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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, 2008

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 incorporation or organization) |  | (I. R. S. Employer Identification Number)
|                                                               | 
|145 Bank Street, Waterbury, Connecticut                        |  | 06702                                    
|(Address of principal executive offices)                       |  | (Zip Code)                               

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

Securities registered pursuant to Section 12(b) 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act of 1933.    Yes   ̈    No  x.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes   ̈    No  x.

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 a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12B-2 of the Exchange Act.

Large accelerated filer   ̈            Accelerated filer   ̈            Non-accelerated filer  x            Smaller Reporting Company   ̈

Indicate by check mark whether the registrant is a shell company (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 June 30, 2007. N/A

The number of shares outstanding of each of the registrants classes of common stock, as of February 28, 2009 is: 100 shares.









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WEBSTER PREFERRED CAPITAL CORPORATION

2008 FORM 10-K ANNUAL REPORT

TABLE
OF CONTENTS



|           |  |                                                                                                                  |  |     
|---------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                  |  | Page
|PART I    
|Item 1.    |  | Business                                                                                                         |  | 3   
|Item 1A.   |  | Risk Factors                                                                                                     |  | 5   
|Item 1B.   |  | Unresolved Staff Comments                                                                                        |  | 11  
|Item 2.    |  | Properties                                                                                                       |  | 11  
|Item 3.    |  | Legal Proceedings                                                                                                |  | 11  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                              |  | 11  
|          
|PART II   
|           |  |                                                                                                                 
|Item 5.    |  | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities |  | 12  
|Item 6.    |  | Selected Financial Data                                                                                          |  | 13  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 14  
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 21  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                      |  | 22  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                             |  | 33  
|Item 9A.   |  | Disclosure Controls and Procedures                                                                               |  | 33  
|Item 9B.   |  | Other Information                                                                                                |  | 36  
|          
|PART III  
|           |  |                                                                                                                 
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                           |  | 36  
|Item 11.   |  | Executive Compensation                                                                                           |  | 37  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   |  | 39  
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                                        |  | 40  
|Item 14.   |  | Independent Registered Public Accounting Firm Fees and Services                                                  |  | 41  
|          
|PART IV   
|           |  |                                                                                                                 
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                       |  | 42  
|           | 
|SIGNATURES |  | 43                                                                                                              
|           | 
|EXHIBITS   |  | 44                                                                                                              



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PART I

Item 1.  Business

General

Webster Preferred Capital Corporation (the Company or WPCC) is a Connecticut corporation incorporated in March 1997. The Company acquires, holds
and manages real estate mortgage related assets. Real estate mortgage related assets consist of mortgage-backed securities and residential mortgage loans. 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).

All of the Companys common stock is owned by Webster Bank, National Association (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 U.S. generally accepted accounting principles, or GAAP) 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 the Company, 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 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 $197.2 million at December 31, 2008, a decrease of $130.7 million compared to $327.9 million at December 31, 2007. The changes were primarily a result of reductions in residential mortgage loans of
$84.6 million and interest-bearing deposits of $51.0 million, partially offset by an increase in cash of $6.1 million. There were $14.5 million of required dividend payments during 2008 to common and preferred shareholders and a return of capital to
Webster Bank of $130.0 million. Shareholders equity was $197.0 million at December 31, 2008 as compared to $327.7 million a year earlier.

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 acquires 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. Loans represent assets that the Company acquires from Webster Bank at carrying value. There were $46.4
million in loans transferred to Webster Bank during 2008. There were $50.8 million in loans acquired from and $90.4 million in loans



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transferred to Webster Bank during 2007. While the loan acquisitions represent legal sales by Webster Bank, Webster Bank may not record the transactions as
sales for GAAP accounting purposes because of its 100% direct ownership interest in the Company. Accordingly, the Companys assets for GAAP purposes represent non-recourse receivables from Webster Bank which are fully collateralized by the
underlying loans. The underlying loans are whole loans secured by first mortgages or deeds of trust on single family (one-to-four unit) residential real estate properties located primarily in Connecticut. The assets continue to be classified as
residential loans in the Companys financial statements because the returns on and the recoverability of these non-recourse receivables are entirely dependent on the performance of the underlying residential loans.

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.

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. Typically, the mortgage loans underlying the mortgage-backed securities are secured by single family residential properties located throughout the United States. At December 31, 2008 and 2007
the Company did not hold any mortgage-backed securities.

The Company intends to acquire only investment-grade mortgage-backed securities issued or
guaranteed by Fannie Mae, Freddie Mac or 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.

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, 2008 and 2007, the Company did not hold any commercial mortgage loans.

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 the Comptroller of the Currency (the OCC) as its primary federal regulator. Webster Bank also is subject to regulation, supervision and examination by the Federal Deposit Insurance
Corporation (the FDIC) and Webster is subject to oversight 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, the OCC has the
authority to require, among other things, that Webster Bank or the Company alter, reduce or terminate any activity that they determine 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,



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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 officers 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 OCC 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 of the Company, to take action adverse to the interest of holders of the preferred shares of the Company.

Taxation

The Company has elected to be treated as a REIT under Sections 856 through 860 of the Code. 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.

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 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.

Employees

The Company has seven officers and no other employees.
The officers are described further in Item 10 of this report, Directors, Officers and Corporate Governance. The Company does not anticipate that it will require any additional employees because it has retained an advisor to
administer the day-to-day activities of the Company pursuant to an Advisory Agreement.

Competition

The Company does not engage in the business of originating mortgage loans. While the Company does intend to acquire additional mortgage assets, it anticipates that these
additional mortgage assets will be obtained from Webster Bank. Accordingly, the Company does not compete or expect to compete with mortgage conduit programs, investment banking firms, savings and loan associations, banks, thrift and loan
associations, finance companies, mortgage bankers or insurance companies in obtaining our mortgage assets. Webster Bank, from which the Company expects to continue to obtain most or all of its mortgage assets in the future, will face competition
from these organizations.

Item 1A.  Risk Factors

The material risks and uncertainties that management believes affect the Company are described below. The risks and uncertainties described below are not the only ones
facing the Company. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair the Companys business operations. This report is qualified in its entirety by
these risk factors. If any of the following risks actually occur, the Companys financial condition and results of operations could be materially and adversely affected.



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Control by Webster Bank

The Company was organized as a wholly-owned subsidiary of Webster Bank, and continues to be controlled by and, through advisory and servicing agreements, is totally reliant on, Webster Bank. The Companys Board of Directors consists
entirely of Webster Bank employees and through 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 an Advisory Agreement, and acts as Servicer of the Companys mortgage loans under a 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.

The Companys
stock price can be volatile

The Companys stock price can fluctuate widely in response to a variety of factors including:



| |  |  | Actual or anticipated variations in quarterly operating results; and
| | - |  | --------------------------------------------------------------------



| |  |  | Changes in government regulations; and
| | - |  | --------------------------------------



| |  |  | Extended recessionary economic environment.
| | - |  | -------------------------------------------

General
market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, credit loss trends or currency fluctuations could also cause the Companys stock
price to decrease regardless of the Companys operating results.

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. See Management. 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 will advise the Company in the selection of mortgage assets, and provide loan
servicing oversight. The finance department will assist 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 out 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 these duties unless it could not perform such duties as
efficiently and economically itself. See Item 13. Certain Relationships and Related Transactions, and Director Independence.

Conflicts of Interest

Webster Bank and its affiliates may in the future have interests which are not necessarily identical to those of the
Company. Consequently, conflicts of interest may arise with respect to transactions, including without limitation: future acquisitions of mortgage assets from Webster Bank and/or affiliates of Webster Bank; servicing of



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mortgage loans; future dispositions of mortgage loans to Webster Bank or affiliates of Webster Bank; and the modification of the Advisory Agreement or the
Servicing Agreement. Under each of the foregoing circumstances, Webster Bank, as sole holder of the common stock, may, or may cause the directors and officers of the Company (each of whom is an employee of Webster Bank) to, take actions adverse to
the interests of holders of Preferred Shares. It is the intention of the Company and Webster Bank that any agreements and transactions between the Company, on the one hand, and Webster Bank and/or its affiliates, on the other hand, are fair to all
parties and consistent with market terms, including the prices paid and received for mortgage assets on their acquisition or disposition by the Company or in connection with the servicing of mortgage loans. Also, the Advisory Agreement provides that
nothing contained in such agreement shall prevent Webster Bank, its affiliates, or an officer, director, employee or stockholder from engaging in any activity, including without limitation, purchasing and managing real estate mortgage assets,
rendering services and investment advice with respect to real estate investment opportunities to any other person (including other REITs) and managing other investments (including the investments of Webster Bank and its affiliates). Although it is
the intent of the Company and Webster Bank that the dealings between the two be fair, there can be no assurance that agreements or transactions will be on terms as favorable to the Company as those that could have been obtained from unaffiliated
third parties.

Risk of Future Revisions in Policies and Strategies by Board of Directors

The Board of Directors of the Company has established the investment policies, operating policies and strategies of the Company. These policies may be amended or revised
from time to time at the discretion of the Board of Directors without a vote of the Companys stockholders, including holders of the preferred shares. The ultimate effect of any change in the policies and strategies of the Company on a holder
of Preferred Shares may be positive or negative. For example, although the Company currently intends to maintain substantially all of its assets in a combination of residential mortgage loans and mortgage-backed securities, the Company may in the
future acquire other mortgage assets, such as commercial mortgage loans, which have a different and distinct risk profile.

Impact of Government
Supervision & Regulation

Webster Bank, which owns 100% of the Companys common stock, is subject to supervision and regulation by, among
others, the OCC and the FDIC. Because the Company is a subsidiary of Webster Bank, such federal banking regulatory authorities will have the right to examine the Company and its activities. If Webster Bank becomes undercapitalized under
prompt corrective action initiatives of the federal bank regulators, such regulatory authorities will have the authority to require, among other things, Webster Bank or the Company to alter, reduce or terminate any activity that the
regulator determines poses an excessive risk to Webster Bank. The regulators also could restrict transactions between Webster Bank and the Company including the transfer of assets; require Webster Bank to divest or liquidate the Company; or require
that Webster Bank be sold. Webster Bank could further be directed to take any other action that the regulatory agency determines will better carry out the purpose of prompt corrective action. Webster Bank could be subject to these prompt corrective
action restrictions 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 skill and diligence of Webster Bank officers 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s
failure to qualify as a REIT.

Adverse Tax 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.



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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 shareholders 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 the dividend to the Company. The Company would use the consent dividend procedures only with respect to its common stock.

