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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2010

OR



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

Commission File Number: 0-23513





WEBSTER
PREFERRED CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                          
|-------------------------------------------------------------- |  | -----------------------------------------
|Connecticut                                                    |  | 06-1478208                               
|(State or other jurisdiction of
incorporation or organization) |  | (I. R. S. Employer
Identification Number)
|                                                               | 
|Webster Plaza, Waterbury, Connecticut                          |  | 06702                                    
|(Address of principal executive offices)                       |  | (Zip Code)                               

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





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     ̈  Yes     ̈  No

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. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

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

The number of outstanding shares of the registrants common stock, $.01 par value per share, as of April 30, 2010 was 100 shares.









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WEBSTER PREFERRED CAPITAL CORPORATION

INDEX



|                               |  |                                                                                       |  |   
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | --
|                               |  | Page                                                                                 
|PART I  FINANCIAL INFORMATION |  |                                                                                      
|                               |  |                                                                                      
|Item 1.                        |  | Financial Statements                                                                  |  | 3 
|                               |  |                                                                                      
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 13
|                               |  |                                                                                      
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 18
|                               |  |                                                                                      
|Item 4.                        |  | Controls and Procedures                                                               |  | 19
|                               | 
|PART II  OTHER INFORMATION    |  | 19                                                                                   
|                               |  |                                                                                      
|Item 1.                        |  | Legal Proceedings                                                                     |  | 19
|                               |  |                                                                                      
|Item 1A.                       |  | Risk Factors                                                                          |  | 19
|                               |  |                                                                                      
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 19
|                               |  |                                                                                      
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |  | 19
|                               |  |                                                                                      
|Item 4.                        |  | [Removed and Reserved]                                                                |  | 19
|                               |  |                                                                                      
|Item 5.                        |  | Other Information                                                                     |  | 19
|                               |  |                                                                                      
|Item 6.                        |  | Exhibits                                                                              |  | 20
|                               | 
|SIGNATURES                     |  | 21                                                                                   
|                               | 
|EXHIBIT INDEX                  |  | 22                                                                                   



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PART I.  FINANCIAL INFORMATION



|Item 1. | FINANCIAL STATEMENTS
|------- | --------------------

WEBSTER PREFERRED CAPITAL CORPORATION

CONDENSED BALANCE SHEETS



|                                                                                                                        |  |             |         |   |              |   |         |  
|----------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | - | ------------ | - | ------- | -
|                                                                                                                        |  | March 31,   |         |   | December 31, |  
|(In thousands, except share and per share data)                                                                         |  | 2010        |         |   | 2009         |  
|                                                                                                                        |  | (unaudited) |         |   |              |  
|Assets                                                                                                                  |  |             |         |   |              |   |         |  
|                                                                                                                        |  |            
|Cash                                                                                                                    |  | $           | 5,759   |   |              | $ | 6,374   |  
|Residential mortgage loans                                                                                              |  |             | 146,703 |   |              |   | 153,102 |  
|Allowance for loan losses                                                                                               |  |             | (2,095  | ) |              |   | (2,183  | )
|                                                                                                                        |  |             |         |   |              |   |         |  
|Residential mortgage loans, net                                                                                         |  |             | 144,608 |   |              |   | 150,919 |  
|Accrued interest receivable                                                                                             |  |             | 539     |   |              |   | 575     |  
|Other assets                                                                                                            |  |             | 26      |   |              |   |        |  
|                                                                                                                        |  |             |         |   |              |   |         |  
|Total assets                                                                                                            |  | $           | 150,932 |   |              | $ | 157,868 |  
|                                                                                                                        |  |             |         |   |              |   |         |  
|                                                                                                                        |  |            
|Liabilities                                                                                                             |  |             |         |   |              |   |         |  
|                                                                                                                        |  |            
|Accrued dividends payable to preferred shareholders                                                                     |  | $           | 180     |   |              | $ | 180     |  
|Accrued expenses and other liabilities                                                                                  |  |             | 671     |   |              |   | 102     |  
|                                                                                                                        |  |             |         |   |              |   |         |  
|Total liabilities                                                                                                       |  |             | 851     |   |              |   | 282     |  
|                                                                                                                        |  |             |         |   |              |   |         |  
|                                                                                                                        |  |            
|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                                                                                                         |  |             | 152,800 |   |              |   | 159,800 |  
|Distributions in excess of accumulated earnings                                                                         |  |             | (3,720  | ) |              |   | (3,215  | )
|                                                                                                                        |  |             |         |   |              |   |         |  
|Total shareholders equity                                                                                              |  |             | 150,081 |   |              |   | 157,586 |  
|                                                                                                                        |  |             |         |   |              |   |         |  
|Total liabilities and shareholders equity                                                                              |  | $           | 150,932 |   |              | $ | 157,868 |  
|                                                                                                                        |  |             |         |   |              |   |         |  

