================================================================================

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

                                    FORM 10-Q

[X]   Quarterly  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
      Exchange Act of 1934 for the quarter ended March 31, 1999

                                       OR

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

      Commission File Number:   0-23513

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



          CONNECTICUT                                       06-1478208
          -----------                                       ----------
(State or other jurisdiction of                        (I. R. S. Employer
 incorporation or organization)                       Identification Number)


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


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

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

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

<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION

                                      INDEX
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                        <C>
PART I - FINANCIAL INFORMATION

Statements of Condition at March 31, 1999 and December 31, 1998...........................  3

Statements of Income for the Three Months Ended March 31, 1999 and March 31, 1998 ........  4

Statements of Cash Flows for the Three Months Ended March 31, 1999 and March 31, 1998.....  5

Condensed Notes to Financial Statements...................................................  6

Management's Discussion and Analysis of Financial Statements..............................  9

Quantitative and Qualitative Disclosures About Market Risk................................ 13

Forward Looking Statements................................................................ 13

PART II - OTHER INFORMATION................................................................14

SIGNATURES.................................................................................15

INDEX TO EXHIBITS..........................................................................16
</TABLE>

                                       2
<PAGE>

WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF CONDITION (UNAUDITED)
(Dollars in Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                                               March 31, 1999      December 31, 1998
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                  <C>      
ASSETS
Cash                                                                                    $  22,362            $  26,964
Mortgage-Backed Securities Available for Sale, at Fair Value (Note 2)                     112,498              118,262
Residential Mortgage Loans, Net (Note 3)                                                  844,508              819,634
Accrued Interest Receivable                                                                 5,393                5,422
Prepaid Expenses and Other Assets                                                             594                  679
----------------------------------------------------------------------------------------------------------------------
      TOTAL ASSETS                                                                      $ 985,355           $  970,961
----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

Accrued Dividends Payable                                                                 $   794            $   1,019
Accrued Expenses and Other Liabilities                                                        742                  224
----------------------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES                                                                     1,536                1,243
----------------------------------------------------------------------------------------------------------------------
MANDATORILY REDEEMABLE PREFERRED STOCK (NOTE 4)
       Series A 7.375% Cumulative Redeemable Preferred Stock, Liquidation
          preference $1,000 per share; par value $1.00 per
          share; 40,000 shares authorized, issued and outstanding                          40,000               40,000

SHAREHOLDERS' EQUITY
      Series B 8.625% Cumulative Redeemable Preferred Stock, Liquidation
          preference $10 per share; par value $1.00 per
          share; 1,000,000 shares authorized, issued and outstanding                        1,000                1,000
      Common Stock, par value $.01 per share:
          Authorized - 1,000 shares
          Issued and Outstanding - 100 shares                                                   1                    1
      Paid-in Capital                                                                     928,799              928,799
      Distributions in Excess of Accumulated Earnings                                          -                (1,198)
      Retained Earnings                                                                    13,096                    -
      Accumulated Other Comprehensive Income                                                  923                1,116
----------------------------------------------------------------------------------------------------------------------
      TOTAL SHAREHOLDERS' EQUITY                                                          943,819              929,718
----------------------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                       $  985,355            $ 970,961
----------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying condensed notes to financial statements

                                       3
<PAGE>



WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
(Dollars In Thousands, Except Share Data)


<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
                                                                        1999                  1998
-----------------------------------------------------------------------------------------------------------
<S>                                                                <C>                    <C>      
Interest Income:
Loans                                                              $  13,617              $  11,974
Securities                                                             1,889                  2,180
-----------------------------------------------------------------------------------------------------------
        Total Interest Income                                         15,506                 14,154
Provision for Loan Losses (Note 3)                                       120                      -
-----------------------------------------------------------------------------------------------------------
Interest Income After Provision for Loan Losses                       15,386                 14,154

