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

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934
                      For the Quarter Ended March 31, 1998

                                       or

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934
                        For the transition period from          to

     Commission File Number: 0-23513

                      WEBSTER PREFERRED CAPITAL CORPORATION
                      -------------------------------------
             (Exact name of registrant as specified in its charter)

         CONNECTICUT                                       06-1478208
         -----------                                       ----------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)

145 BANK STREET, WATERBURY, CONNECTICUT                           06702
---------------------------------------                           -----
(Address of principal executive offices)                         (Zip Code)

        Registrant's telephone number, including area code:(203) 578-2286

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

     The number of shares  outstanding  of each of the  registrant's  classes of
common stock, as of the latest practicable date is: 100 shares


<PAGE>



Webster Preferred Capital Corporation



                                      INDEX

                                                                        PAGE NO.

PART I - FINANCIAL INFORMATION

Statements of Condition at March 31, 1998 and December 31, 1997                3

Statements of Income for the Three Months Ended March 31, 1998 and the
    Period from March 17, 1997 (Date of Inception) to March 31, 1997           4

Statements of Cash Flows for the Three Months Ended March 31, 1998 and
    the Period from March 17, 1997 (Date of Inception) to March 31, 1997       5

Condensed Notes to Financial Statements                                        6

Management's Discussion and Analysis of Financial Statements                  10

Quantitative and Qualitative Disclosures About Market Risk                    14


PART II - OTHER INFORMATION                                                   15



SIGNATURES                                                                    16

INDEX TO EXHIBITS                                                             17


                                   2

<PAGE>




WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF CONDITION (unaudited)
(Dollars in Thousands, except share data)

<TABLE>
<CAPTION>
                                                                                    March 31,        December 31,
Assets                                                                                1998                1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                <C>       
Cash                                                                               $   24,204         $   26,167

Mortgage-Backed Securities Available for Sale (Note 2)                                172,739            120,090
Residential Mortgage Loans, Net (Note 3)                                              650,918            635,634
Accrued Interest Receivable                                                             4,843              4,525
Other Real Estate Owned                                                                   110               --
Prepaid Expenses and Other Assets                                                       1,187              1,145
-----------------------------------------------------------------------------------------------------------------
                Total Assets                                                       $  854,001         $  787,561
-----------------------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity
-----------------------------------------------------------------------------------------------------------------
Accrued Dividends Payable                                                          $      795         $      491
Accrued Expenses and Other Liabilities                                                    680                418
-----------------------------------------------------------------------------------------------------------------
                Total Liabilities                                                       1,475                909
-----------------------------------------------------------------------------------------------------------------

Mandatorily Redeemable Preferred Stock (Note 4)
     Series A 7.375% Cumulative Redeemable Preferred Stock
         liquidation preference $1,000 per share; par value $1.00 per share; 
         40,000 shares authorized, issued and outstanding                              40,000             40,000

Shareholders' Equity (Note 5)
-----------------------------------------------------------------------------------------------------------------
     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                                                                  797,799            745,957
     Retained Earnings                                                                 12,643                 --
     Distributions in Excess of Accumulated Earnings                                       --               (370)
     Unrealized Gains on Securities, Net                                                1,083                 64
-----------------------------------------------------------------------------------------------------------------
                Total Shareholders' Equity                                            812,526            746,652
-----------------------------------------------------------------------------------------------------------------
                Total Liabilities and Shareholders' Equity                         $  854,001         $  787,561
-----------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying condensed notes to financial statements


                                   3

<PAGE>



WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF INCOME (unaudited)
(Dollars in Thousands, except share data)

<TABLE>
<CAPTION>
                                                                                    For the Period from
                                                                                       March 17, 1997
                                                          Three Months Ended        (Date of Inception)
                                                            March 31, 1998           to March 31,1997
--------------------------------------------------------------------------------------------------------
<S>                                                             <C>                    <C>     
Interest Income:
Loans                                                           $ 11,974               $  1,852
Securities                                                         2,180                     --
--------------------------------------------------------------------------------------------------------
       Total Interest Income                                      14,154                  1,852
--------------------------------------------------------------------------------------------------------
Provision For Loan Losses                                             --                     --