See accompanying notes to condensed financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                      |  |                             |        |      |   |       
|----------------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                                                      |  | Three months endedMarch 31,
|(In thousands, except per share data)                 |  | 2010                        |        | 2009
|Interest income:                                      |  |                             |        |      |   |       
|Loans, net of servicing fees                          |  | $                           | 1,815  |      | $ | 2,533 
|                                                      |  |                             |        |      |   |       
|Total interest income                                 |  |                             | 1,815  |      |   | 2,533 
|Provision for loan losses                             |  |                             |       |      |   | 250   
|                                                      |  |                             |        |      |   |       
|Total interest income after provision for loan losses |  |                             | 1,815  |      |   | 2,283 
|                                                      |  |                            
|Non-interest expense:                                 |  |                             |        |      |   |       
|Advisory fee expense paid to Parent                   |  |                             | 55     |      |   | 51    
|Other                                                 |  |                             | 33     |      |   | 40    
|                                                      |  |                             |        |      |   |       
|Total non-interest expense                            |  |                             | 88     |      |   | 91    
|                                                      |  |                             |        |      |   |       
|Net income                                            |  |                             | 1,727  |      |   | 2,192 
|Preferred stock dividends                             |  |                             | 216    |      |   | 216   
|                                                      |  |                             |        |      |   |       
|                                                      |  |                            
|Net income available to common shareholder            |  | $                           | 1,511  |      | $ | 1,976 
|                                                      |  |                             |        |      |   |       
|                                                      |  |                            
|Basic net income per common share:                    |  | $                           | 15,110 |      | $ | 19,760

See accompanying notes to
condensed financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

CONDENSED STATEMENTS OF SHAREHOLDERS EQUITY

(Unaudited)



|                                                                 |  |                             |         |   |      |   |         |  
|---------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                 |  | Three months endedMarch 31, |        
|(In thousands)                                                   |  | 2010                        |         |   | 2009 |  
|Beginning Balance                                                |  | $                           | 157,586 |   |      | $ | 196,971 |  
|Net income                                                       |  |                             | 1,727   |   |      |   | 2,192   |  
|Return of capital dividend                                       |  |                             | (7,000  | ) |      |   | (10,000 | )
|Preferred stock dividends                                        |  |                             | (216    | ) |      |   | (216    | )
|Common stock dividends ($20,160 per share and $29,940 per share) |  |                             | (2,016  | ) |      |   | (2,994  | )
|                                                                 |  |                             |         |   |      |   |         |  
|Ending Balance                                                   |  | $                           | 150,081 |   |      | $ | 185,953 |  
|                                                                 |  |                             |         |   |      |   |         |  

See accompanying notes to condensed financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                             |        |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                  |  | Three months endedMarch 31, |       
|(In thousands)                                                                    |  | 2010                        |        |   | 2009 |  
|Operating Activities:                                                             |  |                             |        |   |      |   |         |  
|Net income                                                                        |  | $                           | 1,727  |   |      | $ | 2,192   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |        |   |      |   |         |  
|Net amortization and accretion                                                    |  |                             | 31     |   |      |   | (21     | )
|Provision for loan losses                                                         |  |                             |       |   |      |   | 250     |  
|Decrease in accrued interest receivable                                           |  |                             | 36     |   |      |   | 43      |  
|Increase in accrued expenses and other liabilities                                |  |                             | 569    |   |      |   | 443     |  
|Increase in other assets                                                          |  |                             | (26    | ) |      |   | (23     | )
|                                                                                  |  |                             |        |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 2,337  |   |      |   | 2,884   |  
|                                                                                  |  |                            
|Investing Activities:                                                             |  |                             |        |   |      |   |         |  
|Net decrease in residential mortgage loans                                        |  |                             | 6,280  |   |      |   | 11,384  |  
|                                                                                  |  |                             |        |   |      |   |         |  
|Net cash provided by investing activities                                         |  |                             | 6,280  |   |      |   | 11,384  |  
|                                                                                  |  |                            
|Financing Activities:                                                             |  |                             |        |   |      |   |         |  
|Dividends paid on preferred stock                                                 |  |                             | (216   | ) |      |   | (216    | )
|Dividends paid on common stock                                                    |  |                             | (2,016 | ) |      |   | (2,994  | )
|Return of capital dividend                                                        |  |                             | (7,000 | ) |      |   | (10,000 | )
|                                                                                  |  |                             |        |   |      |   |         |  
|Net cash used for financing activities                                            |  |                             | (9,232 | ) |      |   | (13,210 | )
|                                                                                  |  |                             |        |   |      |   |         |  
|Net (decrease) increase in cash and cash equivalents                              |  |                             | (615   | ) |      |   | 1,058   |  
|Cash at beginning of period                                                       |  |                             | 6,374  |   |      |   | 8,680   |  
|                                                                                  |  |                             |        |   |      |   |         |  
|Cash at end of period                                                             |  | $                           | 5,759  |   |      | $ | 9,738   |  
|                                                                                  |  |                             |        |   |      |   |         |  

See accompanying notes to condensed financial statements.



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WEBSTER PREFERRED CAPITAL CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)





NOTE 1: Summary of Significant Accounting
Policies

Nature of Operations

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 shareholders 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 Presentation

The Condensed Financial Statements in this Quarterly Report on Form 10-Q have not been audited by an independent registered public accounting firm, but in
the opinion of management, reflect all adjustments necessary for a fair presentation of the Companys financial position and results of operations. All such adjustments were of a normal and recurring nature. The Condensed Financial Statements
have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission (SEC).
Accordingly, the Condensed Financial Statements do not include all of the information and footnotes required by accounting GAAP for complete financial statements and should be read in conjunction with the Companys Financial Statements, and
notes thereto, for the year ended December 31, 2009, included in the Companys Annual Report on Form 10-K filed with the SEC on March 15, 2010 (the 2009 Form 10-K). Operating results for the interim periods disclosed
herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
The allowance for loan losses is particularly subject to change.