Noninterest Expenses:
Advisory Fee Expense Paid to Parent                                       38                     38
Dividends on Mandatorily Redeemable Preferred Stock                      738                    738
Amortization of Start-up Costs                                             -                     37
Other Noninterest Expenses                                               100                    112
-----------------------------------------------------------------------------------------------------------
        Total Noninterest Expenses                                       876                    925

Income Before Taxes                                                   14,510                 13,229
Income Taxes                                                               -                      -
-----------------------------------------------------------------------------------------------------------
NET INCOME                                                            14,510                 13,229
Preferred Stock Dividends                                                216                    216
-----------------------------------------------------------------------------------------------------------
Net Income Available to Common Shareholder                         $  14,294              $  13,013
-----------------------------------------------------------------------------------------------------------
Net Income Per Common Share:
               Basic                                              $  142,940              $ 130,130
               Diluted                                            $  142,940              $ 130,130
-----------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying condensed notes to financial statements

                                       4

<PAGE>

WEBSTER PREFERRED CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars In Thousands)

<TABLE>
<CAPTION>
                                                                           Three Months Ended March 31,
                                                                                1999              1998
-----------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>     
OPERATING ACTIVITIES:
Net Income                                                                  $ 14,510          $ 13,229
Adjustments to Reconcile Net Cash Provided by Operating Activities:
         Provision for Loan Losses                                               120                 -
         Accretion of Securities Discount                                        (17)             (502)
         Amortization of Deferred Loan Fees and Premiums                         415               299
         Increase (Decrease) in Accrued Interest Receivable                       29              (318)
         Increase in Accrued Liabilities                                       1,255             1,000
         Increase (Decrease) in Prepaid Expenses and Other Assets                 85               (42)
-----------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                     16,397            13,666
-----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of  Mortgage-Backed Securities                                             -          (51,682)
Principal Collected on Mortgage-Backed Securities                              5,587               555
Purchase of Loans                                                            (80,767)          (60,356)
Principal Repayments of Loans, Net                                            55,359            44,662
-----------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities                                        (19,821)          (66,821)
-----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Dividends Paid on Common and Preferred Stock                                  (1,178)             (650)
Contributions from Parent                                                          -            51,842
-----------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided by Financing Activities                              (1,178)           51,192
-----------------------------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents                                         (4,602)           (1,963)
Cash and Cash Equivalents at Beginning of Period                              26,964            26,167
-----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                  $ 22,362          $ 24,204
-----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES:
       Income Taxes Paid                                                    $    -            $    --
       Interest Paid                                                        $    -            $    --
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITY:
       Transfer of Residential Mortgage Loans to Other Real Estate
          Owned                                                             $    -            $    110

</TABLE>



See accompanying condensed notes to financial statements

                                       5
<PAGE>

WEBSTER PREFERRED CAPITAL CORPORATION

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


NOTE 1: BASIS OF PRESENTATION

The accompanying  financial statements include all adjustments which are, in the
opinion of management,  necessary for a fair presentation of the results for the
interim periods  presented.  All adjustments were of a normal recurring  nature.
The results of  operations  for the three month  period ended March 31, 1999 are
not necessarily  indicative of the results which may be expected for the year as
a whole.  These  financial  statements  should be read in  conjunction  with the
financial statements and notes thereto included in the Webster Preferred Capital
Corporation 1998 Annual Report to shareholders.


NOTE 2: MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE, AT FAIR VALUE

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


<TABLE>
<CAPTION>
(In Thousands)                                              Mortgage-Backed Securities
---------------------------------------------------------------------------------------------------------
                                            Recorded Value  Unrealized Gains    Unrealized     Estimated
March 31, 1999                                                                    Losses        Fair Value
---------------------------------------------------------------------------------------------------------
<S>                                         <C>                   <C>            <C>           <C>      
      Available for Sale Portfolio          $ 111,575             $ 923          $  -          $ 112,498
===========================================================================================================


                                           Recorded  Value  Unrealized Gains    Unrealized       Estimated
Deccember 31, 1998                                                                Losses         Fair Value
---------------------------------------------------------------------------------------------------------
      Available for Sale Portfolio         $ 117,146             $  1,116        $  -           $ 118,262
===========================================================================================================
</TABLE>



All mortgage-backed securities have a contractual maturity of over 10 years. The
weighted  average  yield at March 31, 1999 is 6.76%.  Although  the stated final
maturity of these  obligations are long-term,  the weighted average life is much
shorter due to scheduled  repayments  and  prepayments.  Gains and losses on the
sales of securities are recorded using the specific identification method.