--------------------------------------------------------------------------------------------------------
Interest Income After Provision for Loan Losses                   14,154                  1,852
--------------------------------------------------------------------------------------------------------

Noninterest Expenses:
Advisory Fee Expense Paid to Parent                                   38                     12
Dividends on Mandatorily Redeemable Preferred Stock                  738                     --
Amortization of Start Up Costs                                        37                     --
Other Noninterest Expenses                                           112                      1
--------------------------------------------------------------------------------------------------------
       Total Noninterest Expenses                                    925                     13
--------------------------------------------------------------------------------------------------------

Income Before Taxes                                               13,229                  1,839
Income Taxes                                                          --                     --
--------------------------------------------------------------------------------------------------------

NET INCOME                                                        13,229                  1,839
Preferred Stock Dividends                                            216                      8
--------------------------------------------------------------------------------------------------------

Net Income Available to Common Shareholder                      $ 13,013               $  1,831
--------------------------------------------------------------------------------------------------------

Net Income Per Common Share:
           Basic                                                $130,130               $ 18,310
           Diluted                                              $130,130               $ 18,310

--------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying condensed notes to financial statements


                                   4

<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                                     For the Period from
                                                                                                        March 17, 1997
                                                                                Three Months Ended   (Date of Inception)
                                                                                  March 31, 1998      to March 31, 1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                   <C>      
OPERATING ACTIVITIES:                                                                                 
                                                                                                      
Net Income                                                                        $  13,229             $   1,839
Adjustments to Reconcile Net Cash Provided (Used) by                                                  
Operating Activities:                                                                                 
Accretion of Securities Discount                                                       (502)                   --
Amortization of Deferred Fees and Premiums                                              299                    --
Increase in Accrued Interest Receivable                                                (318)               (1,707)
Increase in Accrued Liabilities                                                       1,000                   426
Increase in Prepaid Expenses and Other Assets                                           (42)                  (63)
                                                                                                      
-----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                            13,666                   495
-----------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:                                                                                 
Purchase of Securities                                                              (51,682)                   --
Principal Collected on Securities                                                       555                    --
Purchase of Loans                                                                   (60,356)                   --
Principal Repayments of Loans                                                        44,662                 3,483
                                                                                                      
-----------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Investing Activities                                    (66,821)                3,483
-----------------------------------------------------------------------------------------------------------------
                                                                                                      
                                                                                                      
FINANCING ACTIVITIES:                                                                                 
Dividends Paid on  Common and Preferred Stock                                          (650)                   --
Contributions from Webster Bank                                                      51,842                     1
-----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities                                            51,192                     1
-----------------------------------------------------------------------------------------------------------------
                                                                                                      
(Decrease) Increase in Cash and Cash Equivalents                                     (1,963)                3,979
Cash and Cash Equivalents at Beginning of Period                                     26,167                    --
-----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                        $  24,204             $   3,979
-----------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURES:                                                                             
     Income Taxes Paid                                                            $      --             $      --
     Interest Paid                                                                       --                    --
                                                                                                      
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITY:                                                 
     Transfer of Residential Mortgage Loans to Other Real Estate Owned                  110                    --
     Contribution of Mortgage Assets, net by Webster Bank in exchange for 100                         
           shares of common stock and 2,000 Shares of 10% Cumulative Non-                             
           Convertible Preferred Stock                                                   --               617,022
</TABLE>


See accompanying condensed notes to financial statements


                                  5

<PAGE>




Webster Preferred Capital Corporation

CONDENSED NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1 - BASIS OF PRESENTATION
         ---------------------

The accompanying  financial statements include all adjustments which are, in the
opinion of management,  necessary for a fair presentation of the results for the
interim periods  presented.  All adjustments were of a normal recurring  nature.
The results of  operations  for the three month  period ended March 31, 1998 are
not necessarily  indicative of the results which may be expected for the year as
a whole.  These  financial  statements  should be read in  conjunction  with the
financial statements and notes thereto included in the Webster Preferred Capital
Corporation 1997 Annual Report to shareholders.