Condensed Statements of Cash Flows

For purposes of the Condensed Statements of Cash Flows, the Company defines cash as amounts held in deposit accounts with Webster Bank.

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.

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 statements of income (such as net unrealized gains and losses on securities available for sale). For the three months ended
March 31, 2010 and 2009, the only component of comprehensive income for the Company was net income.



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Recent Accounting Standards

FASB ASC Topic 860, Accounting for Transfers of Financial Assets.FASB ASC Topic 860, Accounting for Transfers of Financial
Assets, represents a revision to the provisions of former FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and requires more information about transfers of financial
assets, including securitization transactions, and where entities have continuing exposure to the risks related to the transferred financial assets. The new authoritative accounting guidance under FASB ASC Topic 860 is to be applied
prospectively, with past agreements grandfathered under the previous guidance. The foregoing new authoritative accounting guidance under FASB ASC Topic 860 became effective for the Companys Condensed Financial Statements for periods ending
after January 1, 2010 and did not have an impact on the Companys Condensed Financial Statements.



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NOTE 2: Residential Mortgage Loans, Net

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



|                                          |  |           |         |   |              |   |         |  
|----------------------------------------- |  | --------- | ------- | - | ------------ | - | ------- | -
|                                          |  | March 31, |         |   | December 31, |  
|(In thousands)                            |  | 2010      |         |   | 2009         |  
|Fixed-rate loans:                         |  |           |         |   |              |   |         |  
|15 yr. loans                              |  | $         | 5,198   |   |              | $ | 5,774   |  
|20 yr. loans                              |  |           | 3,644   |   |              |   | 3,864   |  
|25 yr. loans                              |  |           | 2,246   |   |              |   | 2,272   |  
|30 yr. loans                              |  |           | 74,200  |   |              |   | 77,289  |  
|                                          |  |           |         |   |              |   |         |  
|Total fixed-rate loans                    |  |           | 85,288  |   |              |   | 89,199  |  
|                                          |  |           |         |   |              |   |         |  
|Adjustable-rate loans:                    |  |           |         |   |              |   |         |  
|15 yr. loans                              |  |           | 832     |   |              |   | 854     |  
|20 yr. loans                              |  |           | 115     |   |              |   | 117     |  
|25 yr. loans                              |  |           | 377     |   |              |   | 390     |  
|30 yr. loans                              |  |           | 59,429  |   |              |   | 61,849  |  
|                                          |  |           |         |   |              |   |         |  
|Total adjustable-rate loans               |  |           | 60,753  |   |              |   | 63,210  |  
|                                          |  |           |         |   |              |   |         |  
|                                          |  |          
|Premiums and deferred costs on loans, net |  |           | 662     |   |              |   | 693     |  
|                                          |  |           |         |   |              |   |         |  
|Total residential mortgage loans          |  |           | 146,703 |   |              |   | 153,102 |  
|Less: allowance for loan losses           |  |           | (2,095  | ) |              |   | (2,183  | )
|                                          |  |           |         |   |              |   |         |  
|                                          |  |          
|Residential mortgage loans, net           |  | $         | 144,608 |   |              | $ | 150,919 |  
|                                          |  |           |         |   |              |   |         |  

All of the residential mortgage loans held by the Company at March 31, 2010 and December 31, 2009 were acquired
from Webster Bank.

There were no loans acquired by the Company from Webster Bank during the periods ended March 31, 2010 and
December 31, 2009. There were no loans transferred by the Company to Webster Bank for the periods ended March 31, 2010 and December 31, 2009.

At March 31, 2010 and December 31, 2009 58.4% and 58.5%, respectively, of the Companys residential mortgage loans were fixed rate loans
and 41.6% and 41.5%, respectively, were adjustable-rate loans.

Non-Performing/Past Due Loans. Accrual of interest is
discontinued if the loan is placed on nonaccrual status. Residential mortgage and consumer loans are placed on nonaccrual status at 90 days past due. When a loan is transferred to nonaccrual status, unpaid accrued interest is reversed and charged
against interest income. Nonaccrual loans totaled $5.5 million at March 31, 2010 and $5.6 million at December 31, 2009, respectively and represented 3.75% and 3.66% of gross loans as of March 31, 2010 and December 31, 2009,
respectively. Interest on nonaccrual loans that would have been recorded as additional interest income for the three months ended March 31, 2010 and 2009 had the loans been current in accordance with their original terms totaled approximately
$63,600 and $46,500, respectively.



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Impaired Loans. The Company individually reviews loans not expected to be collected in
accordance with the original terms of the contractual agreement for impairment based on the fair value of expected cash flows or collateral. At March 31, 2010 impaired loans totaled $2.1 million, including loans of $1.3 million net of an
impairment allowance of $0.3 million. At December 31, 2009, impaired loans totaled $3.2 million, including loans of $1.3 million net of an impairment allowance of $0.3 million.

