JULY 19, 2001
People's Bank Earns $43 Million Or $0.70 Per Share In 2nd Quarter

Click here to see our 2nd Quarter, 2001 Financial Schedules

BRIDGEPORT, CONN.
People's Bank (NASDAQ: PBCT), a $13 billion financial services company, today announced net income for the quarter ended June 30, 2001, of $43.1 million, or $0.70 per share, compared to $26.5 million, or $0.43 per share, for the second quarter of 2000.

People's Board of Directors declared a $0.34 per share quarterly dividend on People's common stock, payable Aug. 15, 2001, to stockholders of record on Aug. 1, 2001. People's Mutual Holdings, which owns 36.5 million shares of People's Bank common stock, will accept $1.6 million in dividends on its shares.

Earnings for the second quarter of 2001 included a $74 million pre-tax gain on the previously announced sale of People's Kingdom credit card operation. This gain was partially offset by pre-tax charges of $14 million for net security losses, $5 million to increase loan loss reserves, $3 million to prepay $100 million in borrowings and $4 million for miscellaneous other items.

"The gain on the U.K. transaction was a very significant win for the bank and our shareholders. It generated a significant amount of capital, providing us an ideal opportunity to improve our financial position for the remainder of 2001 and beyond," said John A. Klein, president and chief executive officer.

"We are already using the proceeds from the sale to enhance our Connecticut franchise and national lending operations through continued development of our revolutionary financial centers, additional programs targeted at growing balances in our Credit Card Services division and investments in customer relationship management technologies," Klein continued. "We believe investing in the bank's future will deliver long-term value to our customers and shareholders."

People's Connecticut franchise continued its track record of solid performance in the quarter. Stop & Shop branches reported another quarter of double-digit deposit growth with total supermarket deposits increasing 22 percent compared to the second quarter of 2000. The Commercial Banking division saw continued growth in both loans and deposits in a slowing economic environment. In addition, the bank's residential mortgage business has originated more loans in the first six months of 2001 than in all of 2000 with over $500 million of mortgages closed in the second quarter.

"In the second quarter, we opened three more financial centers - which provide our customers with enhanced technological capabilities and financial expertise for their investment needs - and look forward to continuing our expansion in the remainder of the year," said Klein. "Moreover, we recently unveiled our AirRewards credit card program, targeted toward attracting new credit card customers to our national consumer lending business and offering enhanced value to select segments of our existing customer base."

Pre-tax income for Credit Card Services of approximately $59 million was up from the first quarter, reflecting the gain from the U.K. sale. William T. Kosturko, executive vice president and interim chief financial officer noted, "The proceeds from the U.K. sale provide us the flexibility to better position this key U.S. business for the remainder of 2001. In addition, we are encouraged by a $5 million reduction in managed U.S. delinquencies since March 31, 2001. We anticipate that this reduction in delinquencies will lead to lower charge-offs in the second half of this year, which should in turn have a favorable impact on Credit Card Services' profitability."

"Results for the quarter reflect a number of charges specifically aimed at strengthening the bank's financial position and reducing overall borrowing costs for the future," said Kosturko. "While our primary focus continues to be profitable growth in core earnings, the principal challenge in this slowing economy is to grow earning assets while carefully managing and maintaining asset quality."

At the end of the first quarter, People's had a net unrealized loss of $31 million in the bank's common stock portfolio, a large portion of which was attributable to large capitalization stocks in the technology and telecommunications sectors. To better position the portfolio, the bank sold certain stocks that had the potential for further significant declines in value and took additional write-downs on other stocks that remain in the portfolio. As a result of these actions, as of June 30, 2001, the common stock portfolio was reduced to $85 million, with a net unrealized loss of $8 million.

For the first six months of 2001, net income totaled $56.4 million, or $0.92 per share, compared to $53.5 million, or $0.87 per share, for the first six months of 2000.