Geographic Concentration

Certain geographic regions of the United States may from time to time experience natural
disasters or weaker regional economic conditions and housing markets, and, consequently, may experience higher rates of loss and delinquency on mortgage loans generally. Any concentration of the mortgage loans in such a region may present risks in
addition to those present with respect to mortgage loans generally. Substantially all of the residential properties underlying the mortgage assets presently are located in Connecticut. These mortgage assets may be subject to a greater risk of
default than other comparable mortgage assets in the event of adverse economic, political or business developments or natural hazards that may affect such region and the ability of property owners in such region to make payments of principal and
interest on the underlying mortgages.

Risks Related to Changes in Interest Rates

The results of the Companys operations will be affected by various factors, many of which are beyond the control of management. Because the Company does not intend to incur any borrowings, the Companys net
income will be dependent primarily upon the yield on its mortgage assets. Accordingly, income over time will vary as a result of changes in interest rates, the behavior of which involve various risks and uncertainties, and the supply of and demand
for mortgage assets. Prepayment rates and interest rates depend upon the nature and terms of the mortgage assets, the geographic location of the real estate securing the mortgage loans included in or underlying the mortgage assets, conditions in
financial markets, the fiscal and monetary policies of the United States government and the Board of Governors of the Federal Reserve System, competition and other factors, none of which can be predicted with any certainty. While increases in
interest rates will generally increase the



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yields on the Companys adjustable-rate mortgage assets, decreasing rates typically would decrease such yields and also may result in increased levels
of prepayments. Under such circumstances, the Company may not be able to reinvest at a favorable yield.

Real Estate Market Conditions

The results of the Companys operations will be affected by various factors, many of which are beyond the control of the Company, such as local and other
economic conditions affecting the values of the properties underlying the mortgage assets and the ability of mortgagees to make payments of principal and interest on their mortgage loans. A decline in the value of properties underlying the mortgage
assets may cause a higher level of defaults on mortgage loans. There can be no assurance that a decline in local or other economic conditions will not adversely affect mortgage assets currently owned by the Company or acquired by the Company in the
future.

2008 was highlighted by significant disruption and volatility in the financial and capital marketplaces. This turbulence has been attributable to
a variety of factors, including the fallout associated with the subprime mortgage market. The disruptions have been exacerbated by the continued decline of the real estate and housing market along with significant mortgage loan related losses
incurred by many lending institutions. In addition, the significant decline in economic growth, nationally, during 2008 has led to a national economy in recession. The Company is not immune to negative consequences arising from overall economic
weakness and, in particular, a sharp downturn in the housing industry locally and nationally. During 2008, we have experienced an increase in non-performing loans. No assurance can be given that these conditions will improve or will not worsen or
that such conditions will not result in a further increase in delinquencies, causing a decrease in our interest income, or continue to have an adverse impact on our loan loss experience, causing an increase in our allowance for loan losses.

Delays in Liquidating Defaulted Mortgage Loans

Even
assuming that the mortgaged properties underlying the mortgage loans held by the Company provide adequate security for such mortgage loans, substantial delays could be encountered in connection with the liquidation of defaulted mortgage loans, with
corresponding delays in the receipt of related proceeds by the Company. An action to foreclose on a mortgaged property securing a mortgage loan is regulated by state statutes and rules and is subject to many of the delays and expenses of other
lawsuits if defenses or counterclaims are interposed, sometimes requiring several years to complete. In some states, an action to obtain a deficiency judgment is not permitted following a non-judicial sale of a mortgaged property. In Connecticut,
where substantially all of the properties currently securing the Companys mortgage loans are located, foreclosures are judicial and an action to obtain a deficiency judgment is only permitted following a judicial foreclosure of a mortgaged
property. In the event of a default by a mortgagor, these restrictions, among other things, may impede the ability of the Company to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due on the related
mortgage loan. In addition, the servicer of the Companys mortgage loans will be entitled to deduct from collections received all expenses reasonably incurred in attempting to recover amounts due and not yet repaid on liquidated mortgage loans,
including legal fees and costs of legal action, real estate taxes and maintenance and preservation expenses, thereby reducing amounts available to the Company.

Allowance For Loan Losses May Be Insufficient

The Company maintains an allowance for loan losses, which is established through a provision
for loan losses charged to operations, that represents managements best estimate of probable losses within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and
risks inherent in the loan portfolio. The level of the allowance reflects managements continuing evaluation of: industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political
and regulatory conditions; and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires the Company to make
significant estimates of current credit risks and future trends, all



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of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of
additional problem loans and other factors, both within and outside of the Companys control, may require an increase in the allowance for loan losses. In addition, if charge-offs in future periods exceed the allowance for loan losses, the
Company will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on the
Companys financial condition and results of operations. See the section captioned Allowance for Loan Losses in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, located
elsewhere in this report for further discussion related to the process for determining the appropriate level of the allowance for loan losses.

No
Credit Enhancement or Special Hazard Insurance

The Company generally does not intend to obtain credit enhancements such as mortgagor bankruptcy
insurance or to obtain special hazard insurance for its mortgage loans, other than standard hazard insurance, which will in each case only relate to individual mortgage loans. Accordingly, during the time it holds mortgage loans for which third
party insurance is not obtained, the Company will be subject to risks of borrower defaults and bankruptcies and special hazard losses that are not covered by standard hazard insurance (such as those occurring from earthquakes or floods). In
addition, in the event of a default on any mortgage loan held by the Company resulting from declining property values or worsening economic conditions, among other factors, the Company would bear the risk of loss of principal to the extent of any
deficiency between (i) the value of the related mortgaged property, plus any payments from an insurer (or guarantor in the case of commercial mortgage loans) and (ii) the amount owing on the mortgage loan.

Risk Associated with Leverage

Although the Company does not
currently intend to incur any indebtedness in connection with the acquisition and holding of mortgage assets, the Company may do so at any time. Under the Companys Certificate of Incorporation and other corporate governance documents, there
are no limitations on the Companys ability to incur additional indebtedness. To the extent the Company were to change its policy with respect to the incurrence of indebtedness, the Company would be subject to risks associated with leverage,
including, without limitation, changes in interest rates and prepayment risk.

A leveraging strategy may create instability in the Companys
operations and reduce income under adverse market conditions. A decline in the market value of mortgage assets could limit the Companys ability to borrow. The Company could be required to sell mortgage assets under adverse market conditions in
order to maintain liquidity. If these sales were made at prices lower than the carrying value of the mortgage assets, the Company would experience losses. A default by the Company under its collateralized borrowings could also result in a
liquidation of the collateral, resulting in a loss of the difference between the value of the collateral and the amount borrowed. To the extent the Company is compelled to liquidate mortgage assets to repay borrowings, its compliance with the REIT
rules regarding asset and sources of income requirements could be negatively affected, ultimately jeopardizing the Companys status as a REIT.

In
addition, if the Company were to rely on short term borrowings, it also would be subject to interest rate risk to the extent of a mismatch between the long term yield of its mortgage asset portfolio and the short term costs of its borrowings.
Developing an effective interest rate risk management strategy is complex and no management strategy can completely insulate the Company from risks associated with changes in interest rates. In addition, any hedges of interest rate risk would
involve transaction costs, which generally increase significantly as the period covered by the hedge increases as well as during periods of volatile interest rates. To the extent the Company hedges against interest rate risks, the Company may
substantially reduce its net income. Further, the federal tax laws applicable to REITs may limit the Companys ability to hedge fully its interest rate risks. Such federal tax laws may prevent the Company from effectively implementing hedging
strategies that, absent such restrictions, would best insulate the Company from the risks associated with changing interest rates.



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##### Table of Contents

Item 1B.  Unresolved Staff Comments

The Company has no unresolved comments from the SEC staff.

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 matters were submitted to a vote of the Companys
security holders during the fourth quarter of 2008.



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##### Table of Contents

PART II

Item 5.  Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

All of the Companys common stock is owned by Webster Bank, and consequently there is no established public trading market for such securities. The Companys
Series B 8.625% Cumulative Redeemable Preferred Stock (the Series B Preferred Stock) is traded on the NASDAQ Stock Markets Global Market under the symbol WBSTP.

The Series B Preferred Stock is currently redeemable at the option of the Company, 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 are declared and paid at least annually on the common stock. Dividends
paid on the common stock in 2008 and 2007 totaled $13.7 million and $17.6 million, respectively. Dividends are declared and paid quarterly on the Series B Preferred Stock. Dividends paid on the Series B Preferred Stock in 2008 and 2007 totaled
$862,500 for each year.

The following table provides information concerning the market price of the Series B Preferred Stock. At December 31, 2008,
the closing market price was $10.00.







|        |  |                          |       |      |   |      
|------- |  | ------------------------ | ----- | ---- | - | -----
|        |  | Years Ended December 31,
|        |  | 2008                     |       | 2007
|Average |  | $                        | 9.65  |      | $ | 10.73
|High    |  |                          | 10.95 |      |   | 14.49
|Low     |  |                          | 7.50  |      |   | 9.45 

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 Series B Preferred Stock, 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.