NOTE 2 - MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
         ---------------------------------------------

In November 1997 and March 1998,  Webster Bank  contributed  $120.4  million and
$51.8 million,  respectively,  in cash to Webster Preferred Capital  Corporation
(the  "Company"),  which  was  used to  purchase  Government  National  Mortgage
Association ("GNMA")  mortgage-backed  securities and Fannie Mae mortgage-backed
securities.  The  following  table  sets  forth  certain  information  regarding
mortgage-backed securities:

<TABLE>
<CAPTION>
(In Thousands)                                          Mortgage-Backed Securities
--------------------------------------------------------------------------------------------
                                          Recorded     Unrealized     Unrealized  Estimated
March 31, 1998                              Value        Gains          Losses    Fair Value
--------------------------------------------------------------------------------------------
<S>                                      <C>          <C>             <C>          <C>      
Available for Sale Portfolio             $   171,656  $      1,083    $       --   $ 172,739
--------------------------------------------------------------------------------------------
<CAPTION>

--------------------------------------------------------------------------------------------
                                            Recorded   Unrealized     Unrealized  Estimated
December 31, 1997                             Value      Gains         Losses     Fair Value
--------------------------------------------------------------------------------------------
<S>                                      <C>           <C>            <C>          <C>      
Available for Sale Portfolio             $   120,026   $        64    $       --   $ 120,090
--------------------------------------------------------------------------------------------
</TABLE>


All mortgage-backed securities have a contractual maturity of over 10 years. The
weighted  average  yield at March 31, 1998 is 6.76%.  Although  the stated final
maturity of these  obligations  are  long-term,  the  weighted  average  life is
generally   much   shorter   due  to   prepayments.   There  were  no  sales  of
mortgage-backed securities for the period from January 1, 1998 through March 31,
1998.


                                        6

<PAGE>



Webster Preferred Capital Corporation

CONDENSED NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------

NOTE 3 - RESIDENTIAL MORTGAGE LOANS

A summary of the Company's residential mortgage loans follows:

<TABLE>
<CAPTION>
                                                                             March 31,         December 31,
                                                                               1998                 1997
-----------------------------------------------------------------------------------------------------------
                                                                              Carrying            Carrying
(In Thousands)                                                                  Amount              Amount
-----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                 <C>     
Fixed-Rate Loans:
         Fixed Rate 15 yr. Loans                                               $63,305             $59,631
         Fixed Rate 20 yr. Loans                                                 1,582               1,636
         Fixed Rate 25 yr. Loans                                                 1,360                 813
         Fixed Rate 30 yr. Loans                                               164,452             161,884
-----------------------------------------------------------------------------------------------------------
              Total Fixed-Rate Loans                                           230,699             223,964
-----------------------------------------------------------------------------------------------------------
Variable-Rate Loans:
         Variable Rate 15 yr. Loans                                              4,627               4,896
         Variable Rate 20 yr. Loans                                              4,379               4,004
         Variable Rate 25 yr. Loans                                              7,494               8,553
         Variable Rate 30 yr. Loans                                            403,045             393,924
-----------------------------------------------------------------------------------------------------------
               Total Variable-Rate Loans                                       419,545             411,377
-----------------------------------------------------------------------------------------------------------
        Total Residential Mortgage Loans                                      $650,244            $635,341
-----------------------------------------------------------------------------------------------------------
        Premiums and Deferred Fees on Loans, Net                                 2,213               1,831
        Less Allowance for Loan Losses                                          (1,539)             (1,538)
-----------------------------------------------------------------------------------------------------------

               Residential Mortgage Loans, Net                                $650,918            $635,634
-----------------------------------------------------------------------------------------------------------
</TABLE>

In March 1997, Webster Bank contributed approximately $617.0 million of mortgage
assets,  net as  part  of the  formation  of the  Company.  The  $617.0  million
consisted of $215.8 million of fixed rate loans, $401.3 million of variable rate
loans, net of premiums, deferred fees on loans and an allowance for loan losses.