                                       6

<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION

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


NOTE 3:  RESIDENTIAL  MORTGAGE LOANS, NET

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


<TABLE>
<CAPTION>
                                                      March 31,      December 31,
                                                       1999             1998
---------------------------------------------------------------------------------
                                                     Carrying            Carrying
(In Thousands)                                        Amount              Amount
---------------------------------------------------------------------------------
<S>                                               <C>                   <C>      
Fixed-Rate Loans:
       15 yr. Loans                               $  114,492            $ 114,924
       20 yr. Loans                                    4,777                3,213
       25 yr. Loans                                    2,715                1,849
       30 yr. Loans                                  207,217              192,490
----------------------------------------------------------------------------------
        Total Fixed-Rate Loans                       329,201              312,476
----------------------------------------------------------------------------------
Variable-Rate Loans:
       15 yr. Loans                                    5,636                5,222
       20 yr. Loans                                    7,427                6,504
       25 yr. Loans                                    8,067                8,578
       30 yr. Loans                                  492,009              484,824
----------------------------------------------------------------------------------
        Total Variable-Rate Loans                    513,139              505,128
----------------------------------------------------------------------------------
       Total Residential Mortgage Loans            $ 842,340             $817,604

       Premiums and Deferred Fees on Loans, Net        3,843                3,585
       Less: Allowance for Loan Losses                (1,675)              (1,555)
----------------------------------------------------------------------------------
        Residential Mortgage Loans, Net            $ 844,508            $ 819,634
----------------------------------------------------------------------------------
</TABLE>


During 1998, Webster Bank contributed $182.8 million of cash to the Company,  of
which $131.0 million was used to purchase  additional  residential  loans. As of
March 31, 1999,  approximately 39.1% of the Company's residential mortgage loans
are fixed-rate loans and approximately 60.9% are adjustable-rate loans.

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

                                                Three Months Ended
(In Thousands)                             March 31, 1999      March 31, 1998
----------------------------------------------------------------------------
Balance at Beginning of Period              $    1,555         $ 1,538
Provision Charged to Operations                    120              --
Charge-offs                                         --              --
Recoveries                                          --               1
------------------------------------------------- --------------------------
Balance at End of Period                    $    1,675         $ 1,539
-----------------------------------------------------------------------------



                                       7
<PAGE>

WEBSTER PREFERRED CAPITAL CORPORATION

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


NOTE 4: MANDATORILY REDEEMABLE PREFERRED STOCK


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

The Series A  Preferred  Shares may be  redeemed at the option of the Company at
any time on and after January 15, 1999 through January 14, 2001.


NOTE 5: OTHER COMPREHENSIVE INCOME

The  following   table   summarizes   reclassification   adjustments  for  other
comprehensive  income and the related tax  effects  for the three  months  ended
March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                              BEFORE        INCOME TAX
                                                               TAX           (EXPENSE)      NET-OF-TAX
  (In Thousands)                                              AMOUNT         OR BENEFIT       AMOUNT
---------------------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>            <C>      
  Unrealized gain on available for sale securities:
     Unrealized holding gains arisen during the period         $  (193)            --       $   (193)
     Less: Reclassification adjustment for gains
        realized during the period                                   --            --             --
  -------------------------------------------------------------------------------------------------------
      Other comprehensive income at March 31, 1999             $  (193)            --       $   (193)
  -------------------------------------------------------------------------------------------------------
  Unrealized gain on available for sale securities:
     Unrealized holding gains arisen during the period         $  1,019            --       $  1,019
     Less: Reclassification adjustment for gains
        realized during the period                                  --             --             --
  -------------------------------------------------------------------------------------------------------
      Other comprehensive income at March 31, 1998             $  1,019            --       $  1,019
-----------------------------------------------------------------------------------------------------------------------
</TABLE>