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##### Table of Contents

Item 6.  Selected Financial Data

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

Balance Sheet Data







|                                                                  |  |                          |         |   |      |   |         |  |   |         |   |      |   |         |  |   |        
|----------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- |  | - | ------- | - | ---- | - | ------- |  | - | -------
|                                                                  |  | Years Ended December 31,
|(In thousands)                                                    |  | 2008                     |         |   | 2007 |   | 2006    |  |   | 2005    |   | 2004
|Total assets                                                      |  | $                        | 197,185 |   |      | $ | 327,902 |  | $ | 511,990 |   |      | $ | 511,761 |  | $ | 537,346
|Available for sale securities                                     |  |                          | -       |   |      |   | -       |  |   | -       |   |      |   | 41,335  |  |   | 20,709 
|Residential mortgage loans, net                                   |  |                          | 187,696 |   |      |   | 272,862 |  |   | 372,201 |   |      |   | 388,136 |  |   | 475,879
|Interest-bearing deposits                                         |  |                          | -       |   |      |   | 51,000  |  |   | 80,000  |   |      |   | 77,000  |  |   | 29,000 
|Total shareholders equity                                        |  |                          | 196,971 |   |      |   | 327,683 |  |   | 511,774 |   |      |   | 511,571 |  |   | 537,160
|                                                                 
|                                                                  |  |                          |         |   |     
|Income Statement Data                                             |  |                          |         |   |      |   |         |  |   |         |   |      |   |         |  |   |        
|                                                                  |  | Years Ended December 31,
|(In thousands)                                                    |  | 2008                     |         |   | 2007 |   | 2006    |  |   | 2005    |   | 2004
|Total interest income                                             |  | $                        | 14,617  |   |      | $ | 19,424  |  | $ | 27,669  |   |      | $ | 26,708  |  | $ | 26,450 
|(Provision)/credit for loan losses                                |  |                          | (420    | ) |      |   | 250     |  |   | -       |   |      |   | -       |  |   | -      
|(Loss) gain on sale of securities                                 |  |                          | -       |   |      |   | -       |  |   | (117    | ) |      |   | -       |  |   | 536    
|Loss on write-down of securities available for sale to fair value |  |                          | -       |   |      |   | -       |  |   | (526    | ) |      |   | -       |  |   | -      
|Noninterest expenses                                              |  |                          | 372     |   |      |   | 323     |  |   | 329     |   |      |   | 294     |  |   | 399    
|Net income                                                        |  |                          | 13,825  |   |      |   | 19,351  |  |   | 26,697  |   |      |   | 26,414  |  |   | 26,587 
|Preferred stock dividends                                         |  |                          | 863     |   |      |   | 863     |  |   | 863     |   |      |   | 863     |  |   | 863    
|Net income available to common shareholder                        |  | $                        | 12,962  |   |      | $ | 18,488  |  | $ | 25,834  |   |      | $ | 25,551  |  | $ | 25,724 
|                                                                  |  |                          |         |   |      |   |         |  |   |         |   |      |   |         |  |   |        
|                                                                  |  |                          |         |   |     
|Significant Statistical Data                                      |  |                          |         |   |      |   |         |  |   |         |   |      |   |         |  |   |        
|                                                                  |  | Years Ended December 31,
|                                                                  |  | 2008                     |         |   | 2007 |   | 2006    |  |   | 2005    |   | 2004
|Net income per common share                                       |  |                          |         |   |      |   |         |  |   |         |   |      |   |         |  |   |        
|Basic                                                             |  | $                        | 129,624 |   |      | $ | 184,883 |  | $ | 258,339 |   |      | $ | 255,505 |  | $ | 257,244
|Dividends per common share                                        |  |                          | 136,740 |   |      |   | 175,790 |  |   | 261,310 |   |      |   | 256,184 |  |   | 258,319
|                                                                 



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##### Table of Contents

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.

Summary

WPCCs net income for 2008 was
$13.8 million, a decrease of $5.6 million compared to $19.4 million in 2007. Total interest income decreased $4.8 million in 2008 primarily due to the reduction of $78.5 million in average interest earning assets. The yield on interest earning
assets decreased by 16 basis points to 5.43% in 2008 compared to 5.59% in 2007, primarily due to higher rates in 2007 on both short term investments and adjustable interest rate loans that reset downward during 2008.

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 policy upon
which our financial condition depends, and which involves the most complex or subjective decisions or assessments, is the 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 and economic environment; as it is affected by changing economic conditions and various other external
factors, subsequent changes in these factors 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 short term investments, were $197.2 million at December 31, 2008, a decrease of $130.7 million compared to $327.9 million at December 31, 2007. Residential mortgages decreased by $84.6 million as
a result of $46.4 million in loans transferred to Webster Bank and $38.3 million in principal repayments and an increase in loan provisions of $0.4 million. There were no loans acquired from Webster Bank in 2008. Interest bearing deposits decreased
by $51.0 million and cash increased by $6.1 million compared to December 31, 2007. Shareholders equity decreased $130.7 million to $197.0 million at December 31, 2008 from $327.7 million at December 31, 2007, due to the payment
of $130.0 million in return of capital distribution to Webster Bank and $14.5 million in common and preferred dividends offset by net income of $13.8 million for 2008.



14



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##### Table of Contents

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







|                                          |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                          |  | Years Ended December 31, |        
|(In thousands)                            |  | 2008                     |         |   | 2007 |   |         | 2006 |  |   | 2005    |   |  | 2004 |        
|Fixed-rate loans:                         |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|15 yr. loans                              |  | $                        | 7,591   |   |      | $ | 26,465  |      |  | $ | 29,401  |   |  | $    | 50,842  |   |  | $ | 63,747  |  
|20 yr. loans                              |  |                          | 5,991   |   |      |   | 6,610   |      |  |   | 6,652   |   |  |      | 7,218   |   |  |   | 8,083   |  
|25 yr. loans                              |  |                          | 3,029   |   |      |   | 3,140   |      |  |   | 2,857   |   |  |      | 3,718   |   |  |   | 4,037   |  
|30 yr. loans                              |  |                          | 93,329  |   |      |   | 136,124 |      |  |   | 198,172 |   |  |      | 232,742 |   |  |   | 273,028 |  
|                                          |  |                          |         |   |     
|                                          |  |                          |         |   |     
|Total fixed-rate loans                    |  |                          | 109,940 |   |      |   | 172,339 |      |  |   | 237,082 |   |  |      | 294,520 |   |  |   | 348,895 |  
|                                          | 
|Adjustable-rate loans:                    |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|15 yr. loans                              |  |                          | 438     |   |      |   | 547     |      |  |   | 877     |   |  |      | 666     |   |  |   | 1,009   |  
|20 yr. loans                              |  |                          | 557     |   |      |   | 594     |      |  |   | 559     |   |  |      | 1,241   |   |  |   | 5,246   |  
|25 yr. loans                              |  |                          | 444     |   |      |   | 487     |      |  |   | 1,012   |   |  |      | 1,183   |   |  |   | 1,382   |  
|30 yr. loans                              |  |                          | 77,704  |   |      |   | 99,700  |      |  |   | 133,265 |   |  |      | 89,951  |   |  |   | 118,287 |  
|                                          | 
|Total adjustable-rate loans               |  |                          | 79,143  |   |      |   | 101,328 |      |  |   | 135,713 |   |  |      | 93,041  |   |  |   | 125,924 |  
|                                          | 
|Total residential mortgage loans          |  |                          | 189,083 |   |      |   | 273,667 |      |  |   | 372,795 |   |  |      | 387,561 |   |  |   | 474,819 |  
|Premiums and deferred costs on loans, net |  |                          | 796     |   |      |   | 967     |      |  |   | 1,428   |   |  |      | 2,597   |   |  |   | 3,082   |  
|Less: allowance for loan losses           |  |                          | (2,183  | ) |      |   | (1,772  | )    |  |   | (2,022  | ) |  |      | (2,022  | ) |  |   | (2,022  | )
|                                          | 
|                                          |  |                          |         |   |     
|Residential mortgage loans, net           |  | $                        | 187,696 |   |      | $ | 272,862 |      |  | $ | 372,201 |   |  | $    | 388,136 |   |  | $ | 475,879 |  
|                                          | 



Asset
Quality

The Company maintains asset quality by acquiring residential real estate loans that have been conservatively underwritten and by management of
nonperforming assets. During 2008, all loans acquired by the Company were transferred to it from Webster Bank. There were no loans acquired and $46.4 million in loan transfers to Webster Bank in 2008. As such, the Companys asset quality is
dependent upon Webster Banks ability to maintain adequate underwriting standards. At December 31, 2008, residential real estate loans comprised the entire loan portfolio. The Company also invests in mortgage-backed securities issued by
government agencies or government-sponsored enterprises. At December 31, 2008, the Company did not hold any mortgage-backed securities.

Nonperforming Assets and Delinquencies

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

Nonperforming Loans







|                                           |  |                          |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |      
|------------------------------------------ |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - |  | - | -----
|                                           |  | Years Ended December 31,
|(Dollars in thousands)                     |  | 2008                     |       |   | 2007 |   |       | 2006 |  |   | 2005  |   |  | 2004
|Loans accounted for on a nonaccrual basis: |  |                          |       |   |      |   |       |      |  |   |       |   |  |      |       |   |  |   |      
|Residential fixed-rate loans               |  | $                        | 448   |   |      | $ | 379   |      |  | $ | -     |   |  | $    | -     |   |  | $ | -    
|Residential adjustable-rate loans          |  |                          | 375   |   |      |   | 470   |      |  |   | 211   |   |  |      | 97    |   |  |   | 179  
|                                          
|Total nonperforming loans                  |  |                          | 823   |   |      |   | 849   |      |  |   | 211   |   |  |      | 97    |   |  |   | 179  
|Other real estate owned                    |  |                          | -     |   |      |   | -     |      |  |   | -     |   |  |      | -     |   |  |   | -    
|                                          
|Total nonperforming assets                 |  | $                        | 823   |   |      | $ | 849   |      |  | $ | 211   |   |  | $    | 97    |   |  | $ | 179  
|                                          
|Allowance for loan losses                  |  | $                        | 2,183 |   |      | $ | 1,772 |      |  | $ | 2,022 |   |  | $    | 2,022 |   |  | $ | 2,022
|Allowance / nonperforming loans            |  |                          | 265   | % |      |   | 209   | %    |  |   | 958   | % |  |      | 2,085 | % |  |   | 1,130
|Allowance / total mortgage loans           |  |                          | 1.15  |   |      |   | 0.65  |      |  |   | 0.54  |   |  |      | 0.52  |   |  |   | 0.43 
|                                          



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##### Table of Contents

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







|                                  |  |      |       |      |   |      |  |      |     |      |   |       |  |   |    
|--------------------------------- |  | ---- | ----- | ---- | - | ---- |  | ---- | --- | ---- | - | ----- |  | - | ---
|(In thousands)                    |  | 2008 |       | 2007 |   | 2006 |  | 2005 |     | 2004
|Past due 30-89 days:              |  |      |       |      |   |      |  |      |     |      |   |       |  |   |    
|Residential fixed-rate loans      |  | $    | 2,923 |      | $ | 462  |  | $    | 204 |      | $ | 723   |  | $ | 279
|Residential adjustable-rate loans |  |      | 1,862 |      |   | 491  |  |      | 250 |      |   | 539   |  |   | 266
|                                 
|Total                             |  | $    | 4,785 |      | $ | 953  |  | $    | 454 |      | $ | 1,262 |  | $ | 545
|                                 

At December 31, 2008, non accruing loans were $823,000 compared to $849,000 at December 31, 2007, a
decrease of $26,000.

Total delinquent loans at December 31, 2008 was $5.6 million, an increase of $3.8 million from December 31, 2007. A loan is
deemed to be delinquent for reporting purposes when it is more than 30 days past due. The increase in delinquencies in this current period of economic uncertainty is reflected in the increased provision for the year ended December 31, 2008.

During 2008 the domestic and global financial and capital markets experienced significant disruption and volatility which, along with turmoil in the
mortgage market, has led to a significant credit and liquidity crisis. These market conditions were attributable to a variety of factors; in particular the fallout associated with subprime mortgage loans (a type of lending never actively pursued by
the Company). The disruption has been exacerbated by the continued value declines in the real estate and housing markets. The Company is not immune to some negative consequences arising from overall economic weakness and, in particular, a sharp
downturn in the housing market, both locally and nationally. Decreases in real estate values could adversely affect the value of property used as collateral for loans. Adverse changes in the economy may have a further negative effect on the ability
of the Companys borrowers to make timely loan payments, which would have an adverse impact on the Companys earnings. A further increase in loan delinquencies would decrease net interest income and increase loan losses, causing potential
increases in the provision and allowance for credit losses.