The following table summarizes impaired loans as of March 31, 2010 and December 31, 2009.



|                                        |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|--------------------------------------- |  | -------------------- | ----- | ----------------------- | - | ----- |  | -------- | ----- | -------- | - | ----- |  | - | ----- |  | - | -----
|                                        |  | As of March 31, 2010 |       | As of December 31, 2009
|                                        |  | With                 |       |                         |   |       |  | With     |       |          |   |      
|                                        |  | Specific             |       | Without                 |   |       |  | Specific |       | Without  |   |      
|(In thousands)                          |  | Reserves             |       | Reserves                |   | Total |  | Reserves |       | Reserves |   | Total
|Loans impaired and still accruing       |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|Fixed-rate residential loans            |  | $                    | 207   |                         | $ |      |  | $        | 207   |          | $ | 208   |  | $ | 357   |  | $ | 565  
|Adjustable-rate residential loans       |  | $                    |      |                         | $ |      |  | $        |      |          | $ |      |  | $ | 349   |  | $ | 349  
|                                        |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|Total loans impaired and still accruing |  | $                    | 207   |                         | $ |      |  | $        | 207   |          | $ | 208   |  | $ | 706   |  | $ | 914  
|                                        |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|Loans impaired and not accruing         |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|Fixed-rate residential loans            |  | $                    | 1,067 |                         | $ | 874   |  | $        | 1,941 |          | $ | 1,074 |  | $ | 1,235 |  | $ | 2,309
|                                        |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|Total loans impaired and not accruing   |  | $                    | 1,067 |                         | $ | 874   |  | $        | 1,941 |          | $ | 1,074 |  | $ | 1,235 |  | $ | 2,309
|                                        |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      
|Total impaired loans                    |  | $                    | 1,274 |                         | $ | 874   |  | $        | 2,148 |          | $ | 1,282 |  | $ | 1,941 |  | $ | 3,223
|                                        |  |                      |       |                         |   |       |  |          |       |          |   |       |  |   |       |  |   |      

Troubled Debt Restructures. A loan whose terms have been
modified due to the financial difficulties of a borrower is reported by Webster as a troubled debt restructure (TDR). All TDRs are placed on non-accrual status until the loan qualifies for return to accrual status. Loans qualify for
return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months. TDRs are by definition impaired loans and have been reported within the impaired loan categories in the
preceding table. In accordance with the Companys credit risk policy, loans or portions of loans are charged off against the allowance for loan losses when deemed by management to be uncollectible. At March 31, 2010 and December 31,
2009 the Company had $1.4 million and $2.6 million of TDRs, respectively. There were no loans restructured during the three months ended March 31, 2010. At March 31, 2010, all TDRs were on non-accrual. There were no charge-offs on TDR
loans for the three months ended March 31, 2010.

There were no mortgage loans transferred to other real estate owned during the three
months ending March 31, 2010 and for the year ended December 31, 2009.

Allowance for loan losses.The following table
provides detail of activity in the Companys allowance for loan losses:



|                               |  |                              |       |   |      |   |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                               |  | Three months ended March 31, |      
|(In thousands)                 |  | 2010                         |       |   | 2009 |  
|Balance at beginning of period |  | $                            | 2,183 |   |      | $ | 2,183 |  
|Provision for loan losses      |  |                              |      |   |      |   | 250   |  
|Net charge-offs                |  |                              | (88   | ) |      |   | (54   | )
|                               |  |                              |       |   |      |   |       |  
|Balance at end of period       |  | $                            | 2,095 |   |      | $ | 2,379 |  
|                               |  |                              |       |   |      |   |       |  

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 $9.6 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.



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##### Table of Contents

NOTE 4: Servicing

The mortgage loans owned by the Company are serviced by Webster Bank pursuant to the terms of an Amended and Restated Service agreement. Webster Bank in
its role as 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 Webster Bank is responsible. The services provided to the Company by Webster Bank are at the level of a sub-servicing
agreement. As such, the Company estimates that the fees paid to Webster Bank for servicing approximates fees that would be paid if the Company operated as an unaffiliated entity. Servicing fees paid for the three months ended March 31, 2010 and
2009 were $30,000, and $37,000, respectively. Servicing fees are netted against interest income in the Statements of Operations, as they are considered a reduction in yield to the Company.

Webster Bank is entitled to retain any late payment charges, prepayment fees, penalties and assumption fees collected in connection with residential
mortgage loans its serviced. Webster Bank also 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 its serviced. At the end of each calendar month, Webster Bank is required to invoice the Company for all fees and charges due.

On April 16, 2010 the Company was notified by Webster Bank that pursuant to Item 3 in the Amended and Restated Service Agreement, the fixed and
variable rate servicing fees will increase from 8 basis points to 9.58 basis points effective May 1, 2010.

NOTE 5: 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 shareholder, 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 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 the three months ended March 31, 2010 or 2009 or accrued within its balance sheets at March 31, 2010 and December 31, 2009.

The Companys Federal and Connecticut income tax returns remain open to examination for calendar tax years subsequent to 2006.



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##### Table of Contents

NOTE 6: Fair Value of Financial Instruments

The Company uses fair value to record adjustments to certain assets and liabilities and to prepare required disclosures. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using market quotes. However, in many instances, there are no quoted
market prices available. In such instances, fair values are determined using various valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, the fair value estimates may not be
realized in an immediate transfer of the respective asset or liability.

A description of the valuation methodologies used by the Company are
presented below.

Cash

The carrying value of cash approximates fair value.

Loans Receivable

The Company
employs an independent third party to provide fair value estimates for portfolio loans. Such estimates are calculated using discounted cash flow analysis, using market interest rates for comparable loans. The associated cash flows are adjusted for
credit and other potential losses. Fair value for impaired loans are estimated using the net present value of the expected cash flows.