Other News Highlights
During the second quarter, People's announced a number of key organizational developments that enhance the organization's Connecticut franchise and broaden its national businesses. People's was also recognized as "Best Bank" in several Connecticut publications. Some of the more noteworthy news items included:

• Donald T. Heroman, senior vice president and treasurer at SunTrust Banks, Inc., was named People's executive vice president and chief financial officer. And Brian F. Dreyer, a seasoned People's executive and a veteran Connecticut commercial banker was promoted to executive vice president, Commercial Banking.
  
• People's opened three of its revolutionary People's Financial Centers™ during the second quarter in Norwalk, Shelton and Torrington, part of People's statewide branch transformation plan.
  
• RC Knox & Company, People's insurance subsidiary, announced the formation of the eFraud Alliance and the eTailer Fraud Solution Insurance Policy to protect online businesses from the risk of catastrophic credit card fraud losses. The eTailer Fraud Solution Policy integrates fraud detection technology with an insurance and risk management product, a combination no other insurer or agency offers.
  
• People's, Connecticut's number one mortgage lender as ranked by The Commercial Record, announced a faster and more efficient customer-focused mortgage application process that makes it easier for customers to apply for mortgages wherever and whenever it's most convenient for them. The typical mortgage application at a People's branch now requires 60 percent less information than in the past. The process of filling out an application can now take as little as 30 minutes.
  
• People's introduced its new People's AirRewards Plus™ Platinum MasterCard™. Users of this new card will receive one AirRewards Plus point for each dollar spent on purchases made with the card. Points earned can be redeemed for free travel on all major U.S. airlines with no blackout dates, for a variety of hotel and car rental benefits, or as a credit toward any travel booked through the program.
  
• And finally, People's was voted "Best Bank" in New Haven County and Fairfield County by readers of the New Haven Advocate and the Fairfield County Weekly, respectively. People's was also voted "Best Bank," "Best Bank Hours" and "Friendliest Bank" in northwest Connecticut by readers of Winsted-based The Voice. And People's Torrington Super Stop & Shop branch was voted "Best Bank" by readers of the Register Citizen.
  

Conference Call
On July 20, 2001, at 11 a.m., Eastern Standard Time, People's will host a conference call to discuss this earnings announcement along with earnings estimates for the remainder of 2001. The call may be heard through www.peoples.com by selecting Investor Relations, News and Events, Conference Calls. Additional materials relating to the call may also be accessed at People's Web site. The call will be archived on the Web site and available for approximately 90 days.

2Q Key Performance Indicators (2Q 2001 compared with 2Q 2000 unless otherwise indicated)

Summary
Net income totaled $43 million, or $0.70 per share.

• Pre-tax gain of $74 million on sale of U.K. operation.
  
• Charges totaling $26 million for net security losses ($14 million), increased loan loss reserves ($5 million), prepayment fee ($3 million) and other items ($4 million).
  

Managed provision for loan losses increased $19 million.

• Includes $5 million increase to loan loss reserves.
  
• Managed net interest margin decreased 12 basis points to 4.33%.
  
• Operating expenses, excluding charges, decreased 2% from 2Q00 and 4% from 1Q01.
  

Commercial Banking
People's commercial real estate finance portfolio continued its trend of double-digit growth in the second quarter, while growth in commercial loans has slowed in conjunction with the overall economy. The asset quality in commercial banking remained strong with the ratio of non-performing assets to total loans below 1.0%.

• Average commercial real estate finance loans increased $178 million, or 14%.
  
• Average commercial loans grew $72 million, or 7%.
  
• Average commercial demand deposits combined with non-deposit cash management balances increased $84 million, or 8%.
  
  • Cash management fees increased 19%.
    

Consumer Financial Services
This segment includes People's residential mortgage business, consumer deposits, insurance and brokerage services. The evolution of People's Connecticut franchise has supported growth in assets administered by People's brokerage subsidiary, People's Securities Inc. People's revolutionary financial centers have generated approximately $145 million in customer assets, which represents a $29 million increase from the first quarter of 2001. This focus on expanding relationships with customers has generated management fees and commissions for the second quarter that partially offset reduced discount brokerage commissions caused by recent stock market volatility.