Allowance for Loan Losses

At December 31, 2008, the allowance for loan losses was approximately $2.2 million compared to $1.8 million at December 31, 2007. Total loans decreased $84.6
million from December 31, 2007. Allowance for loan losses increased by $0.4 million at December 31, 2008 and the allowance as a percentage of loans increased from 0.65% at December 31, 2007, to 1.15% at December 31, 2008,
primarily due to the increase in delinquent loans.

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.



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##### Table of Contents

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







|                                   |  |                          |       |   |      |   |       |      |  |      |       |      |   |       |  |   |       |  
|---------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | ---- | ----- | ---- | - | ----- |  | - | ----- | -
|                                   |  | Years Ended December 31, |      
|(In thousands)                     |  | 2008                     |       |   | 2007 |   |       | 2006 |  | 2005 |       | 2004 |  
|Balance at beginning of the year   |  | $                        | 1,772 |   |      | $ | 2,022 |      |  | $    | 2,022 |      | $ | 2,022 |  | $ | 2,106 |  
|Provision/(credit) for loan losses |  |                          | 420   |   |      |   | (250  | )    |  |      | -     |      |   | -     |  |   | -     |  
|Charge-offs                        |  |                          | (9    | ) |      |   | -     |      |  |      | -     |      |   | -     |  |   | (84   | )
|                                   | 
|Balance at end of the year         |  | $                        | 2,183 |   |      | $ | 1,772 |      |  | $    | 2,022 |      | $ | 2,022 |  | $ | 2,022 |  
|                                   | 

There was a provision for loan losses of $420,000 for 2008 compared to a credit for loan loss provision of
$250,000 in 2007. The increase in the provision is primarily due to the increase in delinquencies mentioned above, as well as overall deterioration in economic conditions.

Liquidity and Capital Resources

The primary sources of liquidity for the Company have historically been
principal and interest payments from the residential mortgage loans and mortgage-backed securities portfolios. The primary uses of liquidity are typically 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 $0.8625 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. 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 at least 90% of net taxable income
for the year be distributed to shareholders. Accelerated prepayments beginning in 2002 and continuing throughout 2008 resulted in increased cash levels for the Company. In 2007 and 2008, WPCC declared return of capital dividends in order to return a
portion of the available cash to the Companys common shareholder.

In the event that principal and interest payments on its mortgage assets are
insufficient to meet its operating needs, WPCC has the ability to raise additional funds. The Companys residential mortgage loans are underwritten to meet secondary market requirements and could be sold or securitized as mortgage-backed
securities and used as borrowing collateral.

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



17



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##### Table of Contents

mortgage-backed securities generally will tend to increase with the level of prepayments also normally increasing. The interest income earned on the
Companys adjustable-rate, interest-sensitive instruments, which represent primarily adjustable-rate mortgage loans, may change due to changes in quoted interest-rate indices. The adjustable-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, 2008, 41.9% of the Companys residential mortgage loans were adjustable-rate
loans.

Results of Operations

Net income was
$13.8 million for the year ended December 31, 2008 compared to $19.4 million in 2007 and $26.7 million in 2006. The decrease of $5.6 million in 2008 compared to 2007 is primarily due to the reduction of $78.5 million in interest earning assets.
The decrease in net income for 2007 compared to 2006 is primarily due to the reduction of $158.8 million in interest earning assets.

The decrease in
interest income of $4.8 million, or 24.7% in 2008 compared to 2007 is primarily due to the reduction of $78.5 million in interest earning assets. The yield on interest earning assets declined by 16 basis points primarily due to the lower rates on
short-term investments and lower rates on the adjustable interest rate loans that reset in 2008. The decrease in interest income of $8.2 million, or 29.8% in 2007 compared to 2006 was primarily due to the reduction of $158.8 million in interest
earning assets.







|                                    |  |                          |                |  |   |                |  |              |  |      |  |   |                |  |   |                |  |              |  |  |  |   |                |  |   |                |  |             
|----------------------------------- |  | ------------------------ | -------------- |  | - | -------------- |  | ------------ |  | ---- |  | - | -------------- |  | - | -------------- |  | ------------ |  |  |  | - | -------------- |  | - | -------------- |  | ------------
|                                    |  | Years Ended December 31,
|                                    |  | 2008                     |                |  |   | 2007           |  |              |  | 2006
|(Dollars in thousands)              |  |                          | AverageBalance |  |   | InterestIncome |  | AverageYield |  |      |  |   | AverageBalance |  |   | InterestIncome |  | AverageYield |  |  |  |   | AverageBalance |  |   | InterestIncome |  | AverageYield
|Mortgage loans netof deferred costs |  | $                        | 251,866        |  | $ | 14,127         |  | 5.61%        |  |      |  | $ | 301,128        |  | $ | 17,009         |  | 5.65%        |  |  |  | $ | 393,205        |  | $ | 22,020         |  | 5.60%       
|Mortgage-backed securities          |  |                          | -              |  |   | -              |  | -            |  |      |  |   | -              |  |   | -              |  | -            |  |  |  |   | 31,098         |  |   | 1,543          |  | 4.96        
|Interest-bearing deposits           |  |                          | 17,352         |  |   | 490            |  | 2.82         |  |      |  |   | 46,630         |  |   | 2,415          |  | 5.18         |  |  |  |   | 82,296         |  |   | 4,106          |  | 4.99        
|                                   
|Total                               |  | $                        | 269,218        |  | $ | 14,617         |  | 5.43%        |  |      |  | $ | 347,758        |  | $ | 19,424         |  | 5.59%        |  |  |  | $ | 506,599        |  | $ | 27,669         |  | 5.46%       
|                                   

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







|                                     |  |                                      |       |        |   |                                      |  |   |         |      |  |        |   |       |  |   |         |  |   |        
|------------------------------------ |  | ------------------------------------ | ----- | ------ | - | ------------------------------------ |  | - | ------- | ---- |  | ------ | - | ----- |  | - | ------- |  | - | -------
|                                     |  | Years ended December 31,2008 v. 2007 |       |        |   | Years ended December 31,2007 v. 2006
|                                     |  | Increase (decrease) due to           |       |        |   | Increase (decrease) due to          
|(In thousands)                       |  | Rate                                 |       | Volume |   | Total                                |  |   |         | Rate |  | Volume |   | Total
|Interest on interest-earning assets: |  |                                      |       |        |   |                                      |  |   |         |      |  |        |   |       |  |   |         |  |   |        
|Loans, net                           |  | $                                    | (118) |        | $ | (2,764)                              |  | $ | (2,882) |      |  |        | $ | 5     |  | $ | (5,016) |  | $ | (5,011)
|Mortgage-backed securities           |  |                                      | -     |        |   | -                                    |  |   | -       |      |  |        |   | (771) |  |   | (772)   |  |   | (1,543)
|Interest-bearing deposits            |  |                                      | (809) |        |   | (1,116)                              |  |   | (1,925) |      |  |        |   | 7     |  |   | (1,698) |  |   | (1,691)
|                                    
|Net change in net interest income    |  | $                                    | (927) |        | $ | (3,880)                              |  | $ | (4,807) |      |  |        | $ | (759) |  | $ | (7,486) |  | $ | (8,245)











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Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, 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 investment trust 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 Accounting Standards

In December 2007, the FASB issued revised SFAS No. 141, Business Combinations, (SFAS No. 141(R)). SFAS No. 141(R) retains the fundamental
requirements of SFAS No. 141 that the acquisition method of accounting (formerly the purchase method) be used for all business combinations; that an acquirer be identified for each business combination; and that intangible assets be identified
and recognized separately from goodwill. SFAS No. 141(R) requires the acquiring entity in a business combination to recognize the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date,
measured at their fair values as of that date, with limited exceptions. Additionally, SFAS No. 141(R) changes the requirements for recognizing assets acquired and liabilities assumed arising from contingencies and recognizing and measuring
contingent consideration. SFAS No. 141(R) also enhances the disclosure requirements for business combinations. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date.

In December 2007, the FASB issued
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statement  an amendment of ARB No. 51. SFAS No. 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements to
establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Among other things, SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements and requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the
noncontrolling interest. SFAS No. 160 also amends SFAS No. 128, Earnings per Share, so that earnings per share calculations in consolidated financial statements will continue to be based on amounts attributable to the
parent. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 and is applied prospectively as of the beginning of the fiscal year in which it is initially
applied, except for the presentation and disclosure requirements which are to be applied retrospectively for all periods presented. SFAS No. 160 is not expected to have a material impact on WPCCs financial condition or results of
operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an
amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related items are accounted for under SFAS
No. 133 and how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. The new standard is effective for WPCC on January 1, 2009. WPCC is currently evaluating the
impact of adopting SFAS No. 161 on its Interim Financial Statements.



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##### Table of Contents

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,
principles or guidelines. Such developments, or any combination thereof, could have an adverse impact on the Companys financial position and results of operations.



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##### Table of Contents

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Because the majority of the Companys assets are sensitive to changes in interest rates, the most significant form of market risk is interest
rate risk. An effective asset/liability management process must balance the risks and rewards from both short and long-term interest rate risks in determining management strategy and action. The primary goal of managing this risk is to maximize net
income (short-term risk) and net economic value (long-term risk) over time in changing interest rate environments.

The following table summarizes the
estimated fair values of the Companys interest-sensitive assets at December 31, 2008 and 2007, and the projected change to fair values if interest rates instantaneously increase or decrease by 100 basis points. The Company had no
interest-sensitive liabilities at December 31, 2008 and 2007.





|                                  |  |                |         |            |   |                               |  |   |       |  |   |        |  
|--------------------------------- |  | -------------- | ------- | ---------- | - | ----------------------------- |  | - | ----- |  | - | ------ | -
|                                  |  | Amortized Cost |         | Fair Value |   | Estimated Market Value Impact | 
|(In thousands)                    |  |                |         | -100 BP    |   | +100 BP                       | 
|At December 31, 2008              |  |                |         |            |   |                               |  |   |       |  |   |        |  
|Fixed-rate residential loans      |  | $              | 109,940 |            | $ | 112,627                       |  |   | N/A   |  | $ | (3,669 | )
|Adjustable-rate residential loans |  |                | 79,143  |            |   | 78,144                        |  |   | N/A   |  |   | (786   | )
|                                  | 
|                                  |  | $              | 189,083 |            | $ | 190,771                       |  |   | N/A   |  | $ | (4,455 | )
|At December 31, 2007              |  |                |         |            |   |                               |  |   |       |  |   |        |  
|Fixed-rate residential loans      |  | $              | 172,339 |            | $ | 173,534                       |  | $ | 5,262 |  | $ | (7,490 | )
|Adjustable-rate residential loans |  |                | 101,328 |            |   | 101,510                       |  |   | 1,120 |  |   | (1,156 | )
|                                  | 
|                                  |  | $              | 273,667 |            | $ | 275,044                       |  | $ | 6,382 |  | $ | (8,646 | )

Interest-sensitive assets, when shocked by a plus 100 basis point rate change results in an unfavorable $4.5
million, or 2.3%, change in 2008, compared to an unfavorable $8.6 million, or 3.1%, change in 2007.