                                       8
<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION

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


GENERAL

The Company is a subsidiary of Webster Bank and was  incorporated  in March 1997
to provide a  cost-effective  means of raising funds,  including  capital,  on a
consolidated basis for Webster Bank. Total assets at March 31, 1999 and December
31,1998  were  $985.4  million  and  $971.0  million,  respectively,  consisting
primarily of residential mortgage loans and mortgage-backed securities.

The Company has elected to be treated as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986 (the "Code"),  and will generally not be
subject to federal income tax for as long as it maintains its qualification as a
REIT, requiring among other things, that it currently distribute to stockholders
at least 95% of its "REIT  taxable  income"  (not  including  capital  gains and
certain items of noncash income). The Company and Webster Bank will also benefit
significantly  from federal and state tax  treatment  of  dividends  paid by the
Company as a result of its qualification as a REIT. The following  discussion of
the Company's  financial  condition and results of operations  should be read in
conjunction  with the Company's  financial  statements and other  financial data
included elsewhere herein.

CHANGES IN FINANCIAL CONDITION

Total assets were $985.4 million at March 31, 1999, an increase of $14.4 million
from $971.0  million at  December  31,  1998.  The  increase in total  assets is
primarily  attributable to the purchase of additional residential mortgage loans
of $80.7  million,  offset by loan  repayments  of $55.3  million and  principal
collected on mortgage-backed  securities of $5.5 million.  Shareholders'  equity
was $943.8 million at March 31, 1999 and $929.7 million at December 31, 1998.

ASSET QUALITY

The Company  maintains high asset quality by acquiring  residential  real estate
loans  that  have  been  conservatively   underwritten,   aggressively  managing
nonaccrual assets and maintaining adequate reserve coverage.  At March 31, 1999,
residential  real estate loans comprised the entire loan portfolio.  The Company
also invests in highly rated mortgage-backed securities.

The  aggregate  amount of nonaccrual  loans was $766,000 at March 31, 1999.  The
following  table  details the Company's  nonaccrual  loans at March 31, 1999 and
December 31, 1998:

                                                    March 31,    December 31,
(In Thousands)                                          1999            1998
-----------------------------------------------------------------------------
Loans Accounted for on a Nonaccrual Basis:
        Residential Fixed-Rate Loans                  $   59           $  71
        Residential Variable-Rate Loans                  707           1,206
----------------------------------------------------------------------------
              Total Nonaccrual Loans                  $  766         $ 1,277
----------------------------------------------------------------------------


At March 31, 1999 the allowance for loan losses was approximately  $1.7 million,
or 218% of nonaccrual  assets.  Management  believes that the allowance for loan
losses is adequate to cover expected losses in the portfolio.


                                       9
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION

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



LIQUIDITY AND CAPITAL RESOURCES

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

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

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

ASSET/LIABILITY MANAGEMENT

The  goal  of the  Company's  asset/liability  management  policy  is to  manage
interest-rate  risk so as to maximize net interest  income over time in changing
interest-rate  environments  while  maintaining  acceptable  levels of risk. The
Company must provide for sufficient liquidity for daily operations.  The Company
prepares  estimates  of  the  level  of  prepayments  and  the  effect  of  such
prepayments  on the level of future  earnings  due to  reinvestment  of funds at
rates  different  than  those that  currently  exist.  The  Company is unable to
predict future  fluctuations  in interest rates and as such the market values of
certain of the  Company's  financial  assets are  sensitive to  fluctuations  in
market  interest  rates.  Changes in interest  rates can affect the value of its
loans  and  other  interest-earning  assets.  At March  31,  1999,  60.9% of the
Company's  residential  mortgage loans were  variable-rate  loans. The Company's
management  believes these  residential  mortgage loans are less likely to incur
prepayments of principal.