NOTE 4 - MANDATORILY REDEEMABLE PREFERRED STOCK
         --------------------------------------

On December 24, 1997, the Company raised $40 million, less expenses, in a public
offering of 40,000 shares of its Series A 7.375% cumulative redeemable preferred
stock, liquidation preference $1,000 per share.

The Company is required to redeem all outstanding  Series A Preferred  Shares on
January 15, 2001 at a  redemption  price of $1,000 per share,  plus  accrued and
unpaid dividends.


                                        7

<PAGE>



Webster Preferred Capital Corporation

CONDENSED NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------

The Series A  Preferred  Shares are not  redeemable  prior to January  15,  1999
except upon the  occurrence of a tax event.  A tax event can occur when a change
in existing laws and  regulations  results in a substantial  risk that dividends
paid by the Company will no longer be fully  deductible  for federal  income tax
purposes or that dividends paid by the Company to Webster Bank will no longer be
fully  deductible  for state income tax purposes.  Upon the  occurrence of a tax
event,  and at any time on and after January 15, 1999 through  January 14, 2001,
the Series A Preferred Shares may be redeemed at the option of the Company.

NOTE 5 - CAPITAL STRUCTURE
         -----------------

On December 24, 1997, the Company raised $10 million, less expenses, in a public
offering  of  1,000,000  shares  of its  Series B 8.625%  cumulative  redeemable
preferred stock, liquidation preference $10 per share.

Dividends  on the Series B Stock are payable at the rate of 8.625% per annum (an
amount  equal to  $.8625  per  annum per  share),  in all cases if,  when and as
declared by the Board of Directors of the  Company.  Dividends on the  preferred
shares are cumulative and, if declared, payable on January 15, April 15, July 15
and October 15 in each year.

NOTE 6 - COMPREHENSIVE INCOME
         --------------------

The Company adopted the provisions of Statement of Financial Accounting Standard
("SFAS") No. 130, "Reporting  Comprehensive  Income" as of January 1, 1998. SFAS
No. 130,  establishes  standards for the reporting and display of  comprehensive
income and its components ( such as changes in net unrealized  investment  gains
and losses).  Comprehensive income includes net income and any changes in equity
from  non-owner  sources  that  bypass  the  income  statement.  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.  Application of SFAS No. 130 will not impact amounts previously reported
for net  income or affect  the  comparability  of  previously  issued  financial
statements.

The following table summarizes  comprehensive  income for the three months ended
March 31,  1998 and for the period from March 17,  1997 (date of  inception)  to
March 31, 1997:

<TABLE>
<CAPTION>
(In Thousands)                                                             For the Period from
                                                          Three Months        March 17, 1997
                                                             Ended       (Date of Inception) to
                                                         March 31, 1998        March 31, 1997
-----------------------------------------------------------------------------------------------
<S>                                                             <C>                      <C>   
Net Income                                                      $13,229                  $1,839
Other Comprehensive Income
       Unrealized gains (losses) on investments                   1,019                       -
-----------------------------------------------------------------------------------------------
       Total Comprehensive Income                               $14,248                  $1,839
-----------------------------------------------------------------------------------------------
</TABLE>




                                        8

<PAGE>



Webster Preferred Capital Corporation

CONDENSED NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------

NOTE 7 - ACCOUNTING STANDARDS
         --------------------

In June 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement  establishes  standards  for  the  method  in  which  public  business
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating  segments in interim  reports issued to  shareholders.  This statement
requires that public business  enterprises  report  quantitative and qualitative
information  about its reportable  segments,  including profit or loss,  certain
specific revenue and expense items and segment assets.  This SFAS does not apply
to the Company since the Company has only one reportable operating segment.