A
summary of estimated fair values of significant financial instruments consisted of the following,



|                                          |  |                |         |                   |   |          |  |            |         |  |   |        
|----------------------------------------- |  | -------------- | ------- | ----------------- | - | -------- |  | ---------- | ------- |  | - | -------
|                                          |  | March 31, 2010 |         | December 31, 2009
|                                          |  | Carrying       |         | Estimated         |   | Carrying |  | Estimated 
|(In thousands)                            |  | Amount         |         | Fair Value        |   | Amount   |  | Fair Value
|Assets:                                   |  |                |         |                   |   |          |  |            |         |  |   |        
|Cash and due from depository institutions |  | $              | 5,759   |                   | $ | 5,759    |  | $          | 6,374   |  | $ | 6,374  
|Residential Mortgage loans                |  |                | 144,608 |                   |   | 144,094  |  |            | 150,919 |  |   | 151,489
|                                          |  |                |         |                   |   |          |  |            |         |  |   |        



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##### Table of Contents

WEBSTER PREFERRED CAPITAL CORPORATION



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

General

The Company is a
subsidiary of Webster Bank and has elected to be treated as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company will generally not be subject to federal and
Connecticut state income taxes 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 condensed financial condition and results of operations should be read in conjunction with the Companys financial statements and other financial data included
elsewhere herein and in conjunction with the Companys 2009 Annual Report on Form 10-K.

Forward Looking Statements and Factors
that Could Affect Future Results

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as believes, anticipates, expects, intends, targeted,
continue, remain, will, should, may, plans, estimates and similar references to future periods, however such words are not the exclusive means of identifying such
statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, and other financial items; (ii) statements of plans, objectives and
expectations of WPCC or its management or Board of Directors; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are based on WPCCs current
expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult
to predict. WPCCs actual results may differ materially from those contemplated by the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Factors that could cause
actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (1) local, regional, national and international economic conditions; (2) government intervention in the U.S. financial system;
(3) changes in the level of non-performing assets and charge-offs; (4) inflation, interest rate, securities market and monetary fluctuations, and managements estimates and projections of such fluctuations; (5) changes in
managements estimate of the adequacy of the allowance for loan losses; (6) changes in laws, regulations and policies (including tax and securities regulations and policies); (7) changes in applicable accounting policies and practice;
(8) legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (9) the Companys success at managing the risks
involved in the foregoing items; and (10) the other factors that are described in this Annual Report on Form 10-K under the heading Risk Factors. Any forward-looking statement made by the Company in this Annual Report on Form 10-K
speaks only as of the date on which it is made. Factors or events that could cause the Companys actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no
obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Summary

Total interest income
net of servicing fees was $1.8 million for the three months ended March 31, 2010, compared to $2.5 million for the three months ended March 31, 2009. Approximately sixty percent of the decrease is due to lower average loan balances and
approximately 40 percent is due to changes in interest rates on variable rate loans.

For the three months ended March 31, 2010 average
loans outstanding decreased $35.3 million compared to the three months ended March 31, 2009. The yield on average earning assets for the three months ended March 31, 2010 was 4.82%, compared to 5.45% for the three months ended
March 31, 2009.



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##### Table of Contents

Results of Operations

For the three months ended March 31, 2010, the Company reported net income available to the common shareholder of $1.5 million, a decrease of
approximately $0.5 million, or 25.0%, compared to the same period in 2009. This decrease is due primarily to declining loan balances.

Interest income, net of servicing fees for the three months ended March 31, 2010 was $1.8 million, a decrease of $0.7 million, or 28.0%, compared to
$2.5 million for the three months ended March 31, 2009. The decrease in interest income was primarily related to a reduction in average interest earning assets of $35.3 million for the three months ended March 31, 2010 compared to the
three months ended March 31, 2009. The average yield for mortgage loans declined by 63 basis points.

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



|                       |  |                                   |         |                |                                   |              |  |      |                |  |                |         |              |   |       |  |      |  
|---------------------- |  | --------------------------------- | ------- | -------------- | --------------------------------- | ------------ |  | ---- | -------------- |  | -------------- | ------- | ------------ | - | ----- |  | ---- | -
|                       |  | Three Months EndedMarch 
31, 2010 |         |                | Three Months EndedMarch 
31, 2009 |             
|(Dollars in thousands) |  | AverageBalance                    |         | InterestIncome |                                   | AverageYield |  |      | AverageBalance |  | InterestIncome |         | AverageYield |  
|Mortgage loans         |  | $                                 | 150,529 |                | $                                 | 1,815        |  | 4.82 | %              |  | $              | 185,856 |              | $ | 2,533 |  | 5.45 | %
|                       |  |                                   |         |                |                                   |              |  |      |                |  |                |         |              |   |       |  |      |  
|Total                  |  | $                                 | 150,529 |                | $                                 | 1,815        |  | 4.82 | %              |  | $              | 185,856 |              | $ | 2,533 |  | 5.45 | %
|                       |  |                                   |         |                |                                   |              |  |      |                |  |                |         |              |   |       |  |      |  

Interest income is affected by changes in both volume and interest rates. Volume changes are caused by increases or
decreases during the year in the level of average interest-earning assets. Rate changes result from increases or decreases in the yields earned on assets. The following table presents a summary of the changes in interest income resulting from
changes in the volume of average asset balances and changes in the average yields for the three months ended March 31, 2010 then compared with the comparable period for the preceding year. If significant, the change in interest income due to
both volume and rate has been prorated between the volume and the rate variances based on the dollar amount of each variance.