Based on the Companys asset/liability mix at
December 31, 2008, management estimates that a gradual 200 basis point increase in interest rates would increase net income over the next twelve months by 4.1%.

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 the Companys interest-rate risk position at December 31, 2008 represents a reasonable level of risk.



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##### Table of Contents

Item 8.  Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Webster Preferred Capital Corporation:

We have audited the accompanying balance sheets of Webster Preferred Capital Corporation (a subsidiary of Webster Bank, N.A.) as of December 31, 2008 and 2007, 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, 2008. 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 the standards of the Public Company Accounting
Oversight Board (United States). 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, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended
December 31, 2008, in conformity with U.S. generally accepted accounting principles.







/s/ KPMG LLP

Hartford, Connecticut

March 10, 2009



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##### Table of Contents

WEBSTER PREFERRED CAPITAL CORPORATION

CONSOLIDATED BALANCE SHEETS



|                                                                                                                        |  |                    |         |   |      |   |         |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ---- | - | ------- | -
|                                                                                                                        |  | Years December 31, |        
|(In thousands, except share and per share data)                                                                         |  | 2008               |         |   | 2007 |  
|Assets                                                                                                                  |  |                    |         |   |      |   |         |  
|                                                                                                                        |  |                   
|Cash                                                                                                                    |  | $                  | 8,680   |   |      | $ | 2,543   |  
|Interest-bearing deposits                                                                                               |  |                    |        |   |      |   | 51,000  |  
|Residential mortgage loans, net                                                                                         |  |                    | 187,696 |   |      |   | 272,862 |  
|Accrued interest receivable                                                                                             |  |                    | 809     |   |      |   | 1,184   |  
|Prepaid expenses and other assets                                                                                       |  |                    |        |   |      |   | 313     |  
|                                                                                                                        | 
|Total assets                                                                                                            |  | $                  | 197,185 |   |      | $ | 327,902 |  
|                                                                                                                        | 
|                                                                                                                        |  |                   
|Liabilities and Shareholders Equity                                                                                    |  |                    |         |   |      |   |         |  
|                                                                                                                        |  |                   
|Accrued dividends payable                                                                                               |  | $                  | 180     |   |      | $ | 180     |  
|Accrued expenses and other liabilities                                                                                  |  |                    | 34      |   |      |   | 39      |  
|                                                                                                                        | 
|Total liabilities                                                                                                       |  |                    | 214     |   |      |   | 219     |  
|                                                                                                                        | 
|Shareholders Equity                                                                                                    |  |                    |         |   |      |   |         |  
|Series B 8.625% cumulative redeemable preferred stock, liquidation preference $10 per share; par value $1.00 per share: |  |                    |         |   |      |   |         |  
|1,000,000 shares authorized, issued and outstanding                                                                     |  |                    | 1,000   |   |      |   | 1,000   |  
|Common stock, par value $.01 per share:                                                                                 |  |                    |         |   |      |   |         |  
|Authorized - 1,000 shares                                                                                               |  |                    |         |   |      |   |         |  
|Issued and outstanding - 100 shares                                                                                     |  |                    | 1       |   |      |   | 1       |  
|Paid-in capital                                                                                                         |  |                    | 198,799 |   |      |   | 328,799 |  
|Distributions in excess of accumulated earnings                                                                         |  |                    | (2,829  | ) |      |   | (2,117  | )
|                                                                                                                        | 
|Total shareholders equity                                                                                              |  |                    | 196,971 |   |      |   | 327,683 |  
|                                                                                                                        | 
|Total liabilities and shareholders equity                                                                              |  | $                  | 197,185 |   |      | $ | 327,902 |  
|                                                                                                                        | 
|                                                                                                                        | 

See accompanying notes to financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

STATEMENTS OF INCOME





|                                                                  |  |                          |         |   |      |   |         |  |   |         |  
|----------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- |  | - | ------- | -
|                                                                  |  | Years Ended December 31, |        
|(In thousands, except per share data)                             |  | 2008                     |         |   | 2007 |   | 2006    | 
|Interest income:                                                  |  |                          |         |   |      |   |         |  |   |         |  
|Loans                                                             |  | $                        | 14,127  |   |      | $ | 17,009  |  | $ | 22,020  |  
|Securities and interest-bearing deposits                          |  |                          | 490     |   |      |   | 2,415   |  |   | 5,649   |  
|                                                                  | 
|Total interest income                                             |  |                          | 14,617  |   |      |   | 19,424  |  |   | 27,669  |  
|                                                                  |  |                          |        
|(Provision)/credit for loan losses                                |  |                          | (420    | ) |      |   | 250     |  |   | -       |  
|                                                                  | 
|Interest income after recovery of loan losses                     |  |                          | 14,197  |   |      |   | 19,674  |  |   | 27,669  |  
|                                                                  |  |                          |        
|Non-Interest income:                                              |  |                          |         |   |      |   |         |  |   |         |  
|Loss on write-down of securities available for sale to fair value |  |                          | -       |   |      |   | -       |  |   | (526    | )
|Loss on sale of securities                                        |  |                          | -       |   |      |   | -       |  |   | (117    | )
|                                                                  | 
|Total non-interest income                                         |  |                          | -       |   |      |   | -       |  |   | (643    | )
|                                                                  | 
|                                                                  |  |                          |        
|Non-Interest expenses:                                            |  |                          |         |   |      |   |         |  |   |         |  
|Advisory fee expense paid to parent                               |  |                          | 205     |   |      |   | 205     |  |   | 202     |  
|Foreclosed property expenses                                      |  |                          | 62      |   |      |   | -       |  |   | -       |  
|Other non-interest expense                                        |  |                          | 105     |   |      |   | 118     |  |   | 127     |  
|                                                                  | 
|Total non-interest expense                                        |  |                          | 372     |   |      |   | 323     |  |   | 329     |  
|                                                                  | 
|                                                                  |  |                          |        
|Net income                                                        |  |                          | 13,825  |   |      |   | 19,351  |  |   | 26,697  |  
|Preferred stock dividends                                         |  |                          | 863     |   |      |   | 863     |  |   | 863     |  
|                                                                  | 
|Net income available to common shareholder                        |  | $                        | 12,962  |   |      | $ | 18,488  |  | $ | 25,834  |  
|                                                                  | 
|Basic net income per common share                                 |  | $                        | 129,624 |   |      | $ | 184,883 |  | $ | 258,339 |  
|                                                                  | 

STATEMENTS OF COMPREHENSIVE INCOME





|                                                                                                                   |  |                          |        |      |   |        |  |   |        |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | ---- | - | ------ |  | - | ------ | -
|                                                                                                                   |  | Years Ended December 31, |       
|(In thousands)                                                                                                     |  | 2008                     |        | 2007 |   | 2006   | 
|Net income                                                                                                         |  | $                        | 13,825 |      | $ | 19,351 |  | $ | 26,697 |  
|Other comprehensive income:                                                                                        |  |                          |        |      |   |        |  |   |        |  
|Unrealized net holding loss on securitiesavailable for sale arising during the year                                |  |                          | -      |      |   | -      |  |   | (143   | )
|Reclassification adjustment for loss on sale and write-down ofsecurities available for sale included in net income |  |                          | -      |      |   | -      |  |   | 643    |  
|                                                                                                                   | 
|Other comprehensive income                                                                                         |  |                          | -      |      |   | -      |  |   | 500    |  
|                                                                                                                   | 
|Comprehensive income                                                                                               |  | $                        | 13,825 |      | $ | 19,351 |  | $ | 27,197 |  
|                                                                                                                   | 

See accompanying notes to financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

STATEMENTS OF SHAREHOLDERS EQUITY





|                                           |  |                |       |             |   |                |  |   |                                              |   |  |                                            |         |   |       |   |      |   |  |   |          |  
|------------------------------------------ |  | -------------- | ----- | ----------- | - | -------------- |  | - | -------------------------------------------- | - |  | ------------------------------------------ | ------- | - | ----- | - | ---- | - |  | - | -------- | -
|(In thousands, except per share data)      |  | PreferredStock |       | CommonStock |   | Paid-InCapital |  |   | Distributionsin Excess ofAccumulatedEarnings |   |  | AccumulatedOtherComprehensiveIncome (Loss) |         |   | Total |  
|Balance, December 31, 2005                 |  | $              | 1,000 |             | $ | 1              |  | $ | 513,799                                      |   |  | $                                          | (2,729  | ) |       | $ | (500 | ) |  | $ | 511,571  |  
|                                           |  |                |       |             |   |               
|Net income                                 |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | 26,697  |   |       |   | -    |   |  |   | 26,697   |  
|Other comprehensive income                 |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | -       |   |       |   | 500  |   |  |   | 500      |  
|Dividends declared and paid:               |  |                |       |             |   |                |  |   |                                              |   |  |                                            |         |   |       |   |      |   |  |   |          |  
|Common stock ($261,310 per share)          |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | (26,131 | ) |       |   | -    |   |  |   | (26,131  | )
|Series B Preferred stock                   |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | (863    | ) |       |   | -    |   |  |   | (863     | )
|                                           | 
|Balance, December 31, 2006                 |  | $              | 1,000 |             | $ | 1              |  | $ | 513,799                                      |   |  | $                                          | (3,026  | ) |       | $ | -    |   |  | $ | 511,774  |  
|                                           |  |                |       |             |   |               
|Net income                                 |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | 19,351  |   |       |   | -    |   |  |   | 19,351   |  
|Dividends declared and paid:               |  |                |       |             |   |                |  |   |                                              |   |  |                                            |         |   |       |   |      |   |  |   |          |  
|Return of capital dividend on common stock |  |                | -     |             |   | -              |  |   | (185,000                                     | ) |  |                                            | -       |   |       |   | -    |   |  |   | (185,000 | )
|Common stock ($175,790 per share)          |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | (17,579 | ) |       |   | -    |   |  |   | (17,579  | )
|Series B Preferred stock                   |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | (863    | ) |       |   | -    |   |  |   | (863     | )
|                                           | 
|Balance, December 31, 2007                 |  | $              | 1,000 |             | $ | 1              |  | $ | 328,799                                      |   |  | $                                          | (2,117  | ) |       | $ | -    |   |  | $ | 327,683  |  
|                                           |  |                |       |             |   |               
|Net income                                 |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | 13,825  |   |       |   | -    |   |  |   | 13,825   |  
|Dividends declared and paid:               |  |                |       |             |   |                |  |   |                                              |   |  |                                            |         |   |       |   |      |   |  |   |          |  
|Return of capital dividend on common stock |  |                | -     |             |   | -              |  |   | (130,000                                     | ) |  |                                            | -       |   |       |   | -    |   |  |   | (130,000 | )
|Common stock ($136,740 per share)          |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | (13,674 | ) |       |   | -    |   |  |   | (13,674  | )
|Series B Preferred stock                   |  |                | -     |             |   | -              |  |   | -                                            |   |  |                                            | (863    | ) |       |   | -    |   |  |   | (863     | )
|                                           | 
|Balance, December 31, 2008                 |  | $              | 1,000 |             | $ | 1              |  | $ | 198,799                                      |   |  | $                                          | (2,829  | ) |       | $ | -    |   |  | $ | 196,971  |  
|                                           | 