                                        9

<PAGE>



Webster Preferred Capital  Corporation

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

GENERAL
-------

Webster Preferred Capital Corporation (the "Company") is a subsidiary of Webster
Bank and was  incorporated  in March 1997 to provide a  cost-effective  means of
raising funds,  including capital,  on a consolidated basis for Webster Bank. In
March 1997,  Webster Bank contributed  approximately  $617.0 million of mortgage
assets, net as part of the formation of the Company.  In November 1997 and March
1998, Webster Bank contributed  approximately  $120.4 million and $51.8 million,
respectively,  in  cash  which  the  Company  used to  purchase  mortgage-backed
securities.  Total  assets at March 31,  1998 were  $854.0  million,  consisting
primarily of residential mortgage loans and mortgage-backed securities.

The Company has elected to be treated as a real estate investment trust ("REIT")
under the Internal Revenue Code (the "Code"),  and will generally not be subject
to federal income tax for as long as it maintains its  qualifications as a REIT,
requiring  among other thing,  that it currently  distribute to  stockholders at
least 95% of its "REIT taxable income" ( not including capital gains and certain
items of  noncash  income).  The  Company  and  Webster  Bank will also  benefit
significantly  from federal and state tax  treatment  of  dividends  paid by the
Company as a result of its qualification as a REIT. The following  discussion of
the Company's  financial  condition and results of operations  should be read in
conjunction  with the Company's  financial  statements and other  financial data
included elsewhere herein.

CHANGES IN FINANCIAL CONDITION
------------------------------

     Total assets were $854.0  million at March 31,  1998,  an increase of $66.4
million from $787.6  million at December 31, 1997.  The increase in total assets
is  primarily  attributable  to  the  purchase  of  additional   mortgage-backed
securities  totaling   approximately  $51.7  million  and  to  the  purchase  of
additional   residential   mortgage  loans.  The  increases  were  funded  by  a
contribution from Webster Bank and net earnings.

     Total net foreclosed properties were $110,000 at March 31, 1998. There were
no foreclosed properties at December 31, 1997.

     Shareholders'  equity  was  $812.5  million  at March 31,  1998 and  $746.7
million at December 31, 1997.

ASSET QUALITY
-------------

The Company  maintains asset quality by acquiring  residential real estate loans
that have been  conservatively  underwritten,  aggressively  managing nonaccrual
assets and maintaining adequate reserve coverage. At March 31, 1998, residential
real estate loans comprised the entire loan portfolio.  The Company also invests
in highly rated mortgage-backed securities.


                                       10

<PAGE>



Webster Preferred Capital  Corporation

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------

The aggregate  amount of nonaccrual  assets was $807,000 at March 31, 1998.  The
following table details the Company's nonaccrual assets:

<TABLE>
<CAPTION>
                                                                     At March 31,          At December 31,
(In Thousands)                                                           1998                    1997
--------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                    <C>       
Loans Accounted for on a Nonaccrual Basis:
      Residential Fixed-Rate Loans                                   $     209              $      158
      Residential Variable-Rate Loans                                      488                   1,145
--------------------------------------------------------------------------------------------------------------
            Total Nonaccrual Loans                                         697                   1,303

      Residential Foreclosed Properties                                    110                       -
--------------------------------------------------------------------------------------------------------------
           Total Nonaccrual Assets                                   $     807              $    1,303
==============================================================================================================
</TABLE>


At March 31, 1998 the  allowance  for loan losses was $1.5  million,  or 220% of
nonaccrual loans and 191% of total nonaccrual assets.  Management  believes that
the  allowance  for loan  losses is  adequate  to cover  expected  losses in the
portfolio.

The net decrease in nonaccrual  assets of $496,000 at March 31, 1998 as compared
to the  December  31, 1997  balance is due  primarily  to a decrease in mortgage
payment delinquencies.