|                                     |  |                                                                     |      |   |        |   |      |       |  |   |      |  
|------------------------------------ |  | ------------------------------------------------------------------- | ---- | - | ------ | - | ---- | ----- |  | - | ---- | -
|                                     |  | Three Months Ended March 
31,2010 v. 2009Increase (Decrease) due to |     
|(In thousands)                       |  | Rate                                                                |      |   | Volume |   |      | Total | 
|Interest on interest-earning assets: |  |                                                                     |      |   |        |   |      |       |  |   |      |  
|Mortgage loans                       |  | $                                                                   | (272 | ) |        | $ | (446 | )     |  | $ | (718 | )
|                                     |  |                                                                     |      |   |        |   |      |       |  |   |      |  
|Net change in net interest income    |  | $                                                                   | (272 | ) |        | $ | (446 | )     |  | $ | (718 | )
|                                     |  |                                                                     |      |   |        |   |      |       |  |   |      |  

Financial Condition

The Company had total assets of $150.9 million and $157.9 million at March 31, 2010 and December 31, 2009, respectively. The decrease in total
assets of $7.0 million is primarily due to a $6.3 million decrease in the balance of outstanding residential mortgage loans to $144.6 million at March 31, 2010 as compared to $150.9 million at December 31, 2009. The decrease in residential
mortgage loans outstanding is primarily due to repayments.

Shareholders equity decreased $7.5 million to $150.1 million at
March 31, 2010 from $157.6 million at December 31, 2009, due to the $7.0 million return of capital distribution to Webster Bank, the $2.2 million in common and preferred dividends, offset by $1.7 million of net income for the three months
ended March 31, 2010.



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##### Table of Contents

Asset Quality

All loans held by the Company were originated by Webster Bank in the ordinary course of its real estate lending activities. As such, the Companys
asset quality is dependent upon Webster Banks ability to maintain adequate underwriting standards. At March 31, 2010 and December 31, 2009, the loan portfolio was comprised of residential mortgage loans. No loans were acquired by the
Company from Webster Bank for the periods ended March 31, 2010 and December 31, 2009.

Non-performing assets, including impaired and
restructured loans, loan delinquency and credit losses are considered to be key measures of asset quality. Asset quality is one of the key factors in the determination of the level of the allowance for loan losses. See Allowance for Loan
Losses Methodology contained elsewhere within this section for further information.

Nonperforming Assets

The following table details the Companys nonperforming loans:

Nonperforming Loans



|                                                |  |                  |       |            |                   |   |                  |   |            |  |      |  
|----------------------------------------------- |  | ---------------- | ----- | ---------- | ----------------- | - | ---------------- | - | ---------- |  | ---- | -
|                                                |  | March 31, 2010   |       |            | December 31, 2009 |  
|(Dollars in thousands)                          |  | PrincipalBalance |       | % of Loans |                   |   | PrincipalBalance |   | % of Loans | 
|Loans accounted for on a non-accrual basis, net |  |                  |       |            |                   |   |                  |   |            |  |      |  
|Residential fixed-rate loans                    |  | $                | 3,795 |            | 2.59              | % |                  | $ | 3,944      |  | 2.58 | %
|Residential adjustable-rate loans               |  |                  | 1,732 |            | 1.18              |   |                  |   | 1,614      |  | 1.05 |  
|                                                |  |                  |       |            |                   |   |                  |   |            |  |      |  
|Total nonperforming loans                       |  | $                | 5,527 |            | 3.77              | % |                  | $ | 5,558      |  | 3.63 | %
|                                                |  |                  |       |            |                   |   |                  |   |            |  |      |  

It is the Companys policy that all loans 90 or more days past due are placed in non-accrual status.

Loan Delinquencies

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



|                                  |  |                  |       |            |                   |   |                  |   |            |  |      |  
|--------------------------------- |  | ---------------- | ----- | ---------- | ----------------- | - | ---------------- | - | ---------- |  | ---- | -
|                                  |  | March 31, 2010   |       |            | December 31, 2009 |  
|(Dollars in thousands)            |  | PrincipalBalance |       | % of Loans |                   |   | PrincipalBalance |   | % of Loans | 
|Past Due 30-89 days               |  |                  |       |            |                   |   |                  |   |            |  |      |  
|Residential fixed-rate loans      |  | $                | 824   |            | 0.56              | % |                  | $ | 1,942      |  | 1.27 | %
|Residential adjustable-rate loans |  |                  | 1,352 |            | 0.92              |   |                  |   | 660        |  | 0.43 |  
|                                  |  |                  |       |            |                   |   |                  |   |            |  |      |  
|Total past due loans              |  | $                | 2,176 |            | 1.48              | % |                  | $ | 2,602      |  | 1.70 | %
|                                  |  |                  |       |            |                   |   |                  |   |            |  |      |  

Loans past due for 30-89 days decreased by $0.4 million to $2.2 million at March 31, 2010 compared to $2.6 million at
December 31, 2009.

Impaired Loans. The Company individually reviews loans not expected to be collected in accordance with
the original terms of the contractual agreement for impairment based on the fair value of expected cash flows or collateral. At March 31, 2010 impaired loans totaled $2.1 million, including loans of $1.3 million net of an impairment allowance
of $0.3 million. At December 31, 2009, impaired loans totaled $3.2 million, including loans of $1.3 million net of an impairment allowance of $0.3 million.