See accompanying notes to financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

STATEMENTS OF CASH FLOWS







|                                                                                  |  |                          |          |   |      |   |          |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                  |  | Years ended December 31, |         
|(In thousands)                                                                    |  | 2008                     |          |   | 2007 |   |          | 2006 | 
|Cash flow from operating activities:                                              |  |                          |          |   |      |   |          |      |  |   |         |  
|Net income                                                                        |  | $                        | 13,825   |   |      | $ | 19,351   |      |  | $ | 26,697  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |          |   |      |   |          |      |  |   |         |  
|Net amortization and accretion                                                    |  |                          | 171      |   |      |   | 192      |      |  |   | 389     |  
|Loss on write down of securities available for sale to fair value                 |  |                          | -        |   |      |   | -        |      |  |   | 526     |  
|Loss on sale of REO                                                               |  |                          | 56       |   |      |   | -        |      |  |   | -       |  
|Provision (credit) for loan losses                                                |  |                          | 420      |   |      |   | (250     | )    |  |   | -       |  
|Loss on sale of securities                                                        |  |                          | -        |   |      |   | -        |      |  |   | 117     |  
|Decrease (increase) in accrued interest receivable                                |  |                          | 375      |   |      |   | 675      |      |  |   | (75     | )
|(Decrease) increase in accrued expenses and other liabilities                     |  |                          | (5       | ) |      |   | 3        |      |  |   | 26      |  
|Decrease (increase) in prepaid expenses and other assets                          |  |                          | 313      |   |      |   | 1,261    |      |  |   | (1,470  | )
|Net cash provided by operating activities                                         |  |                          | 15,155   |   |      |   | 21,232   |      |  |   | 26,210  |  
|Cash flow from investing activities:                                              |  |                          |          |   |      |   |          |      |  |   |         |  
|Principal repayments on mortgage-backed securities                                |  |                          | -        |   |      |   | -        |      |  |   | 4,393   |  
|Proceeds from sale of mortgage-backed securities                                  |  |                          | -        |   |      |   | -        |      |  |   | 36,769  |  
|Proceeds from sale of forclosed properties                                        |  |                          | 326      |   |      |   | -        |      |  |   | -       |  
|Net decrease (increase) in interest-bearing deposits                              |  |                          | 51,000   |   |      |   | 29,000   |      |  |   | (3,000  | )
|Net decrease in residential mortgage loans                                        |  |                          | 84,193   |   |      |   | 99,397   |      |  |   | 15,576  |  
|Net cash provided by investing activities                                         |  |                          | 135,519  |   |      |   | 128,397  |      |  |   | 53,738  |  
|Cash flow from financing activities:                                              |  |                          |          |   |      |   |          |      |  |   |         |  
|Dividends paid on common and preferred stock                                      |  |                          | (14,537  | ) |      |   | (18,442  | )    |  |   | (26,994 | )
|Return of capital dividend                                                        |  |                          | (130,000 | ) |      |   | (185,000 | )    |  |   | -       |  
|Net cash used by financing activities                                             |  |                          | (144,537 | ) |      |   | (203,442 | )    |  |   | (26,994 | )
|Increase (decrease) in cash and cash equivalents                                  |  |                          | 6,137    |   |      |   | (53,813  | )    |  |   | 52,954  |  
|Cash and cash equivalents at beginning of year                                    |  |                          | 2,543    |   |      |   | 56,356   |      |  |   | 3,402   |  
|Cash and cash equivalents at end of year                                          |  | $                        | 8,680    |   |      | $ | 2,543    |      |  | $ | 56,356  |  
|                                                                                  |  |                          |          |   |      |   |          |      |  |   |         |  

See accompanying notes to financial statements.

During 2008 there were $382,000 of loans transferred from residential mortgage loans to foreclosed properties.



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WEBSTER PREFERRED CAPITAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

Note 1: Summary of Significant Accounting Policies

Business

Webster Preferred Capital Corporation
(the Company) is a Connecticut corporation incorporated in March 1997 and a subsidiary of Webster Bank, National Association, (Webster Bank), which is a wholly-owned subsidiary of Webster Financial Corporation
(Webster). The Company acquires, holds and manages real estate related mortgage assets.

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 commercial 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.

Basis of Financial Statement Presentation

The financial statements have been prepared in conformity with U.S.
generally accepted accounting principles (GAAP). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent
assets and liabilities, as of the date of the 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.

Residential Mortgage Loans

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

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

The
Companys residential mortgage loans are not within the scope of Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118, since
these are homogenous loans with relatively small balances that are collectively evaluated for impairment.



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Allowance for Loan Losses

The 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.

Mortgage-Backed Securities

Mortgage-backed securities are issued by U.S. government agencies or government-sponsored enterprises and were classified as available for sale. Available for sale securities were carried at fair value with unrealized gains and losses
recorded as adjustments to shareholders equity. The adjustment to shareholders equity was not tax-effected, as the Company is generally not subject to federal and state income tax. Realized gains and losses on sales of securities are
recorded using the specific identification method. Unrealized losses on securities are charged to earnings when the decline in fair value is judged to be other than temporary. At December 31, 2008 and 2007, the Company did not hold any
mortgage-backed securities.

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 does not apply since the
Company has issued no options or other instruments representing potential common shares. The weighted-average number of shares used in the computation of basic earnings per common share for the years ended December 31, 2008, 2007 and 2006 was
100.

Comprehensive Income

The purpose of 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).

Statement of Cash Flows

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



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Note 2: Residential Mortgage Loans, Net

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







|                                          |  |                          |         |   |      |   |         |  
|----------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                          |  | Years Ended December 31, |        
|(In thousands)                            |  | 2008                     |         |   | 2007 |  
|Fixed-rate loans:                         |  |                          |         |   |      |   |         |  
|15 yr. loans                              |  | $                        | 7,591   |   |      | $ | 26,465  |  
|20 yr. loans                              |  |                          | 5,991   |   |      |   | 6,610   |  
|25 yr. loans                              |  |                          | 3,029   |   |      |   | 3,140   |  
|30 yr. loans                              |  |                          | 93,329  |   |      |   | 136,124 |  
|Total fixed-rate loans                    |  |                          | 109,940 |   |      |   | 172,339 |  
|Adjustable-rate loans:                    |  |                          |         |   |      |   |         |  
|15 yr. loans                              |  |                          | 438     |   |      |   | 547     |  
|20 yr. loans                              |  |                          | 557     |   |      |   | 594     |  
|25 yr. loans                              |  |                          | 444     |   |      |   | 487     |  
|30 yr. loans                              |  |                          | 77,704  |   |      |   | 99,700  |  
|Total adjustable-rate loans               |  |                          | 79,143  |   |      |   | 101,328 |  
|Total residential mortgage loans          |  |                          | 189,083 |   |      |   | 273,667 |  
|Premiums and deferred costs on loans, net |  |                          | 796     |   |      |   | 967     |  
|Less: allowance for loan losses           |  |                          | (2,183  | ) |      |   | (1,772  | )
|Residential mortgage loans, net           |  | $                        | 187,696 |   |      | $ | 272,862 |  
|                                          |  |                          |         |   |      |   |         |  

There were no loans acquired by the Company from Webster Bank in 2008, $50.8 million in 2007 and $117.7 million in
2006. Loans transferred by the Company to Webster Bank totaled $46.4 million in 2008, $90.4 million in 2007 and $73.3 million in 2006.

At
December 31, 2008, 58.1% of the Companys residential mortgage loans are fixed rate loans and 41.9% are adjustable-rate loans.

During 2008 the
domestic and global financial and capital markets experienced significant disruption and volatility which, along with turmoil in the mortgage market, has led to a significant credit and liquidity crisis. These market conditions were attributable to
a variety of factors; in particular the fallout associated with subprime mortgage loans (a type of lending never actively pursued by the Company). The disruption has been exacerbated by the continued value declines in the real estate and housing
markets. The Company is not immune to some negative consequences arising from overall economic weakness and, in particular, a sharp downturn in the housing market, both locally and nationally. Decreases in real estate values could adversely affect
the value of property used as collateral for loans. Adverse changes in the economy may have a further negative effect on the ability of the Companys borrowers to make timely loan payments, which would have an adverse impact on the
Companys earnings. A further increase in loan delinquencies would decrease net interest income and increase loan losses, causing potential increases in the provision and allowance for credit losses.

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



|                                   |  |                          |       |   |      |   |       |      |  |   |      
|---------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | -----
|                                   |  | Years Ended December 31,
|(In thousands)                     |  | 2008                     |       |   | 2007 |   |       | 2006
|Balance at beginning of year       |  | $                        | 1,772 |   |      | $ | 2,022 |      |  | $ | 2,022
|Provision/(credit) for loan losses |  |                          | 420   |   |      |   | (250  | )    |  |   | -    
|Charge-offs                        |  |                          | (9    | ) |      |   | -     |      |  |   | -    
|Balance at end of year             |  | $                        | 2,183 |   |      | $ | 1,772 |      |  | $ | 2,022
|                                   |  |                          |       |   |      |   |       |      |  |   |      



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Total non-accrual loans at December 31, 2008 was $0.8 million, an increase of $0.1 million from December 31,
2007. Interest on non-accrual loans that would have been recorded as additional interest income for the years ended December 31, 2008, 2007 and 2006 had the loans been current in accordance with their original terms totaled $19,000, $23,000 and
$4,000, respectively.