                                       10
<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION

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

RESULTS OF OPERATIONS

For the three  months  ended March 31, 1999 and 1998,  the Company  reported net
income of $14.5  million  and  $13.2  million,  respectively,  or  $142,940  and
$130,130, respectively, per common share on a diluted basis.


Total  interest  income  for the three  months  ended  March  31,  1999 and 1998
amounted to $15.5  million and $14.2  million,  respectively,  net of  servicing
fees. The following table shows the major categories of average interest-earning
assets, their respective interest income and the rates earned by the Company:

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED MARCH 31, 1999        THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------------------------------------------------------------------------
                                     Average      Interest      Average         Average     Interest     Average
(In Thousands)                       Balance        Income       Yield          Balance       Income       Yield
-----------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>           <C>           <C>          <C>            <C>  
Mortgage Loans                      $808,654       $13,617       6.74%         $660,600     $ 11,974       7.25%
Mortgage-Backed Securities           113,641         1,791       6.30%          127,884        2,140       6.69%
Interest Bearing Deposits              9,749            98       4.02%            3,396           40       6.10%
-----------------------------------------------------------------------------------------------------------------
     Total                          $932,044       $15,506       6.66%         $790,470     $ 14,154       7.16%
==================================================================================================================
</TABLE>


The  provision  for loan  losses  for the three  months  ended  March 31,  1999,
amounted  to  $120,000.  There was no  provision  for loan  losses for the three
months ended March 31, 1998. The provision for loan losses reflects the increase
in the total residential mortgage loan portfolio.

Noninterest expenses for the three months ended March 31, 1999 and 1998 amounted
to $876,000 and $925,000, respectively, and included advisory fees and dividends
on Series A Preferred Stock. The reduction in noninterest expenses of $49,000 is
primarily due to the write-off of remaining start-up costs in the fourth quarter
of 1998. No income tax expense was recorded for either period.


RECENT FINANCIAL ACCOUNTING STANDARDS

In June 1998, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
133,  "Accounting  for  Derivative  Instruments  and Hedging  Activities."  This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments,   including  certain  derivative   instruments  imbedded  in  other
contracts, (collectively referred to as derivatives) and for hedging activities.
This SFAS is not  expected  to impact the  Company  since the  Company  does not
engage in hedging activities or utilize derivative instruments.


                                       11


<PAGE>


WEBSTER PREFERRED CAPITAL CORPORATION

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


YEAR 2000 READINESS DISCLOSURE STATEMENT

The "Year 2000" issue refers to the potential  impact of the failure of computer
programs and equipment to give proper  recognition of dates beyond  December 31,
1999 and other issues related to the Year 2000 century date change.

I.  The Company's State Of Readiness

The Company has  assessed the issues  regarding  Year 2000 and since the Company
depends on Webster Bank as Advisor and Servicer,  as agreed upon in the Advisory
Service Agreement and the Master Service Agreement,  the Company will be reliant
on  Webster  Bank  and  its  parent  company,   Webster  Financial   Corporation
("Webster"), to ensure proper date recognition.

The Company has reviewed  documentation  provided by Webster and has  determined
that Webster is taking the appropriate steps to become Year 2000 compliant.

II.  The Costs To Address The Company's Year 2000 Issues

The Company  currently pays a monthly servicing and managerial fee to Webster as
agreed upon in the Advisory Service Agreement and the Master Service  Agreement.
The Company is not expected to incur any costs  associated with Year 2000 issues
that are not covered under the Advisory Service Agreement and the Master Service
Agreement.  The Advisory  Service  Agreement  and the Master  Service  Agreement
include  technical  support,  and  administrative  services,  in  which  Webster
monitors and  supervises  the  performance  of all parties who have contracts to
perform services for the Company.

III.  The Risks Of The Company's Year 2000 Issues

The Company is in the process of identifying and evaluating  potential Year 2000
related  worst case  scenarios  that could result from 1)  Webster's  failure to
identify,  test,  and validate  all critical  date  dependent  applications  and
embedded  microchips  that affect core business  processes and 2) the failure of
external forces,  such as third party vendors,  and utilities,  to have properly
remediated their systems.