• Average consumer non-interest-bearing deposits increased $69 million, or 9%.
  
• Supermarket deposits increased $292 million, or 22%, and averaged $30 million per branch.
  
  • Same-store deposits for Stop & Shop branches grew an average of $5.4 million per store.
    
• Retail banking service charges increased $2 million, or 16%.
  
• Residential mortgage originations totaled $518 million, up 201%.
  

Credit Card Services
Credit card services encompasses People's credit card and consumer lending businesses. The net income for this segment increased in the second quarter primarily due to the $74 million pre-tax gain on the sale of the U.K. operation partially offset by a $3 million increase in loan loss reserves. The $16 million increase in managed net charge-offs for credit card services continued to reflect the impact of repricing activities initiated in 2000, the softening U.S. economy, a higher volume of bankruptcy filings and the natural seasoning of national consumer loans.

• Average managed loans for credit card services declined $722 million.
  
  • Sale of U.K. accounted for $418 million of the decline.
    
  • Average U.S. consumer loans grew $313 million, or 59%.
    
  • Average managed U.S. credit card receivables decreased $617 million, or 18%.
    
• In July 2001, announced the introduction of AirRewards Plus, a travel points program for Platinum MasterCard customers.
  
• Yield on managed U.S. credit card receivables increased 135 basis points compared to 2Q00 and increased 49 basis points compared to 1Q01.
  
• Net charge-offs (as a percentage of average managed loans) for the credit card services segment equaled 6.99% compared to 4.57% for 2Q00 and 5.62% for 1Q01.
  
  • Three-quarter lagged net charge-offs (5.89%) increased 124 basis points from 2Q00 and increased 36 basis points from 1Q01.
• Delinquencies as a percentage of quarter-end managed loans for the credit card services segment equaled 4.11% compared to 2.85% for 2Q00 and 3.96% for 1Q01.
  
  • Total delinquencies declined $18 million from 1Q01, which includes a reduction of $13 million associated with the U.K. sale.
    
  • Three-quarter lagged delinquencies (3.36%) increased 51 basis points from 2Q00 and declined 44 basis points from 1Q01.
    

Capital Markets

• Common stock portfolio had a total market value of $85 million at June 30, 2001.
  
  • Reduced common stock exposure $49 million from 3/31/01 and $87 million from 12/31/00.
    
  • $11 million in net realized losses associated with the sale of common stocks.
    
  • $4 million in write-downs in the carrying amount of certain equities securities.
    
  • Net unrealized loss of $8 million at June 30, 2001 after sales and write-downs.
    
• Average short-term investments grew $480 million from 2Q00 and $314 million from 1Q01.
  
  • Reflects temporary deployment of proceeds from U.K. sale.
    
  • As the Federal Reserve has reduced short-term interest rates, the yield on short-term investments declined 173 basis points from 2Q00 and 147 basis points from 1Q01.
    
• Average borrowings decreased $55 million from 2Q00 and $444 million from 1Q01.
  
  • $3 million prepayment fee on the paydown of $100 million in FHLB borrowings.
    

People's Bank is a diversified financial services company providing consumer, commercial, insurance and investment services. The bank is a leader in supermarket banking, with 53 of its 144 branches located in Super Stop & Shop stores. Through its subsidiaries, People's provides brokerage services, money management, equipment leasing and insurance. Nationally, People's is the 16th largest issuer of MasterCard and Visa credit cards.

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Certain statements contained in this release are forward-looking in nature. These statements are subject to risks and uncertainties that could cause People's actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors of particular importance to People's include but are not limited to changes in general economic conditions, and price levels and conditions in the public securities markets generally.

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Investor Contact: Vincent J. Calabrese, First Vice President and Controller, 203-338-4114, vjcalab@peoples.com
Media Contact: Deborah P. MacDonnell, Manager, External Communications, 203-338-3255, dpmacdo@peoples.com