A detail of the change in the  allowance  for loan  losses for the three  months
ended March 31, 1998 follows:

<TABLE>
<CAPTION>
(In Thousands)                                                   At March 31, 1998
----------------------------------------------------------------------------------
<S>                                                                       <C>     
Balance at Beginning of Period                                            $  1,538

Provisions Charged to Operations                                                 -

Charge-offs                                                                      -

Recoveries                                                                       1

----------------------------------------------------------------------------------
Balance at End of Period                                                  $  1,539
==================================================================================
</TABLE>


ASSET/LIABILITY MANAGEMENT
--------------------------

The  goal  of the  Company's  asset/liability  management  policy  is to  manage
interest-rate  risk so as to maximize net interest  income over time in changing
interest-rate  environments  while  maintaining  acceptable  levels of risk. The
Company must provide for sufficient liquidity for daily operations.  The Company
prepares  estimates  of  the  level  of  prepayments  and  the  effect  of  such
prepayments  on the level of future  earnings  due to  reinvestment  of funds at
rates  different  than  those that  currently  exist.  The  Company is unable to
predict future  fluctuations  in interest rates and as such the market values of
certain of the  Company's  financial  assets are  sensitive to  fluctuations  in
market  interest  rates.  Changes in interest  rates can affect the value of its
loans  and  other  interest-earning  assets.  At March  31,  1998,  64.5% of the
Company's  residential  mortgage  loans were variable rate loans.  The Company's
management  believes these  residential  mortgage loans are less likely to incur
prepayments of principal.


                                       11

<PAGE>
Webster Preferred Capital  Corporation

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------




LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The  primary  sources  of  liquidity  for the  Company  are net cash  flows from
operating activities,  investing activities and financing  activities.  Net cash
flows from operating  activities  primarily  include net income,  net changes in
prepaid expenses and other assets,  accrued interest  receivable and adjustments
for noncash  items such as  amortization  on  deferred  fees and  premiums,  and
mortgage-backed  securities net amortization and accretion.  Net cash flows from
investing   activities   primarily   include  the  purchase  and  repayments  of
residential real estate loans and mortgage backed securities that are classified
as  available  for sale.  Net cash flows  from  financing  activities  primarily
include net changes in capital generally related to stock issuances and dividend
payments.

While scheduled loan amortization,  maturing securities,  short term investments
and  securities   repayments  are  predictable   sources  of  funds,   loan  and
mortgage-backed  security prepayments are greatly influenced by general interest
rates,  economic  conditions  and  competition.  One of the  inherent  risks  of
investing  in  loans  and  mortgage-backed  securities  is the  ability  of such
instruments to incur  prepayments  of principal  prior to maturity at prepayment
rates  different  than those  estimated at the time of purchase.  This generally
occurs  because of  changes  in market  interest  rates.  The  market  values of
fixed-rate loans and mortgage-backed securities are sensitive to fluctuations in
market  interest  rates,  declining in value as interest rates rise. If interest
rates  decrease,  the market value of loans generally will tend to increase with
the level of prepayments also normally increasing.

Dividends  on the Series A Stock are payable at the rate of 7.375% per annum (an
amount equal to $73.75 per annum per share),  and the  dividends on the Series B
Stock are payable at the rate of 8.625% per annum (an amount equal to $.8625 per
annum  per  share),  in all  cases  if,  when and as  declared  by the  Board of
Directors of the Company.  Dividends on the preferred shares are cumulative and,
if  declared,  payable on January  15,  April 15, July 15 and October 15 in each
year.

                                       12


<PAGE>



Webster Preferred Capital  Corporation

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------



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

GENERAL
-------

The Company  reported net income of $13.0 million,  or $130,130 per common share
on a diluted  basis for the three months  ended March 31, 1988,  compared to net
income of $1.8  million,  or $18,310 per common share on a diluted basis for the
period from March 17, 1997 (date of inception) to March 31, 1997.