Potential worst case scenarios being  addressed,  include:  extended  electrical
power outage,  extended  telephone  communication  outage,  and excessive  media
speculation and community fear.

The Company is unable to estimate  lost revenue  related to Year 2000 issues due
to the  uncertainties  of the impact and  effects of  external  forces and their
potential extended disruptions.

IV.  The Company's Contingency Plans

A contingency  plan is being  drafted by the Company to address each  identified
potential worst case scenario. Alternative solutions for business resumption and
approaches  to  minimize  the  impact of each  scenario  are  being  formulated.
Proposed  approaches  to  address  potential   scenarios  include:   designating
alternate  offices as  emergency  locations  with  alternate  power  sources and
identifying alternate communication methods.

Availability Of Webster's Disclosure

Webster's Year 2000 Readiness Disclosure Statement is available in detail in its
December 31, 1998, Form 10-K.


                                       12

<PAGE>

WEBSTER PREFERRED CAPITAL CORPORATION

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


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  following  table  summarizes  the  estimated  market value of the Company's
interest-sensitive  assets and interest-sensitive  liabilities at March 31, 1999
and the  projected  change to market  values if interest  rates  instantaneously
increase or decrease by 100 basis points.

<TABLE>
<CAPTION>
                                                                  Estimated Market Value Impact
                                                                    ---------------------------
(In Thousands)                           Book Value    Market Value     -100 BP        +100 BP
-----------------------------------------------------------------------------------------------
<S>                                       <C>               <C>           <C>          <C>    
AT MARCH 31, 1999
Interest Sensitive Assets:
      Mortgage-Backed Securities          $ 112,498         112,499       2,024        (3,436)
      Variable-Rate Residential Loans       513,139         523,075       6,464        (9,829)
      Fixed-Rate Residential Loans          329,201         339,358       7,219       (13,330)
Interest-Sensitive Liabilities:
      Series A Preferred Stock               40,000          40,000         533        (3,935)
-----------------------------------------------------------------------------------------------
</TABLE>


FORWARD LOOKING STATEMENTS

Statements  in  Management's  Discussion  and Analysis in the section  captioned
"Year 2000 Readiness Disclosure  Statement" and in "Quantitative and Qualitative
Disclosures about Market Risk" are forward-looking statements within the meaning
of the Securities Exchange Act of 1934, as amended. Actual results,  performance
or  developments  may differ  materially from those expressed or implied by such
forward-looking  statements  as a  result  of  market  uncertainties  and  other
factors. Some important factors that would cause actual results that differ from
those in any  forward-looking  statements  include changes in interest rates and
general economics in the Connecticut market area where a substantial  portion of
the real estate securing the Company's loans is located. Such developments could
have an  adverse  impact on the  Company's  financial  position  and  results of
operations.



                                       13
<PAGE>
WEBSTER PREFERRED CAPITAL CORPORATION

PART II - OTHER INFORMATION
--------------------------------------------------------------------------------

Item 6:  Exhibits and Reports on Form 8-K

(a)      Exhibits

     Exhibit Numbers       Description
     ---------------       -----------
          27              Financial Data Schedule

(b) No reports on Form 8-K were filed during the quarter ended March 31, 1999.










                                       14

<PAGE>


                                   SIGNATURES

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

                                          WEBSTER PREFERRED CAPITAL CORPORATION
                                                       Registrant
                 
                                          BY: /s/ Peter J. Swiatek
                                              ----------------------------------
                                              Peter J. Swiatek,
                                              Vice President & Treasurer
                                              Principal Financial Officer
                                              Principal Accounting Officer

                                              Date: May 12, 1999





                                       15
<PAGE>
                                INDEX TO EXHIBITS


     EXHIBIT NUMBER       DESCRIPTION
     --------------       -----------
          27              Financial Data Schedule


                                       16