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##### Table of Contents

The following table summarizes impaired loans as of March 31, 2010 and December 31, 2009.



|                                        |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|--------------------------------------- |  | -------------------- | ----- | ----------------------- | - | ----- |  | -------------------- | ----- | --------------- | - | ----- |  | - | ----- |  | - | -----
|                                        |  | As of March 31, 2010 |       | As of December 31, 2009
|(In thousands)                          |  | WithSpecificReserves |       | WithoutReserves         |   | Total |  | WithSpecificReserves |       | WithoutReserves |   | Total
|Loans impaired and still accruing       |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|Fixed-rate residential loans            |  | $                    | 207   |                         | $ |      |  | $                    | 207   |                 | $ | 208   |  | $ | 357   |  | $ | 565  
|Adjustable-rate residential loans       |  | $                    |      |                         | $ |      |  | $                    |      |                 | $ |      |  | $ | 349   |  | $ | 349  
|                                        |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|Total loans impaired and still accruing |  | $                    | 207   |                         | $ |      |  | $                    | 207   |                 | $ | 208   |  | $ | 706   |  | $ | 914  
|                                        |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|Loans impaired and not accruing         |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|Fixed-rate residential loans            |  | $                    | 1,067 |                         | $ | 874   |  | $                    | 1,941 |                 | $ | 1,074 |  | $ | 1,235 |  | $ | 2,309
|                                        |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|Total loans impaired and not accruing   |  | $                    | 1,067 |                         | $ | 874   |  | $                    | 1,941 |                 | $ | 1,074 |  | $ | 1,235 |  | $ | 2,309
|                                        |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      
|Total impaired loans                    |  | $                    | 1,274 |                         | $ | 874   |  | $                    | 2,148 |                 | $ | 1,282 |  | $ | 1,941 |  | $ | 3,223
|                                        |  |                      |       |                         |   |       |  |                      |       |                 |   |       |  |   |       |  |   |      

Troubled Debt Restructures. A loan whose terms have been
modified due to the financial difficulties of a borrower is reported by Webster as a troubled debt restructure (TDR). All TDRs are placed on non-accrual status until the loan qualifies for return to accrual status. Loans qualify for
return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement for a minimum of six months. TDRs are by definition impaired loans and have been reported within the impaired loan categories in the
preceding table. In accordance with Websters credit risk policy, loans or portions of loans are charged off against the allowance for loan losses when deemed by management to be uncollectible. At March 31, 2010 and December 31, 2009
the Company had $1.4 million and $2.6 million of TDRs, respectively. There were no loans restructured during the three months ended March 31, 2010. At March 31, 2010, all TDRs were on non-accrual. There were no charge-offs on TDR loans for
the three months ended March 31, 2010.

Allowance for Loan Losses

The allowance, in the judgment of management, is necessary to provide for estimated loan losses inherent in the loan portfolio. The allowance for loan
losses includes allowance allocations calculated in accordance with FASB ASC Topic 310, Receivables and allowance allocations calculated in accordance with FASB ASC Topic 450, Contingencies. 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, as well as trends in the foregoing. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in managements judgment, should be
charged off. The provision for possible loan losses reflects loan quality trends, including the levels of and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among
other factors. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Companys control, including the performance of the Companys
loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

Webster
Banks Credit Risk Management committee, in its role as advisor to the Company, meets on a quarterly basis to review and conclude on the adequacy of the allowance. The results are presented to and reviewed by management of the Company.

At March 31, 2010, the allowance for loan losses was $2.1 million, or 1.43% of the total residential mortgage loan portfolio and 38.2%
of total non-performing loans. This compares with an allowance of $2.2 million, or 1.44% of the total loan portfolio, and 39.3% of total non-performing loans at December 31, 2009. Gross charge-offs for the three months ended March 31, 2010
were $88,000, an increase of $34,000, when compared to charge-offs of $54,000 for the three months ended March 31, 2009. The increase in charge-off activity reflects the focus on non-accrual resolution and updated valuations of non-performing
loans.



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##### Table of Contents

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



|                               |  |                              |       |   |      |   |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                               |  | Three months ended March 31, |      
|(In thousands)                 |  | 2010                         |       |   | 2009 |  
|Balance at beginning of period |  | $                            | 2,183 |   |      | $ | 2,183 |  
|Provision for loan losses      |  |                              |      |   |      |   | 250   |  
|Net charge-offs                |  |                              | (88   | ) |      |   | (54   | )
|                               |  |                              |       |   |      |   |       |  
|Balance at end of period       |  | $                            | 2,095 |   |      | $ | 2,379 |  
|                               |  |                              |       |   |      |   |       |  

Liquidity and Capital Resources

The primary sources of liquidity for the Company have historically been principal and interest payments from 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 Companys 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 the Companys 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.

In the event that principal and interest payments on its mortgage assets are insufficient to
meet its operating needs, the Company 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.



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##### Table of Contents

WEBSTER PREFERRED CAPITAL CORPORATION



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

As 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. 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. 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 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. Webster Bank, in its role as advisor to 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. Webster Bank 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.

Both Webster Bank and the Company are
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 fixed rate loans and mortgage-backed securities generally will tend to increase, with the level of prepayments also typically 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 re-price
based on a stated margin over U.S. Treasury Securities indices of varying maturities, the terms of which are established at the time that the loan is closed. At March 31, 2010, 41.6% of the Companys residential mortgage loans were
adjustable-rate loans, compared to 41.5% at December 31, 2009.