NET INTEREST INCOME
-------------------

Total  interest  income for the three months ended March 31, 1998 and the period
from March 17,  1997 (date of  inception)  to March 31,  1997  amounted to $14.2
million,  and $1.9 million,  respectively.  The following  table shows the major
categories of average  interest-earning assets, their respective interest income
and the rates earned by the Company:

<TABLE>
<CAPTION>
                                                                                         THE PERIOD FROM MARCH 17, 1997 (DATE
                                        THREE MONTHS ENDED MARCH 31, 1998                  OF INCEPTION) TO MARCH 31, 1997
------------------------------------------------------------------------------------------------------------------------------------
                                        Average          Interest           Average       Average         Interest           Average
(In Thousands)                          Balance            Income             Yield       Balance           Income             Yield
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                <C>                 <C>        <C>                <C>                <C>  
Mortgage Loans                         $660,600           $11,974             7.25%      $102,968           $1,852             7.19%
Mortgage-Backed Securities              127,884             2,140             6.69%             -                -                 -
Interest Bearing Deposits                 1,986                40             6.10%             -                -                 -
------------------------------------------------------------------------------------------------------------------------------------
     Total                             $790,470           $14,154             7.16%      $102,968           $1,852             7.19%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



PROVISION FOR LOAN LOSSES
-------------------------

There were no  provisions  for loan losses for the three  months ended March 31,
1998 or the period from March 17, 1997 (date of inception) to March 31, 1997.

NONINTEREST EXPENSES
--------------------

Noninterest  expenses  for the three  months ended March 31, 1998 and the period
from March 17, 1997 (date of  inception)  to March 31, 1997 amounted to $925,924
and $13,000,  respectively,  and included  advisory fees,  dividends on Series A
Preferred Stock, and amortization of start-up costs.

INCOME TAXES
------------

No income tax expense was  recorded for the three months ended March 31, 1998 or
the period from March 17, 1997 (date of inception) to March 31, 1997.

                                       13


<PAGE>



Webster Preferred Capital  Corporation

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------------------



The  following  table  summarizes  the  estimated  market value of the Company's
interest-sensitive assets and interest- sensitive liabilities at March 31, 1998,
and the  projected  change to market  values if interest  rates  instantaneously
increase or decrease by 100 basis points.

<TABLE>
<CAPTION>
                                                                                           Estimated Market Value
                                                                                                   Impact
                                                                                           ----------------------
                                                             Book           Market
(In Thousands)                                               Value           Value          -100 BP       +100 BP
-----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>               <C>         <C>     
Interest-Sensitive Assets:
     Mortgage-Backed Securities                            $171,656        $172,739          $3,680      $(5,570)
     Variable-Rate Residential Mortgage Loans               419,545         428,671           3,736       (5,370)
     Fixed-Rate Residential Mortgage Loans                  230,699         237,131           3,836       (8,456)
Interest-Sensitive Liabilities:
     Series A Preferred Stock                                40,000          40,072             992       (2,497)
-----------------------------------------------------------------------------------------------------------------
</TABLE>



                                       14


<PAGE>



Webster Preferred Capital Corporation

                           PART II - OTHER INFORMATION



Item 1.  LEGAL PROCEEDINGS  - Not Applicable

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS  -  Not Applicable

Item 3.  DEFAULTS UPON SENIOR SECURITIES  -  Not Applicable

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable

Item 5.  OTHER INFORMATION  -  Not Applicable

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K  -  Not Applicable

            (a)    Exhibits

         Exhibits No.              Description
         ------------              -----------

             27                    Financial Data Schedule

             (b) No  reports on Form 8-K were filed  during  the  quarter  ended
             March 31, 1998.

                                       15


<PAGE>



              Webster Preferred Capital Corporation

                                   SIGNATURES

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

                      WEBSTER PREFERRED CAPITAL CORPORATION
                      -------------------------------------
                                   Registrant



Date:  May 14, 1998                By:  /s/ Peter J. Swiatek
                                        ----------------------------------------
                                            Peter J. Swiatek
                                            Vice President and Treasurer
                                            Principal Financial Officer and
                                            Principal Accounting Officer

                                       16


<PAGE>



              Webster Preferred Capital Corporation

                                INDEX TO EXHIBITS

              EXHIBIT NUMBER                  DESCRIPTION
              --------------                  -----------

                    27                   Financial Data Schedule








                                       17