rise to such liability arises. The Advisory Agreement also provides that to the
extent that third parties make claims against the Advisor arising out of the
services provided thereunder, the Company will indemnify the Advisor against all
loss arising therefrom.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------

The executive officers and directors of the Company do not own any shares of
stock in the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

The Company is organized as a subsidiary of Webster Bank, is controlled by and
through advisory and servicing agreements, and is totally reliant on Webster
Bank. The Company's Board of Directors consists entirely of Webster Bank
employees and, through the advisory and servicing agreements, Webster Bank and
its affiliates are involved in every aspect of the Company's existence. Webster
Bank administers the day-to-day activities of the Company in its role as Advisor
under the Advisory Agreement, and acts as Servicer of the Company's Mortgage
Loans under the Servicing Agreement. In addition, all of the officers of the
Company are also officers of Webster Bank. As the holder of all of the
outstanding voting stock of the Company, Webster Bank generally will have the
right to elect all of the directors of the Company. For a description of the
fees Webster Bank is entitled to receive under the advisory and servicing
agreements, see Notes 5 and 6 to the Company's Financial Statements included as
part of Item 8.

DEPENDENCE UPON WEBSTER BANK AS ADVISOR AND SERVICER
----------------------------------------------------

The Company is dependent on the diligence and skill of the officers and
employees of Webster Bank as its Advisor for the selection, structuring and
monitoring of the Company's mortgage assets. In addition, the Company is
dependent upon the expertise of Webster Bank as its Servicer for the servicing
of the Mortgage Loans. The personnel deemed most essential to the Company's
operations are Webster Bank's loan servicing and administration personnel, and
the staff of its finance department. The loan servicing and administration
personnel advises the Company in the selection of Mortgage Assets, and provide
loan-servicing oversight. The finance department assists in the administrative
operations of the Company. The Advisor may subcontract all or a portion of its
obligations under the Advisory Agreement to one or more affiliates, and under
certain conditions to non-affiliates, involved in the business of managing
Mortgage Assets. The Advisor may assign its rights or obligations under the
Advisory Agreement, and the Servicer may assign its rights and obligations under
the Servicing Agreement, to any affiliate of the Company involved in the
business of managing real estate mortgage assets. Under the Advisory Agreement,
the Advisor may subcontract its obligations to unrelated third parties with the
approval of the Board of Directors of the Company. In the event the Advisor or
the Servicer subcontracts or assigns its rights or obligations in such a manner,
the Company will be dependent upon the subcontractor or affiliate to provide
services. Although Webster Bank has indicated to the Company that it has no
plans in this regard, if Webster Bank were to subcontract all of its loan
servicing to an outside third party, it also would do so with respect to
Mortgage Assets under the Servicing Agreement. Under such circumstances, there
may be additional risks as to the costs of such services and the ability to
identify a subcontractor suitable to the Company. The Servicer does not believe
it would subcontract those duties unless it could not perform such duties
efficiently and economically itself.

ITEM 14.  CONTROLS AND PROCEDURES
          -----------------------

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company's management, including the Principal Executive Officer and
Principal Financial Officer, evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) (the
"Exchange Act") as of a date (the "Evaluation Date") within 90 days prior to
this report. Based upon that evaluation, the Company's management, including the
Principal Executive Officer and Principal Financial Officer concluded that, as
of the Evaluation Date, the Company's disclosure controls and procedures were
effective in alerting them in a timely manner to any material information
relating to the Company required to be included in the Company's Exchange Act
filings.

                                       29
<PAGE>

CHANGES IN INTERNAL CONTROLS

There were no significant changes made in the Company's internal controls or in
other factors that could significantly affect these internal controls subsequent
to the date of the evaluation performed by the Company's Principal Executive
Officer and Principal Financial Officer.

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
          ----------------------------------------------------------------

(a)(1)    The following financial statements are filed as a part of this Report:

          Statements of Condition at December 31, 2002 and 2001

          Statements of Income for years ended December 31, 2002, 2001 and 2000

          Statements of Shareholders' Equity for years ended December 31, 2002,
          2001 and 2000

          Statements of Cash Flows for years ended December 31, 2002, 2001 and
          2000

          Notes to Financial Statements

          Independent Auditors' Report

(a)(2)    There are no financial statement schedules which are required to be
          filed as part of this form.

(a)(3)    See below for all exhibits filed herewith or incorporated by reference
          and the Index to Exhibits.

EXHIBIT NUMBER                                  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).

      3.3           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).

      3.4           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).

      4.2           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).

     10.1           Mortgage Assignment Agreement, made as of March 17, 1997, by
                    and between Webster Bank and the Company (incorporated
                    herein by reference from Exhibit 10.1 to the Company's
                    Registration Statement on Form S-11 (File No. 333-38685)
                    filed with the Securities and Exchange Commission (the
                    "SEC") on October 24, 1997).


                                       30
<PAGE>

     10.2           Master Service Agreement, dated March 17, 1997, between
                    Webster Bank and the Company (incorporated herein by
                    reference from Exhibit 10.2 to the Company's Registration
                    Statement on Form S-11 (File No. 333-38685) filed with the
                    SEC on October 24, 1997).

     10.3           Advisory Service Agreement, made as of October 20, 1997, by
                    and between Webster Bank and the Company (incorporated
                    herein by reference from Exhibit 10.3 to the Company's
                    Annual Report on Form 10-K for the fiscal year ended
                    December 31, 1997).

     99.1           Written Statement pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002, signed by the Company's
                    Principal Executive Officer.

     99.2           Written Statement pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002, signed by the Company's
                    Principal Financial Officer.

(b)       No reports on Form 8-K were filed during the fourth quarter of 2002.

(c)       There are no financial statements and financial statement schedules
          which were excluded from this Report which are required to be included
          herein.

                                       31
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ Ross M. Strickland
                                      ------------------------------------------
                                      Ross M. Strickland, President and Director
                                                                  -


                                  Date: March 20, 2003


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated as of March 20, 2003.

By: /s/ Ross M. Strickland
    ------------------------------------------------
        Ross M. Strickland, President and Director
        (Principal Executive Officer)

By: /s/ Gregory S. Madar
    ------------------------------------------------
        Gregory S. Madar, Senior Vice President,
        Treasurer and Assistant Secretary
        (Principal Financial and Accounting Officer)

By: /s/ William J. Healy
    ------------------------------------------------
        William J. Healy, Director

By: /s/ Harriet M. Wolfe
    ------------------------------------------------
        Harriet Munrett Wolfe, Director

                                       32
<PAGE>

                                   CERTIFICATION

I, Ross M. Strickland, certify that:

         1. I have reviewed this annual report on Form 10-K of Webster Preferred
Capital Corporation.

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

         a) all significant deficiencies in the design or operations of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

         6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  March 20, 2003

By: /s/ Ross M. Strickland
    -----------------------------------------
    President and Principal Executive Officer


                                       33
<PAGE>

                                  CERTIFICATION

I, Gregory S. Madar, certify that:

         1. I have reviewed this annual report on Form 10-K of Webster Preferred
Capital Corporation.

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

         a) all significant deficiencies in the design or operations of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

         6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  March 20, 2003

By: /s/ Gregory M. Madar
    ----------------------------------------
    SVP, Treasurer & Assistant Secretary
    Principal Financial & Accounting Officer

                                       34