The following table summarizes the estimated fair values of the
Companys interest-sensitive assets at March 31, 2010 and December 31, 2009, and the projected change to fair values if interest rates instantaneously increase or decrease by 100 basis points. Loans are presented in the following
table gross of the allowance for loan losses and exclude premiums and deferred costs as these components are not interest-sensitive assets. The Company had no interest-sensitive liabilities at March 31, 2010 and December 31, 2009.



|                                  |  |            |         |              |   |                               |  |         |  |   |        |  
|--------------------------------- |  | ---------- | ------- | ------------ | - | ----------------------------- |  | ------- |  | - | ------ | -
|                                  |  |            |         |              |   | Estimated Market Value Impact | 
|(In thousands)                    |  | Book Value |         | Market Value |   | -100 BP                       |  | +100 BP | 
|At March 31, 2010                 |  |            |         |              |   |                               |  |         |  |   |        |  
|Interest sensitive assets:        |  |            |         |              |   |                               |  |         |  |   |        |  
|Fixed-rate residential loans      |  | $          | 85,288  |              | $ | 83,996                        |  | N/A     |  | $ | (3,712 | )
|Adjustable-rate residential loans |  |            | 60,753  |              |   | 60,098                        |  | N/A     |  |   | (690   | )
|                                  |  |            |         |              |   |                               |  |         |  |   |        |  
|                                  |  | $          | 146,041 |              | $ | 144,094                       |  | N/A     |  | $ | (4,402 | )
|                                  |  |            |         |              |   |                               |  |         |  |   |        |  
|At December 31, 2009              |  |            |         |              |   |                               |  |         |  |   |        |  
|Interest sensitive assets:        |  |            |         |              |   |                               |  |         |  |   |        |  
|Fixed-rate residential loans      |  | $          | 89,199  |              | $ | 88,360                        |  | N/A     |  | $ | (4,016 | )
|Adjustable-rate residential loans |  |            | 63,210  |              |   | 63,129                        |  | N/A     |  |   | (619   | )
|                                  |  |            |         |              |   |                               |  |         |  |   |        |  
|                                  |  | $          | 152,409 |              | $ | 151,489                       |  | N/A     |  | $ | (4,635 | )
|                                  |  |            |         |              |   |                               |  |         |  |   |        |  

Interest-sensitive assets, when shocked by an immediate plus 100 basis point rate change, sustain an unfavorable $4.4
million, or 3.1%, change in market value at March 31, 2010, compared to an unfavorable $4.6 million, or 3.1%, change in market value at December 31, 2009. As the federal funds rate was at .25% on March 31, 2010, the -100 basis point
scenario has been excluded.

Based on the Companys asset/liability mix at March 31, 2010, management estimates that a gradual 200
basis point increase in interest rates would increase net income over the next twelve months by 2.7%.



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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. Based upon review of the work performed by Webster Bank, Management believes that the Companys interest-rate risk position at March 31, 2010 represents a reasonable level of
risk.

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s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of
goods and services. In the current interest rate environment, the maturity structure of the Companys assets is critical to the maintenance of acceptable performance levels.



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

As of March 31, 2010, the Company carried out an evaluation, under the supervision and with the participation of the Companys management,
including its Principal Executive Officer and its Principal Financial Officer, of the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934). Based
on this evaluation, the Companys Principal Executive Officer and Principal Financial Officer concluded that the Companys disclosure controls and procedures were effective as of March 31, 2010 for recording, processing, summarizing
and reporting the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SECs rules and forms. There was no change in the Companys
internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II  OTHER INFORMATION



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

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



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

During the first quarter of 2010, there were no material changes to the risk factors previously disclosed in the Companys Annual Report on Form 10-K
for the year ended December 31, 2009.



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

Not Applicable.



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

Not Applicable.



|Item 4. | REMOVED AND RESERVED
|------- | --------------------

Not Applicable.



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

None.



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



|              |  |                                                                                                                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                
|3.1           |  | Amended and Restated Certificate of Incorporation of Webster Preferred Capital Corporation (the Company) (incorporated herein by reference from Exhibit 3.1 to the
Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1997).                    
|              | 
|3.2           |  | Certificate of Amendment 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).                 
|              | 
|31.1          |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    
|              | 
|31.2          |  | Certification 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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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                   |  |  |  |                                                  |  |                              
|------------------ |  |  |  | ------------------------------------------------ |  | -----------------------------
|                   |  |  |  | WEBSTER PREFERRED CAPITAL CORPORATION
Registrant
|                   |  |  | 
|Date: May 12, 2010 |  |  |  |                                                  |  |                              
|                   |  |  | 
|                   |  |  |  | BY:                                              |  | /s/ Theresa M. Messina       
|                   |  |  |  |                                                  |  | Theresa M. Messina           
|                   |  |  |  |                                                  |  | Chief Financial Officer      
|                   |  |  |  |                                                  |  | (Principal Financial Officer)



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                
|3.1           |  | Amended and Restated Certificate of Incorporation of Webster Preferred Capital Corporation (the Company) (incorporated herein by reference from Exhibit 3.1 to the
Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1997).                    
|              | 
|3.2           |  | Certificate of Amendment 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).                 
|              | 
|31.1          |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    
|              | 
|31.2          |  | Certification 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.                                                                                                                                          



22