During 2008, there was $382,000 in mortgage loans transferred to other real estate owned. At December 31, 2008 the loans held
in other real estate owned were sold and there was no remaining balance for 2008. The Company recorded foreclosure expenses of $62,000 for 2008.

Note
3: Redeemable Preferred Stock

In December 1997, 1,000,000 shares of Series B 8.625% cumulative redeemable preferred stock were issued at $10 per
share, raising $10.0 million net of issuance costs. The Series B preferred stock is redeemable solely at the option of the Company, which has no current plans to redeem the preferred stock. The redemption price is $10 per share.

Note 4: 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 adjustable-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 2008, 2007 and 2006 were $205,000, $240,000 and $313,000, respectively. Servicing fees are
netted against interest income in the Statements of Income, as they are considered a reduction in yield to the Company.

The Servicer is entitled to retain
any late payment charges, prepayment fees, penalties and assumption fees collected in connection with residential 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 5: 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 mortgage assets, advise with respect to the acquisition, management, financing, and disposition of mortgage related assets and provide the necessary executive administration, human resources, accounting
and control, technical support, record keeping, copying, telephone, mailing and distribution, investment and funds management services. Webster Bank received an annual fee for advisory services provided to the Company of $205,000 in 2008 compared to
$205,000 in 2007 and $202,500 in 2006. 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.

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



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Note 6: 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 or Connecticut income taxes on its net income and capital gains that it distributes to the holders of its common and preferred stock. Therefore, because all of the Companys net income has been distributed to its
stockholders, no provision for federal or Connecticut 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 distribute 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.

The
Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income taxes, on January 1, 2007, which addressed the determination of how tax benefits
claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, a Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate resolution. FIN 48 did not have a material impact on the results of the operations, financial condition, or liquidity of the Company.

The Company recognizes interest and penalties related to unrecognized tax benefits, where applicable, in income tax expense. No interest or penalties were recognized in its statements of income for 2008 or 2007, or in
its statement of condition at December 31, 2008.

The Companys federal and Connecticut income tax returns remain open to examination for
calendar tax years subsequent to 2004.

Note 7: Fair Value Measurements

Effective January 1, 2008, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, for financial assets and
financial liabilities. In accordance with Financial Accounting Standards Board Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157, Webster will delay application of SFAS No. 157 for non-financial
assets and non-financial liabilities, until January 1, 2009. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair
value measurements.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market,
the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a
transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market
participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

SFAS No. 157 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information
generated by



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market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such
as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be
consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in
pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing
the asset or liability developed based on the best information available in the circumstances. In that regard, SFAS No. 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active
markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:



| |  |  | Level 1 Inputs  Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at
the measurement date.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2 Inputs  Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3 Inputs  Unobservable inputs for determining the fair values of assets or liabilities that reflect an entitys own assumptions about the
assumptions that market participants would use in pricing the assets or liabilities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There were no financial assets and financial
liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2008.

Effective January 1, 2008, the Company adopted
the provisions of SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115. SFAS No. 159 permits the Company to choose to measure eligible
items at fair value at specified election dates. The fair value option (i) may be applied instrument by instrument, with certain exceptions, thus the Company may record identical financial assets and liabilities at fair value or by another
measurement basis permitted under generally accepted accounting principals, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. Adoption of SFAS
No. 159 on January 1, 2008 did not have an significant impact on the Companys financial statements as the Company did not elect to report any additional financial assets or financial liabilities at fair value.

A summary of estimated fair values of significant financial instruments consisted of the following at December 31. Beginning with the year ended December 31, 2008,
the fair value estimates are determined in accordance with SFAS 157.



|                                |  |                          |         |                     |   |                |  |                     |         |  |   |        
|------------------------------- |  | ------------------------ | ------- | ------------------- | - | -------------- |  | ------------------- | ------- |  | - | -------
|                                |  | Years Ended December 31,
|                                |  | 2008                     |         | 2007               
|(In thousands)                  |  | CarryingAmount           |         | EstimatedFair Value |   | CarryingAmount |  | EstimatedFair Value
|Assets:                         |  |                          |         |                     |   |                |  |                     |         |  |   |        
|Cash                            |  | $                        | 8,680   |                     | $ | 8,680          |  | $                   | 2,543   |  | $ | 2,543  
|Interest-bearing deposits       |  |                          |        |                     |   |               |  |                     | 51,000  |  |   | 51,000 
|Residential mortgage loans, net |  |                          | 187,696 |                     |   | 176,805        |  |                     | 272,862 |  |   | 273,272
|                                |  |                          |         |                     |   |                |  |                     |         |  |   |        



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The carrying amounts for cash and interest-bearing deposits approximate fair value. Webster utilized an independent third
party valuation firm to determine the fair value for loans, net as of December 31, 2008 in light of current market conditions and illiquidity of the secondary market for loan sales. The fair value of loans is estimated based on discounted
expected cash flows. These cash flows include assumptions for prepayment estimates over the loans remaining life. Considerations for the current interest rate environment compared to the weighted average rate of each portfolio, a credit risk
component based on the historical and expected performance of each portfolio and a liquidity adjustment related to the current market environment.

Note
8: Selected Quarterly Financial Data (unaudited)





|                                           |  |               |        |                |   |        |               |  |                |        |  |   |        |  
|------------------------------------------ |  | ------------- | ------ | -------------- | - | ------ | ------------- |  | -------------- | ------ |  | - | ------ | -
|(In thousands, except share data)          |  | First Quarter |        | Second Quarter |   |        | Third Quarter |  | Fourth Quarter |       
|                                           | 
|2008                                       |  |               |        |                |   |        |               |  |                |        |  |   |        |  
|Interest income                            |  | $             | 4,193  |                | $ | 3,687  |               |  | $              | 3,507  |  | $ | 3,230  |  
|Provision for loan losses                  |  |               | -      |                |   | (170   | )             |  |                | -      |  |   | (250   | )
|Non-interest expenses                      |  |               | 79     |                |   | 91     |               |  |                | 134    |  |   | 68     |  
|                                           | 
|Net income                                 |  |               | 4,114  |                |   | 3,426  |               |  |                | 3,373  |  |   | 2,912  |  
|Preferred dividends                        |  |               | 216    |                |   | 215    |               |  |                | 216    |  |   | 216    |  
|                                           | 
|Net income available to common shareholder |  | $             | 3,898  |                | $ | 3,211  |               |  | $              | 3,157  |  | $ | 2,696  |  
|                                           | 
|                                           | 
|                                           |  |               |        |               
|Basic net income per common share          |  | $             | 38,980 |                | $ | 32,110 |               |  | $              | 31,570 |  | $ | 26,964 |  
|                                           | 
|                                           | 
|2007                                       |  |               |        |                |   |        |               |  |                |        |  |   |        |  
|Interest income                            |  | $             | 5,322  |                | $ | 4,913  |               |  | $              | 4,823  |  | $ | 4,366  |  
|Noninterest income                         |  |               | -      |                |   | -      |               |  |                | -      |  |   | -      |  
|Credit for loan losses                     |  |               | -      |                |   | 250    |               |  |                | -      |  |   | -      |  
|Non-interest expenses                      |  |               | 78     |                |   | 100    |               |  |                | 85     |  |   | 60     |  
|                                           | 
|Net income                                 |  |               | 5,244  |                |   | 5,063  |               |  |                | 4,738  |  |   | 4,306  |  
|Preferred dividends                        |  |               | 216    |                |   | 215    |               |  |                | 216    |  |   | 216    |  
|                                           | 
|Net income available to common shareholder |  | $             | 5,028  |                | $ | 4,848  |               |  | $              | 4,522  |  | $ | 4,090  |  
|                                           | 
|                                           | 
|                                           |  |               |        |               
|Basic net income per common share          |  | $             | 50,280 |                | $ | 48,480 |               |  | $              | 45,220 |  | $ | 40,900 |  
|                                           | 
|                                           | 

Item 9.  Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

The Company had no changes in or disagreements with its independent registered public accounting firm on accounting and
financial disclosures.

Item 9A.  Disclosure Controls and Procedures

Disclosure Controls and Procedures

The Companys management,
including the Companys 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-15(e) and 15(d)-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period covered in this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the
Companys disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and forms.



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Internal Control Over Financial Reporting

The Companys management has issued a report on its assessment of the effectiveness of the Companys internal control over financial reporting as of December 31, 2008.

There were no changes made in the Companys internal control over financial reporting that occurred during the most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect the Companys internal control over financial reporting. The reports of the Companys management and of the Companys independent registered public accounting firm follow.



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MANAGEMENTS REPORT ON INTERNAL CONTROL

We, as management of Webster Preferred Capital Corporation (the Company or WPCC), are responsible for establishing and maintaining effective internal control over financial reporting. Pursuant
to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the Companys principal executive and principal financial officers, or
persons performing similar functions, and effected by the Companys board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. generally accepted accounting principles, and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; and

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

Provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.

Management has evaluated the effectiveness of the Companys internal control over financial reporting as of December 31, 2008 based on the control criteria
established in a report entitled Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluation, we have concluded that the
Companys internal control over financial reporting is effective as of December 31, 2008.

This annual report does not include an attestation
report of the Companys independent registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys independent registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report



|                                               |  |                                                     
|---------------------------------------------- |  | ----------------------------------------------------
|/s/ Douglas O. Hart                            |  | /s/ James C. Smith                                  
|Douglas O. Hart                                |  | James C. Smith,                                     
|Senior Vice President, Chief Financial Officer |  | President and Director (Principal Executive
Officer)
|(Principal Financial Officer)                  | 

Date: March 10, 2009



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Item 9B.  Other Information

None

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

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

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



|                      |  |                          |  |                                                
|--------------------- |  | ------------------------ |  | -----------------------------------------------
|Name                  |  | Age at December 31, 2008 |  | Positions and Offices Held                     
|                      |  |                         
|James C. Smith        |  | 59                       |  | President, Director                            
|                      |  |                         
|Harriet Munrett Wolfe |  | 55                       |  | Director                                       
|                      |  |                         
|Gerald P. Plush       |  | 50                       |  | Director                                       
|                      |  |                         
|Douglas O. Hart       |  | 57                       |  | Senior Vice President, Chief Financial Officer 
|                      |  |                         
|Gregory S. Madar      |  | 46                       |  | Senior Vice President, Chief Accounting Officer
|                      |  |                         
|Bruce E. Wandelmaier  |  | 48                       |  | Treasurer                                      
|                      |  |                         
|Mark S. Lyon          |  | 48                       |  | Secretary                                      

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

James C. Smith has been a director and President of the Company since July 2008. He is also Chairman, President, Chief Executive Officer and a director of Webster
and Webster Bank, having been elected Chief Executive Officer in 1987 and Chairman in 1995. Mr. Smith joined Webster Bank in 1975, and was elected President, Chief Operating Officer and a director of Webster Bank in 1982 and of Webster in 1986.
Mr. Smith served as President of Webster and Webster Bank until 2000. Mr. Smith is a director of the Federal Reserve Bank of Boston and was a member of the Federal Advisory Council which advises the deliberations of the Federal Reserve
Board of Governors until December 2007. He is a member of the executive committee of the Connecticut Bankers Association, co-chairman of the American Bankers Council and a former director of the Federal Home Loan Bank of Boston. He is a director of
St. Marys Hospital and the Palace Theater, both of Waterbury, Connecticut, and was a director of MacDermid, Incorporated (NYSE: MRD) until it was sold in June 2007.

Harriet Munrett Wolfe has been a director of the Company since 1997. 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 December 2002, she was appointed Executive Vice President of Webster and Webster Bank.

Gerald P. Plush has been a director of the Company since 2006. He is also Senior Executive Vice President and Chief Financial Officer/Chief Risk Officer of
Webster and Webster Bank. Mr. Plush joined Webster in July 2006 and was promoted to Senior Executive Vice President in July 2007. He was elected Chief Risk Officer in July 2008. Prior to joining Webster, Mr. Plush was employed at MBNA
America in Wilmington, Delaware. In his most recent position with MBNA, he was Senior Executive Vice President and Managing Director of Corporate Development and Acquisitions. Prior to this position, Mr. Plush was Senior Executive Vice
President and Chief Financial Officer of MBNAs North American Operations, and prior to that he was Senior Executive Vice President and Chief Financial Officer of U.S. Credit Card.



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Douglas O. Hart has been the Senior Vice President and Chief Financial Officer of the Company since April 2008. He
is also Executive Vice President, Chief Accounting Officer of Webster and Webster Bank. Mr. Hart joined Webster and Webster Bank as Chief Accounting Officer in June of 2007 and was appointed Executive Vice President in September of 2008. Prior
to joining Webster and Webster Bank he was Senior Executive Vice PresidentTreasury Operations and Deposits for MBNA Corporation in Wilmington, Delaware.

Gregory S. Madar has been the Senior Vice President and Chief Accounting Officer of the Company since April 2008. He also served as the Treasurer of the Company from 2001 to 2003, as Secretary of the Company from March 1997 to March
1999 and as Assistant Secretary of the Company from 1999 to April 2008. 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 of Webster.

Bruce E. Wandelmaier has been the Senior Vice President and Treasurer of the Company since April 2008. He is also Senior Vice President and Treasurer of Webster Bank. Mr. Wandelmaier joined Webster Bank in 1999 as Senior Vice
President and Asset/Liability Manager. He was promoted to Treasurer in December 2007. Prior to joining Webster, Mr. Wandelmaier was Vice President and Corporate Forecasting Manager of First Union, Charlotte, North Carolina and prior to that
Vice President and Asset/Liability Manager of First Fidelity Bank in Newark, New Jersey.

Mark S. Lyon has been the Secretary of the Company since
December 2005. He is also Assistant Secretary of Webster and Senior Vice President and Assistant Secretary of Webster Bank. Mr. Lyon joined Webster in November 2005. Previously Mr. Lyon was Assistant Secretary for Praxair, Inc., an
industrial gases company in Danbury, CT.

Code of Business Conduct and Ethics

The Company, including its Board of Directors is subject to Websters Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available at Websters website at www.websteronline.com.

Audit Committee Matters

The entire Board of Directors
serves as the audit committee of the Company. The Company, as an indirect subsidiary of Webster Financial Corporation (NYSE: WBS), is relying on the exemption provided in Section10A-3(c)(2) of the Securities Exchange Act of 1934.

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 executive 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, 2008, 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
executive officers, none of whom receive compensation as employees of the Company. The Company has never issued options or warrants to officers or directors of the Company. The Company does not have any stock option plan or similar plan, retirement
or pension plan or any other form of employee compensatory plan. 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.



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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
persons 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 $205,000 per year beginning May 1, 2006 with respect to the advisory
services provided by it to the Company, as per the amended agreement adopted on April 19, 2006. 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 all fees payable by the
Company to the Advisor under the Advisory Agreement during the year immediately preceeding 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.



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##### Table of Contents

Item 12.  Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth, as of December 31, 2008, the number and
percentage of the outstanding shares of either our Common Stock or Series B Preferred Stock beneficially owned by (i) all persons known by the Company to own more than five percent of such shares, (ii) each director of the Company, and
(iii) each executive officer of the Company, and (iv) all executive officers and directors of the Company as group. i



|                                                                 |  |                                |  |                                      
|---------------------------------------------------------------- |  | ------------------------------ |  | -------------------------------------
|Name and Address of Beneficial Owner                             |  | Amount of Beneficial Ownership |  | Percent of Class of OutstandingShares
|                                                                 |  |                               
|Webster Bank 145 Bank Street Waterbury, CT                       |  | 100 shares                     |  | Common  100%                        
|                                                                 |  |                               
|James C. Smith President, Director                               |  | -0-                            |  | -0-                                  
|                                                                 |  |                               
|Harriet Munrett Wolfe Director                                   |  | -0-                            |  | -0-                                  
|                                                                 |  |                               
|Gerald P. Plush Director                                         |  | -0-                            |  | -0-                                  
|                                                                 |  |                               
|Douglas O. Hart Senior Vice President, Chief Financial Officer   |  | -0-                            |  | -0-                                  
|                                                                 |  |                               
|Gregory S. Madar Senior Vice President, Chief Accounting Officer |  | 300 shares                     |  | Series B Preferred Stock*            
|                                                                 |  |                               
|Bruce E. Wandelmaier Treasuer                                    |  | -0-                            |  | -0-                                  
|                                                                 |  |                               
|Mark S. Lyon Secretary                                           |  | -0-                            |  | -0-                                  
|                                                                 |  |                               
|All Officers and Directors as a group                            |  | 300 shares                     |  | Series B Preferred Stock*            



* Less then one percent

The Company does not maintain any compensation plans pursuant to which equity securities of the Company may be issued.



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##### Table of Contents

Item 13.  Certain Relationships and Related Transactions, and Director
Independence

The Company is organized as a subsidiary of Webster Bank, is controlled by, and through advisory and servicing agreements 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 Agreement and Servicing Agreements, see Notes 5 and 6 to the Companys Financial Statements included in 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
advise 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.

Because Webster bank owns more than 50% of the voting power of
WPCCs common stock, the Company is considered a controlled company for the purposes of NASDAQ listing requirements, and the Company qualifies for, and relies on, the controlled company exception to the board of
directors and committee composition requirements under the Marketplace Rules of the NASDAQ Stock Market. Pursuant to this exception, the Company is exempt from the rules that require its board of directors to be comprised of a majority of
independent directors.

Policies and Procedures Regarding Transactions with Related Persons

The Company is covered under Websters Code of Business Conduct and Ethics. Pursuant to Websters Code of Business Conduct and ethics, all related party
transactions must be conducted at arms length. Any consideration paid or received in such a transaction must be on terms no less favorable than terms available to an unaffiliated third party under similar circumstances.



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Item 14.  Independent Registered Public Accounting Firm Fees and
Services

Audit and Non-Audit Fees

The
following table presents fees for professional audit services rendered by KPMG LLP for the audit of the Companys annual financial statements for the years ended December 31, 2008 and 2007, and fees billed for other services rendered by
KPMG LLP during those periods.







|           |  |                          |        |      |   |       
|---------- |  | ------------------------ | ------ | ---- | - | ------
|           |  | Years Ended December 31,
|           |  | 2008                     |        | 2007
|          
|Audit Fees |  | $                        | 33,600 |      | $ | 32,000
|          

Audit Fees consist of fees for professional services rendered for the audit of the Companys annual financial
statements and review of the interim financial statements included in quarterly reports, and services that are normally provided in connection with statutory and regulatory filings or engagements.

Before KPMG LLP is engaged by the Company to render audit or non-audit services, the engagement is approved by the Companys Board of Directors.



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PART IV

Item 15.  Exhibits and Financial Statement Schedules



|(a)(1) | The financial statements of the registrant are included in Item 8 of Part II of the report.
|------ | -------------------------------------------------------------------------------------------



|(a)(2) | All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are
inapplicable and therefore have been omitted.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(a)(3) | A list of the exhibits to this Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Exhibits to this Form 10-K are attached or incorporated herein by reference as stated above.
|--- | --------------------------------------------------------------------------------------------



|(c) | Not applicable.
|--- | ---------------



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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 CORPORATIONRegistrantBY:

/s/ James C. SmithJames C. Smith , President and DirectorDate:

March 10, 2009


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 10, 2009.



|    |  |                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------
|By: |  | /s/ James C. Smith                                                                               
|    |  | James C. Smith, President and Director (Principal
Executive Officer)                             
|    | 
|By: |  | /s/ Douglas O. Hart                                                                              
|    |  | Douglas O. Hart , Senior Vice President and Chief
Financial Officer (Principal Financial Officer)
|    | 
|By: |  | /s/ Gerald P. Plush                                                                              
|    |  | Gerald P. Plush, Director                                                                        
|    | 
|By: |  | /s/ Harriet Munrett Wolfe                                                                        
|    |  | Harriet Munrett Wolfe, Director                                                                  



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|               |  |                                                                                                                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                                               
|               | 
|3.2            |  | Certificate of Amendment of Rights and Preferences of the Series B 8.625% Cumulative Redeemable Preferred Stock of the Company (incorporated herein by reference from Exhibit 3.3 to the
Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1997).                           
|               | 
|3.3            |  | Amended and Restated By-Laws of the Company (incorporated herein by reference from Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the SEC on November 9,
2007).                                                                                                                   
|               | 
|4.1            |  | Specimen of certificate representing the Series B 8.625% Cumulative Redeemable Preferred Stock of the Company (incorporated herein by reference from Exhibit 4.2 to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 1997).                                            
|               | 
|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 SEC on October 24, 1997).                          
|               | 
|10.2           |  | Amended and Restated Master Service Agreement, dated March 31, 2006, between Webster Bank and the Company (incorporated herein by reference from Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006, filed with the SEC on August 8, 2006).              
|               | 
|10.3           |  | Amended and Restated Advisory Service Agreement, made as of March 31, 2006, by and between Webster Bank and the Company (incorporated herein by reference from Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, filed with the SEC on August 8, 2006).
|               | 
|31.1           |  | Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 
|               | 
|31.2           |  | Certificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 
|               | 
|32.1           |  | Written Statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Companys Principal Executive Officer.                                                                                                                                                                     
|               | 
|32.2           |  | Written Statement pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Companys Principal Financial Officer.                                                                                                                                                                     



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